Location is what makes a good real estate investment. With the right location, your property investment will keep on rising in value. The economic factors will decide whether the property in the location you are looking at have good prospects for appreciation into the future.
If you are scoping out real estate for capital gains, you have to look at various aspects of the location or target market. Is it a “dying” neighborhood or one that is undergoing a great deal of commercial or industrial rejuvenation and where significant wealth is likely to be created in the coming decades?
Some of the best areas to purchase property for capital gains include the following.
- Around universities and colleges
- Beaches and holiday destinations
- Around industrial and innovation parks
Properties around universities and colleges are generally high yield because of their high demand or low vacancy rates. No matter the state of the economy, universities always admit students year after year making these investments attractive for buyers looking for good rental yields. Many Australian universities are attracting thousands of international students who find the rental rates in Australia affordable and comparable with those in their countries. The locations within the vicinity of the universities and colleges offer the highest yields for investors. The yields go down as you move farther away from these institutions.
If you are looking for properties for capital gains, try to focus on cities or parts of the city that has historically been popular with tourists. Tourism has an enduring value and that means your property will always be in high demand. These fetch a premium but you also have the leeway to charge a premium for property rentals so you can recoup your investments while your property appreciates in value.
Holiday rentals or vacation homes generally have a very high ROI. The yields on the short term rentals are generally the highest due to the ultra-high demand. Just like in the university towns, the yields go down as you move farther away from the beaches or some holiday attraction that serves as the “pull factor” for that particular real estate market.
When buying these properties, it is important to keep in mind that buyers pay for the view. As long as they can catch a glimpse of the beach or some spectacular scenery, they will be willing to pay more and the yield will go up. These properties will have an impressive capital gain. The downside is that these properties with a view often a cost a fortune. You will pay a premium and that is why you shouldn’t be buying them for short term rental yields. The overriding consideration will be that the property prices will soon appreciate in value in the not so distant future.
Industrial Parks and Innovation Hubs
The great advantage with these locations is their capacity for regeneration. These locations don’t need to be too close to the city’s central business district but they should be accessible. Instead they should be close to the airport, railway stations or even bus stops. Future buyers or renters will always look for an easy commute. When buying these properties for capital gain, you should also ensure that they are close to all the important amenities including schools, health facilities, recreational centres as well as shopping malls.