Narrowing Down Location of Property Purchase

Real estate rules are not the same for those investing in properties to build a portfolio and those investing in it to live. A place, most scenic and captivating, can be great for you if you want to buy a property and live in it but its scenery and blissful calm may not make it an enticing investment purchase.

Where is the market headed?

An investor has to find out where the market is headed- what kind of rental returns can he expect (rental yield providing the magic clue) and what kind of capital growth is being predicted for the area (history of capital growth can help)? Only based on this can he evaluate his chances of lapping up a decent profit, the proverbial “best bang for the buck”.

1% rule

For rent, the 1% rule is still your pole star. If the rent you charge is 1% of the purchase price, you have got yourself well covered. If your house is far too expensive to command 1% return you may still make a good deal from its capital growth but relatively poor rental returns will kill positive cash flow.

Fixer-uppers

Similarly, if you invest in a fixer-upper, intending to save on the purchase cost, you may find yourself incurring too much in way of repair and renovation costs. In little time, the bargain deal does not remain so.

Emerging markets your best bet

Location of property should ideally be in line with emerging markets and if you can narrow it down to the bullseye zone, nothing better than that. For instance, the waterfront estates in the suburbs are suffering for one or more reasons (expected rise in water levels and their subsequent submersion being the top reason). This is not where your money should ride at any rate. You will be much better off seeking urban emerging markets close to the CBD.

A look at the neighbourhood

When you find one, look for the best neighbourhood- one that is decently priced and giving maximum chances to the general public. When many can buy without jitters, the neighbourhood will exhibit sustainable growth- a wonderful prospect and one that is only possible if the prices are close to median.

You can seek a buyer’s agent who knows the area like the back of his hand. Today, reputed buyer’s agents easily double up as informed counsellors. I take pride in believing I am among those professionals. If you have a property purchase in mind, you can get in touch with me here.