Which Aussie Suburbs Should You Avoid Investing In?

Dilleen Property Group 2021

When it comes to property investing you may always hear the saying “location, location , location”, where is the best place to invest? Where’s the next hot suburb? Etc.

In this blog post I’m going to discuss if there are any suburbs that I would avoid investing in.

The answer may come as a surprise to most of you, but there is actually no particular suburbs I wouldn’t invest in, and I’ll explain why.

Why I Wouldn’t Rule Out Particular Suburbs

You may be thinking, well what about suburbs with a low socio-economic status and housing commission, or if it’s out in the middle of no-where, or in a flood zone. There are a million different scenarios. Taking all of this into account, there is not any particular suburb that I would rule out when investing. However, when investing, the property must tick 3 key boxes. It must be below market value – I must be able to make money on the way into the deal and I must be able to physically see that it is below the price of what other comparable sales have sold for recently. This way I can gain instant equity from the get-go. Secondly, the property must have good cash flow and support itself, and thirdly, the property must have good growth potential over the next 10-20 years.

It’s important to remember that there are a lot of variables to this. It widely depends on a person’s particular situation as to where they should invest, however as I have mentioned before, I have invested in capital cities and metro locations throughout Australia. This is where I would start off with, even if I could start over.

It is also important to consider spreading out your risk by diversifying your property portfolio. I have personally invested in many different types of properties in many different locations. I have invested in some good blue-chip properties worth over 1 million dollars. These properties have been in nice areas, look fancy, and some have been right on the beach. When going in to purchasing higher end properties I still always make sure they tick all the boxes, including purchasing them below market value. On the other hand, I have also invested in properties a bit further out, that I personally wouldn’t like to live in myself, however, they are an investment property, so the numbers stack up. It’s not about where you would like to live yourself when considering purchasing an investment property, it’s about what is going to give you the greatest results as an investment.

The Growth Ripple Effect

I grew up in Western Sydney in Mount Druitt, which is a suburb that is commonly referred to as a ‘bad’ suburb. Most people would say not to invest there because “there’s no nice places, there’s no growth and look at all the housing commission”.  But I’ve seen Mount Druitt and similar areas housing prices go from $150,000 to $400,000 over the last 15 – 20 years. Properties will always be going up in any location no matter what due to inflation, but to me it’s all about the numbers.

Location is a factor to consider, especially in terms of transportation and population growth, but if you are growing a portfolio, it really depends on the deal itself. If you are trying to get from point A to B you need quality properties, but you also need quantities of properties. No property investor achieves financial freedom and building a passive income with only two or three properties. If you are looking at the long-term you need to aim for 6 - 10 + properties.

Another example of this is the growth ripple effect in capital city areas. Suburbs 10kms from the CBD and others 20km-40km from the CBD are going to have almost the same growth rate over 15 – 20 years. For example, Bondi, Liverpool and Penrith. Looking at the data and statistics a lot of properties in Bondi went from 1 million to 2 million dollars, while in Penrith or Liverpool properties went from $400,000 to $800,000. Realistically, both suburbs doubled in value.

Building A Portfolio

It’s about using each property as a stepping stone to get from one to multiple properties. If you build a property portfolio with 6 - 8 + properties, chances are you’re going to have properties in many different locations. Some may be in fancy areas, and some may be in areas a bit further out with a large cash flow and growth. You may want to diversify into different states as well. In the end it all comes down to the deal itself, how the numbers stack up and ticking the boxes, not the specific suburb.

Disclaimer: This is not intended as legal, financial, or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature, you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.