The title of this blog post is somewhat a contradiction because, well, let’s be honest, aren’t ALL investors trying their best to pick the boom suburbs?
Hot spots or boom suburbs as we in the property world like to refer to them as, continue to grab our attention as the media spotlight often follows the so called property experts who are tipping the next growth suburb.
After all, who wouldn’t invest in a place where the experts claim there is going to be a rapid rise in property values – and if it’s going to happen soon, how can you possibly go wrong?
But what if I told you there was a downside to all of this?
What if gambling on the next tipped hot spot actually lost you money and cost you, instead of put you ahead. And yes, I do refer to this type of investing as gambling.
BECAUSE BOOM SUBURBS CAN BE LIKE SUGAR HITS.
You’ll be feeling great on the high of a potential quick equity gain, but even if this does happen, the long term viability of growth in an area like this may not be as desirable as expected.
What do I mean by all of this?
Rather than follow the next boom suburb, buyers should adopt a more strategic and long term approach to investing.
In my experience, the investments that outperform the averages in the long run have these three (3) characteristics.
1. THEY ARE LOCATED WITHIN 10KM OF A CBD.
2. THE DEMOGRAPHIC WHO RESIDE IN THE AREA ARE HIGH INCOME EARNERS.
3. PAST STATISTICS SHOW A CONSISTENT UPWARD TREND OF CAPITAL GROWTH THAT HAS OUTPERFORMED THE CITY AVERAGE.
In other words,
Investors should buy and hold in better quality areas with statically proven long term capital growth.
I wholeheartedly agree that this is much more sound and strategic way of investing your hard earned dollars. Particularly if your end goal is like the 99% of other property investors out there. To achieve financial freedom in the future.
Between 2004 and 2008, I owned and managed a real estate agency in the regional town of Gladstone and experienced first hand what it was like to watch a boom town “do it’s thing”.
I saw the rise and I watched the fall… the hard fall.
These huge peaks and troughs wreaked havoc on this little industrial town and it wasn’t long before the smart investors saw that in the long term, these types markets should be avoided altogether.
I was one of them.
I can tell you now that the investors who ignore the more important factors of property investment and get caught up in the hype of rapidly rising markets and hot spots rarely make it to financial freedom in the end.
This is a statistically proven and very sad fact to think these people wasted years of their time and money on poor performing investments only to come out in a less than desirable position.
So how do you win the game?
To succeed in property, Investors must see it as a long term strategy, not a short term one.
There is so much to know about property investing and most people find out the hard way when it’s often too late.
One of the most famous property investors of our time, Warren Buffett is all about the long term over the short and has achieved huge success as a result.
In his eyes, slow and steady wins the race.
So what type of investor are you?
In my opinion, chasing and betting on hot spots is much like gambling.
Sure there’s the potential of the big gain at the beginning. But like most gamblers, the dangling carrot of quick gains often leads to more and more daring investments where eventually, the house wins, not you.