Capital Gains: Why It Pays To Buy In A Suburb You Know

I always like the question, “Where should I buy?”. 

I think it’s because there are so many great places and so many different reasons why one property or area would suit a person. Surprising to a lot of people is the first question, “where did you grow up?”. This usually comes with some response and an inquiry about why. 

Knowing an area means you know the good streets, the bad streets, where the jobs and schools are and which parts get affected by floods or noise. This information is so valuable when you buy. There are a lot of people in Brisbane who have moved from regional areas. They are almost always surprised when I tell them to buy in their home town. Regional areas are cheaper than big cities, so the barrier of entry is lower. 

The job of an investment property, especially one of your first ones, is capital growth. Rent is important, but not as important as the capital growth. Getting into the market is hard if you don’t have a property or asset to gear off. So by getting an affordable property in an area you know and trust is a great place to start. Then you let time do some work. I have done this exercise with many of our property managers over the years. They have been purchased in Tamworth, Miles, Townsville and Gladstone. 

Over a period of seven years they have made more in capital growth than they could have saved. Now with that increase they can leverage that equity and buy in Brisbane. If they had realised on savings alone it would have taken longer, they would be saving against an increasing market and they would have lost all that capital gain.