How can you find a good suburb to invest in? A suburb that is likely to go up in value, one that is low risk and has the potential for capital growth.
So you want to invest in property. Obviously, you want to choose a suburb that has minimum risks and the potential for maximum returns but what are the steps that you need to take to actually find a good suburb to invest in?
What are the steps that you need to take to find a good suburb to invest in?
1. Start At A State Level
The first thing that you need to do is to start broad. What most people do is they start from the ground up which is the wrong approach.
They will find a property, someone might send them a link and say, “Hey, look at this property” or they might say, “My uncle is selling a property and you can buy it. If you don’t go through a real estate agent he will give you a discount.”
And so for one reason or another, you end up starting at the property level and you then need to work your way up to understand, “Okay, is this a good suburb to invest in? Is this property a good price?”
But what tends to be a better way to approach things is to actually start broad, so start at a state level or start at an area level.
2. Narrow Down To A Major District
Let’s say you decide to invest in Queensland, then let us first assess Gold Coast, Brisbane, Sunshine Coast, Hervey Bay, maybe some regional areas as well.
Assess them as areas and first understand, “Okay, what kind of area do I feel comfortable with and want to invest in?”
Analyze your area and look at things like past capital growth history.
You can also go to council websites and you can try and assess what infrastructure developments are going into an area.
Is the population growing or declining?
What you want to do is to start to whittle down the area so you just have a couple of areas you want to look at.
3. Start Looking At Suburb Research
Then you start going into the suburb research. What I advise is to do research on a lot of different suburbs, not just one.
The way most people approach finding a good area to invest in or finding a good suburb to invest in is they say, “Okay, here is a suburb. Suburb X. Is this a good suburb to invest in? Yes or no?” That is one way you can approach it, but it’s probably not the best way.
It is very difficult to collect enough data to understand if one suburbs is a good suburb to invest in. It is very difficult for the average investor because you may not understand what all the data means. Maybe you don’t understand exactly how to research a suburb.
What is a lot more effective and a lot easier is to spread out and you look at all the different suburbs and actually compare those suburbs to each other.
Look For The Best Suburb In The Area
Let’s say you decided the Gold Coast was a good place to invest. Rather than saying
“Okay, the Gold Coast. There is a suburb in the Gold Coast called Robina, do I want to invest in Robina, yes or no?”
That is the old way to do it. The better way to do it is to say:
“Well, what are all the suburbs of the Gold Coast? There is Robina. Mudgeeraba. Burleigh. Broadbeach. Surfers Paradise. Southport. Which of these suburbs is going to be THE BEST suburb for me to invest in?”
Collect all of the suburbs, do research and data on all of the suburbs and then lay them out in front of you and compare them to each other. You will then be able to rank them in order and you will see that some suburbs you definitely do not want to invest in and you will see a few suburbs that really go to the top of the pile.
What you can then do is assess those top suburbs and decide which of these top suburbs do you think is the best for you.
Don’t Just Choose On Suburb And Hope For The Best
Rather than just choosing one suburb and hoping for the best, you are actually assessing a wide variety of suburbs and you are ranking them on a scale to choose the best suburb.
How Do You Find A Good Suburb To Invest In?
- Start broad
- Analyse each individual suburb
- Rank them in order to find the one that is best for you.
Tips On How To Analyse A Suburb
That is all well and good for me to say that but what about some tips on how to actually analyse a suburb. When comparing suburbs, what are we looking for?
While I go into this in full detail in the Advanced Suburb Research Course, I will give you a couple of tips here.
Tip #1: Look For Risk Factors
What I find as the best approach to suburb research is to actually look for risk factors in the area. I like to call these red flags.
Red flags are indicators that the area may decrease in value or may not be promising in terms of capital growth in the future.
Some examples of a red flag could be high vacancy rates of an area which could indicate there is an oversupply of properties in an area. This could stagnate growth or could indicate that there is just not enough demand for the properties that are there and could stagnate growth into the future.
What you want to look for when you are looking in an area is to look for things that are red flags in an area.
High vacancy rates is one example. Growing vacancy rates is another example. If population is declining, that is a red flag for an area. You also want to look at vendor discounting to find out how much the properties are being discounted and the higher the discount indicates that there is less demand.
Days on market, you can look at as well and there are a couple of other things in there as well.
Tip #2: Compare Suburbs To Each Other To Choose The Best
After you go through each suburb and identify the red flags in the area.
Then when you are comparing suburbs to each other you can ask yourself
“Okay, which suburbs have the most red flags and are the riskiest suburbs? Let us cancel them out.”
As well as:
“Which suburbs don’t have red flags or don’t have many red flags?”
Keep the good suburbs in a pile and once you have whittled down the list you can then say:
“Okay, these areas have very low risks, what is the potential upside and what is the data that I have collected showing me about the future of this suburb?”
Tip #3: Do More Speculative Research On The Best Suburbs
You can also go and do a more speculative research, like going through the streets and try and work out if it is a good area.
You can look at the percentage of people owning properties in the area versus renting. You can talk to real estate agents. Talk to the council and all of that sort of stuff.
The steps are:
- Look for red flags in an area.
- Whittle down the high-risk areas
- Compare the areas you have and look at the growth factors in the area, how much demand is there, which area has the lowest vacancy rate, all of that sort of stuff.
Now It’s Up To You To Choose The Best Suburb For Your Financial Goals
You should now have a pretty clear shortlist of potential suburbs to invest in and hopefully, if you have done your research correctly, then most of these suburbs will be good suburbs to invest in.
Now it will just be up to you to choose the best suburb from all the good suburbs that are out there.
The best suburb is really the one that is going to meet your investment needs better than any other suburb. It’s not like one best suburb in Australia that everyone should be trying to invest in.
Everybody has different financial goals and your financial goals are different to my financial goals are different to Bob’s financial goals.
Which Suburb Will Help You Achieve Your Financial Goals As Quickly As Possible?
Understanding your financial goals and creating a property investment strategy to move you towards them will then allow you to take the last step to assess the suburbs.
You need to say to yourself:
“Of all these good suburbs, which suburb is going to help me achieve my financial goal as quickly as possible or with the least risks as possible?”
A Quick Recap
First thing that we want to do is start broad and we want to look at different areas. Assess those broad areas and try to narrow those down. Once you have assessed a broad area, go through and research all the suburbs in those areas and compare them to each other.
Look for red flags in suburbs or risk factors and then cancel out the high-risk suburbs. Then look as well for suburbs that seem to have the best results and the most demand and the most potential growth.
Then the last step, once you have those good suburbs in that shortlist, you try and assess those suburbs to think, “Okay, which suburb is going to be best for my property strategy and for my investment strategy to help me achieve my goals?”
There is how to find a good suburb to invest in.
I hope that this has been helpful, giving you some insights into the steps to actually take to find a good suburb to invest in. You can get more details on how to research a suburb in my Advanced Suburb Research course which you can check out. Go to OnProperty.com.au/suburb now in order to get access to that course. I know that course is going to help a lot of people.
So until next time guys, stay positive!