In real estate, everything is a trade-off. If we had unlimited access to funds, then it would be easy to buy the right property. That’s why you see the wealthiest people out there building very impressive portfolios of blue-chip assets.
However, for everyone else, something has to give. As a property investor, your job is to allocate your available cash and borrowing capacity to the very best assets that are going to serve you best and help you achieve your personal goals.
That means that you’re going to be weighing up different strategies and different types of properties in different areas to try and build the right property portfolio for you.
One of the questions I get a lot is what should they focus on out of location and land size. We all know that both land component and the location of a property are incredibly important and are some of the key drivers of capital growth.
But which one is more important?
I always tell people, it’s not actually about either land or location, but the asset that you’re buying.
You can have a bad property in a great location, or you could have a huge portion of land in a poor location. Both aren’t good assets. You need to find a balance between the two.
Location will do a lot, but it’s not the be-all and end-all. You can have a really good property in a location that is classified as ‘good’, but maybe not as premium as some others, yet it can still outperform a property from a better suburb.
If you’re talking about all things being equal when it comes to land size or location, I would prefer to get a property in a better location that has a land component that is the average of that suburb, rather than a larger block of land, that is bigger than the average block size in an inferior suburb.
I would also be prepared to compromise slightly on size to get into that better location. For example, if the average block size of a suburb is 600sq m if you purchase a property that is 450-500sq m, then that’s not going to make a big difference.
That’s because the average buyer that is purchasing a property in that area, is not going to be impacted if they purchased a slightly smaller property. What I mean is that their quality of life is not going to change dramatically if the block is that little bit smaller. That means you can still see strong demand when the time comes to sell and similar capital growth to the rest of the suburb.
This changes only when you’re buying something that would greatly impact the buyer and their preferences. If you wanted to buy a 200sq m block of land in that same suburb, then you are now starting to significantly move away from what the buyers in that location expect and want.
When in doubt, always ask yourself what people in that suburb actually want and what they are currently buying. Then you can work backwards from there.
If you are interested in the above, feel free to reach out to a Henderson buyers agent today for more information.
