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Investing In Regional City Properties

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Transcript

Investing in regional city properties. 

When you’re investing in regional city properties there’s this blanket approach placed on it at times, where people are saying, “Don’t invest in it because capital cities are much better.” Now, if you’re looking at different years, if you go the last five or the last 10 or the last 20, or maybe you pick out a year in between, you can almost jump between the two to say which one’s better. Now, there are going to be some outliers in capital city locations that have really well performed, but even in that, there are suburbs and areas that have performed and have not performed.

When you’re considering investing in regional versus capital, let’s just take it to another country perhaps before we make the decision in Australia. If for example we use countries where they don’t really have a distinction between regional and capital, they just have big city or smaller city … USA is one example. They have many different states, population that’s spread across, as well as big city, small city. If we put that same analogy here, big city small city, then it’s almost like saying that regional city is perhaps a [inaudible 00:01:29]. Or maybe that regional city is perhaps is a particular part of a region, in Victoria or in Melbourne. So when we’re doing this look into properties, and we’re taking off this tagline away from regional and capital, we start to just go, “Wait, there’s people that live there. There are jobs that are there, there is transport that is there, and it’s just a matter of thinking, ‘Is it a small city or a same size as one of the major regions in a big city?'”

When you start thinking of that, you start to remove the bias that comes with it. I actually recently asked a poll across a few different platforms: one on Facebook, one on LinkedIn, and in this poll I asked this question saying, “Would you invest in regional property?” There was actually mixed responses. On Facebook, there was 95% that said yes they would, and five percent that were no. And then on LinkedIn, it was roughly a 75/25 split saying yes and no. 

From these varying responses, what did I learn? I learned that people were placing a blanket approach on capital city investing as a whole, and regional city investing as a whole. Now, if you did that, there’s a few things that would have happened. Over the last two years, you would have missed out on exceptional cash flow as well as growth opportunities across markets such as Geelong, Newcastle, perhaps even Launceston … To some extent, even though Hobart is considered a capital, population-wise, it’s almost similar to some of the suburbs or regions within major cities, so you could even place that. Perhaps Ballarat, the Gippsland area, there’s so many areas that we could have just kept going and going … Burnie, Devonport … The list goes on.

What that shows is that by investing with a blanket approach, you can miss out on opportunities that not just are cash flow opportunities, or not just growth opportunities, but opportunities that provide the best of both worlds, where people were not willing to enter it because of certain yields, but then it surprised people and those yields have pulled right back, and now the price growth phase is entered. So when considering investing, remove the headlines. Remove regional, remove capital, and place the fundamentals of demand, supply and consumer confidence or sentiment, basically saying, “How much more stuff is popping up, how many of those people want some of that stuff, and how do people feel about the area or region in general?” Or even just lending or property in general. 

When you’re combining these three factors, you can take it anywhere. You can take it where it’s 50,000 people, 100,000 people or millions of people. And by having that approach, you’re able to find the little spots across this amazing country, this large country, that have provided double digit growth, as well as high yields, as well as an opportunity to take your portfolio to the next level. So when you’re considering investing, think of investing in property, not investing with labels such as capital, region, blue chip, outer ring, middle ring … You’ll be able to find the sweet spots through just looking at the numbers, as well as by taking away the bias. 

That’s it from us here at InvestorKit, the experts in wealth creation, helping you take action.