Keen to give the idea of building your next investment property a go? One investment builder explains how he identifies his next ideal location to invest in for profit – and reveals where his research is taking him
JUST LIKE all good property investors, we know the value
and importance of doing our due diligence. Whether you’re building from scratch, doing a renovation or investing in a buy-and-hold property, there’s a fair amount of research that needs to be done before you sign a contract or hand over a dime.
We’re a 27-year-old family- owned business, so we have been in this for the long haul.
As specialist investment builders, when we begin looking for our next acquisition of land to build on, we spend plenty of time researching the market fundamentals.
is the CEO of Choice Homes, winner of the Developers and Builders category of the 2019 Your Investment Property Investor of the Year Awards
We’re most active in select Southeast Queensland areas such as the Gold Coast, Logan, Brisbane, Ipswich and Beaudesert, as well as the major resource industry hub of Mackay, but regardless of the location, we know how important it is to watch where money is either planned to be invested or already being spent on large infrastructure projects.
Key development projects such as roads, new schools, shopping centres and employment hubs all point towards potential growth areas. But they’re not the only indicators of a smart place to buy your next investment property.
When researching where to develop our new homes, we look at the bigger picture. For example, are there lifestyle attributes that supplement infrastructure spend, which will not only attract people to the area but keep them there?
Good renters want nice homes to live in, but they also want convenience and a range of amenities that they can take advantage of on a regular basis, whether these are shopping centres, schools or recreation facilities.
When we look for our next development location, we also consider growth potential, as areas that may be greenfield now could easily become large lifestyle and employment hubs one day.
Building, on average, one new home every day for 27 years, our company has focused its efforts on areas with plenty of upside, providing an affordable entry level for investors with a view to long-term capital growth.
For instance, we were one of the first to build around the Horizon Park, Forest Lake and Springfield Lakes areas in Queensland back in the late 1990s and early 2000s, when home and land packages sold for under $150,000.
At the time, the property market was beginning to heat up and Brisbane was coming of age as a capital city – but not everyone wanted to live in or near the CBD. Areas like Forest Lake and Springfield Lakes provided excellent value for money and had a number of infrastructure projects in play, including the upgrade to the Centenary Highway into Brisbane.
Again, seeing roads, schools and shopping centres being planned in or near a target area is always a good sign, as this indicates that the people making big decisions to invest big amounts of money are expecting an influx of residents.
In the early 2000s, we began building investment homes in Coomera on the Gold Coast, where the area had largely been underdeveloped.
Coomera on the Gold Coast is “one of the fast-growing areas in the country”, Knight says
Coomera was and remains, in our view, one of the fastest-growing areas in the country, providing solid capital gains and strong rental returns, and we see this continuing for many years to come.
While land is becoming scarcer, there are still plenty of opportunities in smaller subdivisions, and the flow-on effect of the scarcity will mean the demand will continue and push up prices.
With the Gold Coast being centrally located between the two largest cities in the state, offering easy access to both, plenty of schools and shopping centres and some of the best beaches in the world, demand is driven not only by the basic fundamentals but by lifestyle choices as well, and when emotion plays into people’s decision-making process it adds a very strong reason to live there.
Spotting a suburb ripe for building profits
We look for what’s going to provide the best long-term value for our clients, rather than what’s just in vogue right now, and there are
still plenty of opportunities in Southeast Queensland that aren’t centred around the CBD.
Indicators such as interstate migration play a key role for
us when looking for our next land acquisition.
We continue to see strong migration from the southern states, thanks to Queensland’s housing affordability, great lifestyle and favourable economic climate, particularly in the southeast of the state.
In 2017/18, Brisbane had the highest net internal migration gain of all capital cities, ahead of strong markets such as Melbourne and Hobart, with most coming from within the state or Sydney.
People move here to take advantage of an opportunity to create a new life, and most will choose to rent in an area offering access to infrastructure that will make their lives easier.
Just look at the Logan to Brisbane growth corridor, which we’ve earmarked as an area to watch. The population is set to almost double from 313,800 to 586,000 in just over 20 years, according to the South East Queensland Economic Foundations Paper, prepared by the Queensland Government in January 2018.
It’s not just the state government spending money in these regions; the local councils are also carefully planning for this expected growth, and these are the places we see providing the best value for us as builders and in turn our clients as investors.
As an example, the $512m Logan Enhancement Project was completed at the end of 2019 and included widening sections of the Logan and Gateway motorways, improving key congestion hotspots, and constructing new south-facing on- and off-ramps on the Gateway Motorway, a main arterial bypassing Brisbane that provides easier access between the Gold Coast and Sunshine Coast.
The suburb of Park Ridge in Logan is set to be transformed with a network of new transport infrastructure, including road connections and footpaths to cope with more traffic due to the addition of two new subdivisions.
The Park Ridge Connector has also been identified as an area to be set aside by the state government for a transport corridor that will connect planned future communities at Park Ridge, Flagstone and Yarrabilba to services and employment.
While a new road will not be required for 20 years or more,
the state government has said it is important to preserve the corridor now so that more dense development can be catered for in the future.
Because of this infrastructure, a proactive council and many lifestyle attributes, we consider this area to be just as important as we did suburbs such as Forest Lake, Springfield Lakes and Coomera some 20 years ago.
The next building boom location?
We have a dedicated in-house research team continually looking at the fundamentals of locations for their next land acquisition, and this due diligence has led us to Central Queensland.
Knight pinpoints Mackay in Central Queensland for investment, on the strength of its employment, business and development opportunities
We have invested heavily in the city of Mackay, as mining and associated industries in Queensland have added billions to the state’s economy in the last financial year.
It’s no secret that Central Queensland suffered through the mining downturn, but regional cities such as Mackay don’t rely on a single economy like many others do.
Mackay not only benefits from the rich coal resources to the west but is also one of the largest sugar- producing zones in Australia, as well as a hub for the education, health, aviation and tourism industries.
At just over an hour’s flight from the Brisbane Domestic Airport, Mackay benefits from growing employment, business and development opportunities and is an investment location we strongly believe in.
Here’s what Choice Homes recommends when considering a new investment opportunity:
Follow the fundamentals
- New infrastructure projects create new jobs and boost the local economy by attracting more people to an area, who in turn spend money in local businesses and help drive demand for local property, as more people want to live there.
- Look out for strong sur infrastructure projects that are already in place or going to be developed in the near future. These include new schools, childcare centres, hospitals and transport networks.
Go for growth
- Look for areas expecting high growth over the next 20 years.
- Solid long-term investments that provide good returns and capital gains aren’t built in the short term. Areas that are on the fringes of capital cities or connect to other regional or satellite centres are always worth looking at.
- Find out if councils or government is planning for growth with upgraded road networks or the release of new land developments.
- Buying new property rather
than second-hand can provide
a number of tax depreciation opportunities (see boxout below).
- New property provides builder warranties that may not be applicable to older buildings.
Look for retail and recreation
- Seek out areas with good options for recreation. Families look for locations with well-equipped sports facilities, parks and a range of recreational choices.
- Areas close to shopping centres and multiple retail outlets will also be more attractive to tenants.
Identify employment hubs
- Find out if there are employment opportunities nearby. Business or enterprise parks are always good providers of employment, as are large company headquarters or government offices.
- Small businesses are key providers of jobs and a driver of Australia’s economy. Areas such as the Gold Coast and Mackay are hotbeds of small businesses that employ people and spend close to home, keeping the local economy turning. YIP