“If you dive in now, the only people who are going to do well out of it are the people selling the properties, now at a peak price because every man and his dog are interested,” he said.
Davis adds investors should be aware that just because the property values in the suburb have increased, this does not mean that rents have followed suit.
“So there’s a danger of paying a premium for a property, and not being able to recover it through rental income, as well as the risk of pricing your property out of the local rental market, should you try and increase the asking rent,” Davis said.
“Secondly, it could be that there are a lot of older properties in the area – too valuable to knock down and start again, but requiring a lot of money to bring to a standard where they’ll attract a quality tenant or a good price.
“And this is an obvious one – if the properties are out of your price range, it doesn’t really matter how hot the suburb is.”
Davis offers these tips to help give investors a clear investment strategy:
- Look for solid properties in less desirable areas - they’re often the best chance of increasing in value as higher income residents move in, and they have the added benefit of being more affordable.
- New or expanded amenities such as schools & shopping centres - developers & planners will have done solid research before committing the funding, so this is a good indicator of future population growth and therefore rental demand.
- While not necessarily an indicator of imminent growth, a property achieving a high rent relative to the property value and maintenance costs will give you a good rental return into the future.
