Determining the best areas for yield play and capital growth

The property professional explained: “Some are nearing retirement and some are starting out.”

“I think the people who are starting out or have a few properties ... they don't mind being out of pocket [$100,000 to $300,000] a month to own a property, whereas the people nearing retirement ... they want their money in their pocket,” he explained further.

Essentially, every property investor is the same, but Simon believes that everyone should strive for one common goal.

According to him: “Look for properties that are always going to have growth even if the market doesn't necessarily grow.”

The properties are often found in areas with new and existing infrastructures such as trains, schools, hospital, and shopping centres. By implementing this strategy, a property investor won’t need to worry about the demand for property because people are always going to want to rent the dwelling.

“It's always going to have a good reason for growth … Then, you're going to get that happy medium,” Simon said. 

Good suburbs for property investment

If, as a property investor, your strategy leans towards yield play, Simon suggests looking at Brisbane and other property markets outside Sydney.

Simon shared: “For a yield play, a lot of our clients are buying in Queensland. The yields are great [as] the … property we're buying [is located] in the blue-chip areas there.”

“There are [also] some really good areas in western Sydney for yield play [with] some really good infrastructural purposes … [Those would be my] two main yield areas,” he added.

For those who are all about capital growth, it might be best to stay in Sydney or whichever property market they are already in and hold their properties through three or four cycles, hoping it would double or triple in value. Australia might currently have an “uncertain market”, but property investors can make it work to their advantage, according to Simon.

He said: “If you can take advantage of that in the blue-chip areas, definitely [look at] Sydney ... [and in the] inner cities … [like] Surry Hills, your Darlinghurst … Potts Point, Elizabeth Bay ... Bondi.”

“If you're in Queensland … [there are] new farms [located in] Brisbane—you drive through a new farm and there [are] things happening [which is] a sign of good things to happen in areas. In Melbourne, there's some really good stuff happening if you're buying in blue-chip areas.

“So, if it's for capital growth, as long as it's the right property in a blue-chip area, they're typically the safest,” the property professional advised.

Blue-chip areas are often close to major cities where people can enjoy a “village lifestyle”—close to shops, transportation, or the beach—and where the median house price is typically the highest.

Property investors who buy in blue-chip areas tend to have fewer properties in their portfolio due to higher prices, but blue-chip properties often attract high-quality tenants, who stay longer and are more able to afford rent increases.

Moreover, the properties are typically more valuable because it’s less likely that local councils will allow the building of more dwellings. 

‘Try them all’

As a buyer’s agent, Simon always gets asked about the right area and the right property, but he always makes it a point to remind his clients that every property investment journey is different.

Before you go on finding and purchasing a property, you have to identify your goals, capabilities, and limitations as a property investor in order to make the right decisions.

“It really comes down to where you are in your life … your appetite for risk and liquidity,” according to Simon.

He explained further: “For me, as a young person, I'll take a lot more risk … For me, the long-term capital growth of a property will be far more exciting than the yield."

“But for my father, for example, who's potentially at retirement age, yield and safety of asset is going to be more appealing.

“Ultimately, it's all about finding a happy medium, but everyone's portfolio and what's attractive to everyone is always going to be different because everyone's at different stages of lives,” the property professional added.

While the recommendations of property professionals are important, investors must not hesitate to try other strategies that they feel might work for them, as long as it’s backed up by thorough research and good education. There are, after all, a lot of different strategies in property investment and there’s no one foolproof recipe for success.

“I have properties all over [Australia], so there's not one particular recipe. If there was, I'd be on the beach right now in the Bahamas, but there isn't, so you try them all,” Simon concluded. 

Tune in to Simon Cohen’s Q&A episode on the Smart Property Investment Show to know more about identifying assets that can be subdivided and why it’s important to do your research before implementing specific strategies, as well as the most useful measures to evaluate the performance of your property portfolio.