Episode Details

How should you choose the location of your next investment property? And what are the floods going to mean for Brisbane property values?

Those are two of your questions we answer in today's question and answer session with Brett Warren.

In the end, you're going to learn a little about how we put our strategic property plan together to help

Russel B left the following question –

"Thanks for the great Podcast – I really love it – can I please ask a hypothetical question?

If an investor had a spare $1m, where and how should they spend it?

In the bigger capital city markets where the median property prices are now $1m (or close to) - where would their money be better spent? In the capital cities or further out where they can get more bang for their buck?

Any areas that should be avoided at all costs?"

While that's a good question - I'm afraid that's the wrong question, a shallow question, even though that's where most property investors start their journey.

However, statistics show that around 50% of all property investors sell up in the first five years, and of those that stay in the market, 92% never get past their first or second investment property.

So, if you want to outperform the average investor, if you want to develop financial freedom through property investing, then don't start by selecting a location, or looking for that ideal property.

What makes a great investment property for you is not likely to be the same as what would suit a different investor at a different stage in their investment journey or with a different risk profile or with a different size portfolio behind them.

The correct order is, to begin with, the end in mind - what do you want to achieve with your property portfolio and then build a Property Plan to get you there.

So, my first recommendation to anyone asking where to invest is to sit with an independent property strategist to formulate their plan.

When you invest in property there are really only three major levers you can pull:

1. Your budget – and that is usually determined by the banks.
2. Location and you can't afford to compromise on that.
3. The right property in that location.

And unless you have an unlimited budget, and that applies to very few of us, investors usually need to compromise on at least one of the above.

So back to the original question – what makes a great property investment location?

It's impossible to say this location is perfect for everyone.

When selecting a location, I would initially start by eliminating locations.

I suggest you should only consider investing in Australia's big three capital cities. I'm also saying that it's important to be very selective in choosing suburbs in these cities – investment grade suburbs that are likely to outperform.

I recommend looking for an area that has a long, proven history of strong capital growth and is likely to continue to outperform the averages.

In general, there are 3 types of property.

• A-Grade homes and "investment grade" properties are the type of assets you want to own, and the type of properties where great tenants want to live, not because they need to, but because they want to and are prepared to pay extra to live there.
• B grade properties still have a lot going for them, and during hot property markets like we are currently experiencing they still perform well, but their second location within their suburb or the less than perfect attributes of these properties mean they will slump more in downtimes.
• C grade properties – these are to be avoided unless they're in a great neighborhood and your intention is to demolish the property and replace it with something more appropriate for the location.

Having said that can you give us some thoughts about how to invest that hypothetical $1million

Sydney