I am well known for being a property and position snob. I know some builders and developers don’t understand why I am happy to recommend some suburbs and not others. Whilst I maintain that all properties will double in value in a 7 to 10 year period, when using my formula it is important to consider rental returns as well as capital growth.
I recommend going to suburbs where there has been consistent capital growth and good rental returns. I have often doubled my investment in 3.5 to 5 years and recently almost tripled an investment in 10 years by sticking to long term performing suburbs.
I am a firm believer that you don’t have to pay big prices to be in a good suburb. As with all investment decisions there are degrees of risk. I try to mitigate risk by buying in a good suburb that has a track record in delivering strong capital growth and high rental returns.
When I benchmark most capital cities, inner city living within an 8 – 10 kilometer range is high on the scale for return on investment. Rarely is the CBD as attractive as the suburbs closest to the CBD and these fringe suburbs generally are the top performers. Research and consistent performances of these suburbs all point to investing within an 8-10 kilometer range from the city center.
So often I meet people who want to invest, but don’t know where to buy. For this reason, I created coffee and donuts. Firstly apply all of the thinking within this chapter and stay within an 8 – 10 kilometer radius of the city. Take the CBD out of the circle, forming the donut. Secondly, make sure your investment is within an easy stroll of at least three options for coffee and wine.
In observing coffee and donuts, you will be steered towards good suburbs with good amenities, which in turn will generally protect your returns. Infrastructure and amenities, along with unique features, are key ingredients to selection and asset protection, but be careful, because these can be lost in high-density areas. So, if you are unsure, stick to the coffee and donuts formula.
Lynne Wilton, The Formula – A mentor’s guide to confident property investing