How to find good investment suburbs in softening markets

According to Mr Kumar: “The reality of it is that, for those who have seen this before or those who have invested over more than one property cycle, this is business as usual. All you need to do is simply adjust your strategy to suit the market phase that we've got and realign what you’re buying and where you’re buying.”

“Stop following these negative media stories and look at the data in its entirety rather than small snippets of data taken and bandied around as the truth. Just look at your borrowing capacity and adjust your portfolio accordingly.”

At the end of the day, the Australian property market will continue to thrive as the national economy remains strong, inspiring a continuous surge of strong demand for housing across the states and territories.

‘Death of the hotspot’

In order to continue capitalising on the changing property market, Mr Kumar strongly encouraged investors to disregard the notion of hotspots and study their portfolio thoroughly to find out exactly what it needs to grow.

“One of the most common questions we get asked is, ‘Which suburbs should I buy to make money?’ There is no one answer because it depends on their financial circumstances, it depends on how many properties that they own, how they derive their income, what are they trying to achieve.”

“Once you've answered all of those questions, then you can ask yourself which suburb, then which property in that particular suburb,” the property expert highlighted.

While there are a lot of factors to consider when finding the best location for property investment, Mr Kumar said that the first and most important step is to determine the investor’s goals.

As they work out the different ways to achieve their goals, consider financial capabilities and limitations as well as lifestyle elements that may affect their ability to secure a mortgage and ultimately hold an investment property for the long-term.

Mr Kumar said: “There's so many different moving parts, but the easiest way to begin is to get some clarity on what you're trying to achieve so that you're not just going out there buying any property.”

“Most people invest by osmosis—they see and hear other people invest in a particular area and they jump in. What you should do is sit down and map out a plan to see what your portfolio is going to look like in one year, two years, five years, even in 10 years. That’s in terms of the properties, the cash flow and life events that are about to happen.”

“Then, reverse engineer that. Decide what you need to buy right now based on what you just determined, such as the cash flow, the amount of capital that you've got, what the bank's willing to lend you and other factors.”

Investors are advised to remember that property is simply a vehicle to get them where they want to go, which is why goal-setting is always an important step to take before ultimately building a property portfolio.

As the property markets transition from one cycle to another, reassessing goals is critical in order to determine the best way to adjust strategies for the long-term.

Due diligence

The changing property market would naturally attract attention and dominate headlines as people seek to know where the real estate industry is headed.

While it’s a good thing to be updated about the current state of the market and even analyse forecasts from time to time, Mr Kumar advised investors to avoid ‘getting too absorbed’ by it all.

Where appropriate, seek the guidance of property professionals to be able to filter out all the information available and ultimately focus on your own wealth-creation journey, he said.

“Now more than ever, you should really get some professional advice and professional guidance to shut out the noise and concentrate in the areas that does make sense.”

“There's just so much other good news out there. People need to sort the wheat from the chaff and just not focus on the negative stuff. Just go forward, business as usual,” Mr Kumar concluded.

Tune in to the October episode of Investing Insights with Right Property Group to find out more about how to address opportunities in the current market.

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