Beyond the backyard – investing outside your ‘comfort zone’

Sunday, 5th Nov 2017

Many property investors choose to ‘stay close to home’ and invest in areas they are familiar with, however, by limiting their search radius they may be missing out on greater opportunities.

Investors are typically more comfortable investing in areas familiar to them. Many tend to buy in suburbs close to their own home, or close to areas they have lived previously.

At first glance, choosing to invest close to home seems like a prudent approach. Having your investment property close by may heighten your sense of control, since an asset you can drive past may feel more tangible and manageable.

Limiting your search area to the locations you are familiar with can also make the research required appear a lot less daunting. For example, you may already have intimate knowledge of the suburb’s local amenities, the schools and parks, and which streets offer more appeal than others.

This kind of knowledge can help you feel more confident to move forward and buy a property. Yet herein also lies the crux. Because of our emotional attachment to suburbs we live in or have lived in previously, this personal bias can cloud our judgement regarding an area’s growth potential.

For example, having a strong personal attachment to your childhood suburb may lead you to view its long-term outcomes more favourably than the raw suburb statistics would indicate. Additionally, if you are content to stay within the bounds of familiar locations, you may not adequately research other, potentially more promising areas.

It is vital you make an informed decision on which location to invest in that is based on solid research. While familiarity can certainly help speed up the research process, you must not let it make you complacent. It is key to smart investing that you adopt a systematic approach and that you are not swayed by the ‘quick fix’ of settling on a familiar area.

One of the best ways to protect your interests and ensure you receive unbiased and expert advice is to work with a buyer’s agent. Buyer’s agents are paid by, and work for, the investor – which means they serve the best interests of the investor.

A good buyer’s agent monitors the entire market, allowing investors to gain access to and compare more opportunities than they might otherwise be able to themselves. The additional resources and negotiation expertise of a buyer’s agent can provide investors with the tools to invest in ‘unfamiliar’ markets with confidence.

In summary, as tempting as it may be to favour your local area for investment, care must be taken to research and compare it with other locations for its long-term investment potential. Failure to do so may mean missing out on opportunities further afield, potentially hampering your wealth creation in the long run.

For more information on how a buyer’s agent can help you find the best investment properties, find out more about how they work here.