Investing in areas that are newly opened up for new development; areas that are evolving and emerging as the growth centre with people, jobs, entertainment, public facilities, industrial/government spending.
Keys to make it work:
- Local knowledge is essential
- Government initiatives
- Strategic investments
- Micro economics
These investments tend to have a lower price compared to developed regions.
Time frame and exit strategies:
These types of properties have a medium to long term investment potential of 2 to 10 years depending on the nature of the developments/changes. The aim is to sell the property at the peak performance or refinance to cash out equity for another investment property. It can also be used to pay down the non-deductible debt on a Primary Place of Residence (PPR).
The return perspective:
When buying well and capitalising on booming areas, there have been plenty of investments generating 15% to 30% annual growth or higher; with some investments doubling in value in 3-5 years.
The main advantage is the relatively low purchase price. Most of these properties are within the price range that derives limited to no stamp duty. Depending on the postcode, higher lending ratios can be achieved as well.
The potential risks/difficulties:
Since these types of properties are often in the regional areas, investors often need to hire an agent to manage the rental issues at a cost. However, a good agent can make things simple and easy for distant investors. In this strategy, managing the managing agents is necessary.
As is with every investment, growth may vary from your expectations. Timing to re-sell and refinance is critical for profit realisation.
Being able to keep tack of local news and area changes can challenge the likes of "Do It Yourself" (DIY) investors. Decisions between selling and holding requires a good understanding of local development movements and perspective.