There’s a reason they say location, location, location.
Location matters, especially when you’re a property investor.
When people come to me to talk about buying their first investment property, I will always suggest that regardless of your budget, you should be looking to buy the best asset you can in the best location that you can afford.
A lot of people out there look for different things like high cash flow. That’s great for some people, but if you’re looking to build equity and grow a property portfolio that you can live off, you need to be shooting for growth.
And to do that, invest in the best location you can. For example, if you have a $1 million budget, I think it’s a mistake to purchase two $500,000 properties. There are some advantages to splitting it up into two. You will probably be able to go out and find two properties that have higher yields. But those higher yields also indicate that the location is not as good.
If you’re buying a property that is under $500,000, you are likely going to be forced to look at poorer regional areas or the smaller capital cities. In contrast, with a $1 million budget, you can find good quality properties in great locations in many different areas. Or it would buy you more of a blue-chip property in one of those smaller capital cities.
However, by buying well in a blue chip location with a long history of solid capital growth, you can be confident that over the long term the value of that property will increase.
It’s at that point, you can then leverage off that higher-quality asset to get you into the next property. In the end, you will grow your portfolio, but you have better assets to your name, which in time should outperform those secondary locations.
If you want to make your money go even further, you can look to add value to the property you purchase.
For example, if you buy a property that has the potential to be renovated and sold at a profit, you can quickly make that equity go even further.
Better yet, you can buy a property in a quality location, renovate it, get the property revalued, and then refinance and release the equity. That allows you to move on to the next property and do it all again.
That’s exactly what we do with our accelerator strategy.
It’s a great way to get into high-quality assets in premium locations at a discount.
It will also mean that you grow your portfolio at a faster rate. The more properties you can get into today, the more time you will allow for them to increase in value.
But again, it comes down to buying well in the first place. If in doubt, focus on getting a property that is in the best location you can.
Over time it will pay dividends.
Engaging a trusted buyers advocate through Henderson’s buyers advocacy service is your best chance at navigating the competitive real estate market.
