The best investment opportunities are often beyond your own backyard and investors who insist on purchasing locally could be selling themselves short.
There’s something really nice about knowing a neighbourhood well. We know where to find the good coffee and how to get to the shops, and we even run into people we know in the street.
Certainly, there’s something special about becoming intimate with a particular location. Generally speaking, we all tend to love our own little corners of the world. I know I do!
But when it comes to property investment, the most effective investors understand that emotion and all of those warm and fuzzy feelings need to be left at home.
Successful property investment really is a business and it is all about creating wealth, not about a particular property in a particular neighbourhood. So when it comes to picking a location to invest in, you need to think about it in a business-like manner – and that means considering the full spectrum of opportunity.
Sometimes – in fact, more often than not – the best investment opportunities can be found outside of your own locale. All of my own investment properties are miles away from my family home and so are many of my clients’ investments. And while for some investors it might be daunting to invest in an area you don’t know as well as your own, you could really limit your investment prospects if you don’t take the chance to explore.
Think of it a bit like travelling; sometimes a trip will make us realise how much we appreciate home, but other times we find destinations we think are even better than our own.
DIFFERENT PROPERTY CYCLES
The national property market cannot be regarded as one big homogenous market, even though that’s often the way it’s spoken about. In reality, the national property market is made up of hundreds of small property markets, all moving in their own unique market cycles.
The best time to buy in any property cycle is at the bottom of the market, or as close to that as possible, before the market hits an upswing. Inversely, it’s not ideal to buy at the very top of a hot market.
The advantage of investing in locations outside of your own is that you can take advantage of property cycles that are entering the right phase of growth. This is especially attractive if your local property market is at the peak of a growth phase, or offering very limited prospects for future growth.
DIVERSIFY YOUR PORTFOLIO
Just as you can diversify across asset classes, you can also diversify your property portfolio by purchasing property in a range of locations.
From a diversification perspective, concentrating all of your investment properties in one location is not only limiting, it can also increase your risk exposure.
A well-balanced, low-risk investment portfolio often includes different properties and different markets, shielding you from any high concentration of risks that might be outside your control. It also spreads your opportunity for growth across markets, so that at any one time you should be benefiting from an upswing in property values in at least one location.
If long-term consistent growth and low-risk strategies are high on your agenda, diversification is worth considering.
STEPS FOR SUCCESS
Convinced you’d like to spread your wings and explore some new pastures? Great! But don’t forget to undertake proper due diligence on the location and the property. Thorough market research is a must – or the help of a trusted professional who can help you navigate your options.
And once the contracts are in place and it’s time to manage your investment property, my best tip is to ensure you have a fantastic property manager who can make your investment a worthwhile, hands-off and profitable experience.
Multifocus Properties & Finance was established in 2005 with the aim of mentoring investors to create wealth and invest in their future by building an investment property portfolio.
The company is led by Philippe Brach who has over 25 years experience in the international corporate world specializing in finance, accounting and investment. He is a fully qualified and extremely experienced real estate agent, concentrating his attention solely on investment opportunities around Australia. In addition he is a highly regarded mortgage broker, being accredited with around 35 different lenders.