It’s that Goldilocks real estate zone that many property investors swear by.
Encompassing the first 2-10 kilometres of the city, these inner-city suburbs are seen as the best places to invest due to their enormous capital growth prospects.
You only have to look at some of the prices being paid for inner-city homes in Melbourne, Sydney and parts of Brisbane to realise there is a fortune being made in the inner-city ring.
But it is also extremely expensive to break into this market, and many new investors are priced out of these blue-chip suburbs.
Which is why the regions look so attractive. The median house price in the Victorian town of Bendigo, for example, is $373,500 – which is still significantly lower than Melbourne’s median of $688,000.
But not all regional centres will offer the same return, and the trick to making money in a regional city or town is to do your homework first.
Close to home
Investor Michael Matusik, from Matusik Property Insights, says investors should look to buy in regional centres that they’re either extremely familiar with or they live close to.
“In my experience people who buy into regional areas that are nowhere near where they live end up having a bad time,” he says.
“They are not familiar with the area and if you are buying your first couple of properties, in other words if you are a novice, then you should focus on where you know.”
A Brisbane investor, for example, is much better off buying in a Queensland region they can readily access than in a central Victorian town they have never been to.
Buyers’ agent Miriam Sandkuhler from Property Mavens advises cautious investors to avoid one-industry towns, such as mining hot spots, which have the potential to bankrupt investors.
Who can forget what happened in Western Australia recently when the price of iron ore came off and rental returns in mining towns, such as Karratha and Port Hedland, dropped by as much as 50 per cent?
Many investors were burnt in Gladstone, too, which was lauded as property hot spot in 2012 due to a large number of infrastructure projects.
But an excessive level of spending caused certain Gladstone markets to become oversupplied and values plummeted.
“If you have a low-risk profile you need to stay away from these high-risk investments,” Ms Sandkuhler says.
Mr Matusik recommends first-time investors stick to towns and cities with populations of 100,000 people or greater, while Ms Sandkuhler urges her clients to look for towns that display growth indicators: employment, population growth and affordability of housing.
Know the difference
Regional property markets often fail to mimic their capital city counterparts, but many investors forget this, Mr Matusik adds.
“A major mistake many investors make is in transplanting their concept of value-for-money to the regional centre,” he says.
“They may look at a home for less than $300,000 in Rockhampton and think that it is cheap, but you have to take into consideration local wages and the local market.”
You have to also be aware that regional centres are not going to attract as many buyers or tenants.
“When it comes time to sell you may find that it takes a little longer than you thought,” Mr Matusik says.
“You have to remember that regional centres are very much affected by employment figures which wax and wane.”
Even if you do find a regional centre that ticks all the boxes you still need to find the right suburb within that town or city.
“Regions are smaller versions of capital cities in that there are many markets within the region,” Ms Sandkuhler says.
“There will be good neighbourhoods to buy in and bad neighbourhoods to buy in and you have to make sure you do your homework and due diligence first.”
Johanna Leggatt is a Melbourne-based freelance journalist. You can follow her on Twitter at @johannaleggatt