Note: This post has been completely rewritten as of October 2021.
A successful property portfolio is the result of meticulous planning, research and an ongoing review of your financial circumstances. Simple things like educating yourself about the property market by reading books, magazines and free online articles can help you stay up to date with the latest market trends. This is important for investors who wish to build a successful property portfolio, as understanding the market dynamics can help you choose a property that is more likely to perform well.
However, what’s even more critical is having an end goal in sight. It’s usually easier to work towards something when you have a set target. So, as clichéd as it may sound, the first step towards building an investment portfolio is determining why you need to create one.
Do you want to build a passive income stream through rentals? Are you looking for long term capital gains or plan to make some quick money through flipping properties?
Once you determine your personal goals and a timeframe to achieve them, it’s easier to build an effective investment strategy aligned to your requirement.
The next step is identifying a property to buy – which largely depends on your income. If you have a lot of surplus income, you can probably afford to invest in one of the thriving suburbs. However, this isn’t the case with most first-time investors, who are generally on a tight budget. Besides, increasing property prices and stricter lending criteria have made it even more challenging to buy in popular areas. Therefore, depending on your income and serviceability, it’s usually a good idea to purchase real estate in upcoming suburbs with potential for capital growth. Making savvy investments in such suburbs can help you build equity faster that can be used for financing more properties.
Choosing the right suburb for your real estate investment
Investing in high-growth suburbs is the key to building your investment portfolio. However, buying in the most popular Australian suburbs isn’t possible for many first-time investors due to the high property prices. The solution is to identify the next booming suburbs that will show capital growth and earn better rental yields.
You can start by comparing historical figures to find out suburbs that have shown significant capital growth in the past. If you find buying in such an area unaffordable, scout for a property in the neighbouring suburbs offering similar family-friendly infrastructure and low prices.
To help you get started, we did some digging and made a list of 5 suburbs across the country that could prove to be profitable for investors in the coming years. However, it’s important to note that this is just a guide. Though the list is compiled using in-depth research, it’s always better to supplement the information with your own research to identify an appropriate investment.
- Bardwell Park
Buying in the overheated Sydney property market isn’t for everyone. But if you’re keen, consider Bardwell Park, the site of the new Metro line. Even though Bardwell Park wasn’t historically expensive due to poor transport links with the CBD, the metro line could be a gamechanger. Better connectivity will reduce the vacancy rates in the area. As it grows in popularity, property prices will also rise, leading to capital growth over time.
Melton is about half an hour away from Melbourne CBD. It’s an easy commute, well-connected by public transport. The area is well-developed with good facilities but maintains a modest median house price of around $500,000. The median rent for houses in the area is $370 per week, and the median rental yield is 3.65%.
- Box Hill
According to an article on News.com.au, Box Hill saw a capital gain of 20.84% over 2020, making it one of the best-performing suburbs in the country. Even though the median house price in Box Hill has shot up significantly, if you can afford a property here, you can expect significant capital growth in the future.
This area is popular with the young crowd, owing to abundant employment and education opportunities. The median house price in Bathurst is a modest figure of $475,000. The area presents an attractive investment opportunity with good medical facilities and a well-known university in the area.
Yanchep has become extremely popular in recent times, as many people look for a tree change post-COVID. Not surprisingly, properties in the area have given investors a capital gain of 20.07% over the past year. The median property price for a house in the area currently sits at around $426,000, with an average weekly rental of $375.
You may also consult this list by Real Estate Investar that brings you the top 50 fastest rental growth suburbs of Australia.
Besides choosing the right suburb for investing in, getting the right loan structure for your purchase is essential. Each lender has different criteria for assessing your mortgage application. Different lenders also have a different level of risk tolerance, which means your choice of lender will impact your borrowing capacity. A mortgage broker can help you take advantage of this fact by diversifying your borrowings across multiple lenders to keep you from hitting the serviceability wall as your portfolio grows. Connect with an experienced mortgage broker on Hashching to simplify financing for your real estate journey.