“Property investment hot spots make for nice reading in the media but all property investors need to be wary of being burned by the hype,” according to Jerry Collova, Managing Director of PEB Group.
“Of-course there are always exceptions but as a general rule of thumb when we see "hot spots" advertised on any marketing material, we are always wary and heavily research these claims.” he said.
A Lot of it is Just Marketing
Firstly, a lot of it may be marketing hype from property developers and real estate agents. They may have developments and stock that they want to sell, so naturally they are going to promote it as aggressively as they can. As an investor you need to see past the promotional hype and do your research to ensure their claims stack up. For example, is that "HUGE" new shopping complex and golf course they are promoting to be built in 2020 ACTUALLY going to translate into reality? Do your research to confirm or deny all claims made.
Looking for the next BOOM is......SPECULATION
Self explanatory really, but looking for that next BIG BOOM is speculation. Are you a risk taker? Is that mining town going to hold up? It may pay off but it may not. And if it doesn't are you prepared to lose. True property investing requires long term capital growth and a strong and solid long term strategy.
It’s High Risk
As we’ve said before, buying an investment property purely for capital growth is a high risk strategy, especially in flavour of the month suburbs. Some examples of situations where this has happened are mining towns such as Karratha, Hopetoun, Roxby downs, Bowen or Emerald just to name a few. There are success stories but ensure you do your research and try not to get emotional about your purchase.
It’s Speculation Not Investment
As noted above, Hot spotting to us is speculation. You’re speculating on rising market values and hype rather than doing your research and making a sound investment decision. Timing may be crucial. Is it worth the risk.
So What Should You Do?
“In order to make a sound investment there are a number of things you must do,” Mr Collova said.
Do Your Research
First do your research.
- Understand what the area is relying on for growth
- Know what’s driving the market in the area
- Ask yourself are those factors sustainable?
- Thoroughly understand the current and future planning and development codes for the area
- Know if they are going to change
Buy Close to Services
Mr Collova said most home buyers always wanted to be close to established services and infrastructure. So when buying an investment property there are some key things to look for:
- Proximity to schools
- Established public transport services
- Vibrant shopping districts
- Closeness to jobs and industry
- Hospitals and health services
- Well established councils and council services
Above All, Have a Plan
“We’ve said this many times before, above all before you do any sort of investing you need to have a properly thought out strategy and plan,” Mr Collova said.
Our two part blog on how to be a successful property investor will give you more tips and advice on getting things right.
*This article is for general information purposes only. It is not intended as financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified and registered financial or investment adviser.
PEB Group is a complete property advisory service for Perth families. Offices are located in Inglewood and Willetton, Perth, Western Australia and offer service in - Financial Planning · Finance Broking · Property Management · Property Sales · Property Investment · Development
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