Why asset selection is just important as location

With the wide range of real estate content out there today, it’s very easy to get caught up in what all the latest ‘hot suburbs’ or best-performed locations might be.


Real estate sites often list the best-performed suburbs over the past quarter and unfortunately, many people use this information as the basis for their investing decisions. If you’re following what’s happening in the short-term then you’re likely making a big mistake and need to readjust your perspective.


When I look for locations to invest in, I don’t care about what’s happened in the last few months. I’m far more interested in how that suburb has performed over a long period of time.


All the areas I focus on will typically have at least a 30-year record of consistent capital growth. When you’re buying into this type of area, you can feel confident that no matter what happens in the news, which way the economy is going or which political party wins an election, your investments are going to still perform strongly.


While there are many investors out there who like to speculate on the next hotspot and how a large infrastructure project will help speed up the capital growth in a certain location, I believe they are still just gambling.


Many of these large projects might never get off the ground and could well be decades away from being completed if they do at all. When a large infrastructure project is announced, the time it takes to actually see any meaningful amount of people moving into an area could be years away and there are no guarantees.


Compare that to a rock-solid, blue-chip location that has seen steady growth for decades and contains all the key drivers of an in-demand area including a limited supply of land, strong local economy and jobs, high median incomes that are increasing and a large base of owner-occupiers wanting to live there.


When you contrast these two options, you can clearly see the difference between speculation and investing.


But there’s also another important element to the growth equation that we can’t overlook – choosing the right asset within that location.


While a suburb might be growing at 7 per cent per year over many decades, that doesn’t mean all the properties within that suburb are doing well. It’s important that you break down, the different types of assets in a location and invest in the ones that are both in demand and seeing that growth.


For example, if a location that is growing steadily, is being driven by four-bedroom family homes within a certain school zone, there’s no point buying a one-bedroom apartment in that area and hoping to achieve the same types of results.


There’s likely a clear reason for the strong performance of four-bedroom family homes and if you’re going to make a smart investment decision, you need to be thinking very closely about what’s driving the local demand.


Investing doesn’t have to be complicated and when you break it down, it’s easy to see why some areas and properties have performed so well over a long period of time, especially with the knowledge and support of the best buyers agent in Melbourne. Start thinking about investing with that long term perspective and your portfolio will thank you for it in the years and decades ahead.


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