About to buy your first investment property?
Location, location, location.
It’s real estate speak for a reason. The single biggest factor in whether your first property investment becomes a positive cashflow dream or a nightmare is the location.
The right area can deliver ongoing returns, equity growth, and healthy rental demand. The wrong one can turn a potentially profitable property into a money pit.
Here’s the secret…
With 38% of Americans planning to buy a home in 2025, there will be fierce competition for investment properties, especially in popular first time property investment hotspots.
Smart investors know that thorough location research is what separates profitable investments from costly mistakes.
In this guide we cover:
- Why Location Outweighs All Other Factors
- The Key Metrics To Track
- Essential Economic Indicators
- Location Pitfalls To Avoid
Ready? Let’s jump in.
Why Location Is The Make-or-Break Factor
Location, location, location…
You can renovate an old property. Repaint the walls, knock out a wall to create an open-plan kitchen and bathroom, and replace tired fixtures and finishes.
But you can’t change the location.
Where the property is will impact rental demand and potential price appreciation more than any other single factor when it comes to first time property investment opportunities. Cashflow, tenant quality, and returns all ultimately flow from the location. Smart investors know that before committing to buy you need to do your research on the exact area.
Here’s the part that most first time investors miss…
The most expensive areas aren’t always the smartest first property investment opportunities. In some markets it pays to find the next big thing before everyone else. That’s where options like first mortgage investments can help secure property in promising locations before prices surge. Being early in the right location can pay off big time for building long term wealth.
The Numbers That Actually Matter
Want to know which metrics separate a good location from a great one for your first property investment?
Check out these first:
Rental Yield
Rentals tell you how much income you can expect relative to the property price. Rental yield is the annual rent divided by the property value. The higher the rental yield the better. 5%+ is solid but can vary by market.
Days on Market
How quickly are properties selling? The less days on market the more in-demand that area is. Vacant homes on the market for months are a warning sign.
Price Growth
Look at 5 and 10-year trends rather than just last year. Smooth consistent growth is better than wild peaks and troughs. Markets that have grown by 2-3% annually over time tend to be more stable and less risky than those that have been boom-bust.
Vacancy Rates
The lower the vacancy rate the higher the rental demand. Areas with high vacancy rates struggle to find tenants.
Economic Indicators You Can’t Ignore
Local economic factors are the foundation of successful property investment.
Here’s the ones you need to track:
Job Growth
Employment and housing demand are inextricably linked. The more jobs an area has the more residents to fill rental properties. The key industries, the health of the local job market, and the unemployment rate all provide clues to how buoyant housing demand is likely to be. A diverse range of employers is better than a single dominant industry.
Population Growth
More people means more housing demand. Look for population growth numbers in your target areas. The growth in younger professionals, families and retirees all drive different types of housing demand, but it’s growth you want to see.
Infrastructure Investment
Is the state or federal government investing in the area? New transport infrastructure, schools, hospitals, and shopping centres are all a vote of confidence in a location. Infrastructure projects also make a place more liveable which improves property values.
Income Levels
Are locals able to afford to rent or buy? Median household income is the key figure to track. Areas with rising real incomes are better than places where residents can’t afford the rent.
Location Types For Different Goals
Not all locations are the same.
Cities, suburbs and regional hubs each have different types of investment opportunities.
Urban Locations
Cities have higher property prices but also high rental demand from young professionals and students. Yields tend to be stronger in central areas of larger metros, though the competition is also fierce. Around 74% of buyers are shopping under $500,000.
Suburban Areas
Suburbs provide family friendly rental opportunities with good schools and larger properties. They also offer some of the best long-term capital growth locations in many markets. Suburbs are often cheaper than city centres.
Regional Centres
Smaller cities and regional centres often offer the best entry prices alongside healthy growth prospects. The remote work trend has also benefitted many regional hubs with people moving out of expensive metro areas.
Pitfalls To Avoid In Location Research
Don’t fall for location hype.
Beware these warning signs:
● Declining population ● Rising crime ● Major employers moving out ● Oversupply of new developments ● Poor local schools ● Bad transport options
Multiple red flags mean walk away. There are always better investments out there.
The Research Process That Works
Pick a location, any location.
Wrong. When considering first time property investment options the right approach is systematic and detailed research. Choose 3-5 potential locations and then drill down deep. Do web searches on the local council site for new development approvals. Read local newspaper sites and blog posts to get a feel for community issues. Visit the area multiple times at different times of day and week.
Talk to locals. You can Google employment data and demographic statistics, but to understand what it’s really like in a location you need to chat to people. Ask about crime, schools, community feel and the future direction of the area.
Take your shortlist and compare the locations to each other across all the factors above. Which tick the most boxes? Where do the hard numbers stack up best? Let the data lead you, not the gut feel.
Timing Your Market Entry
Location is crucial, but timing is also important.
Markets go through ups and downs. Buying a first property when the market is at or near a low point can dramatically improve your returns. Look for markets that have recently corrected or are in early expansion phases where price growth is just picking up.
Don’t get cute trying to time the absolute bottom of the market. It’s a fools errand. Instead, focus on the long game and buy first time property investment opportunities at sensible prices in great locations. Good locations always recover.
Final Thoughts
Picking the right location for your first property investment doesn’t need to be a daunting process. Focus on the fundamentals, follow the data and avoid the hype. The best first time property investment opportunities are available in locations with strong economic data, population growth, and infrastructure improvements.
Do your homework, compare options and trust the data over instincts. Home sales are expected to rise by 9% in 2025 and mortgage rates will likely stabilise around 6% which will make it easier for first time investors to enter the market. The real key is buying in a strong location that will pay you now and appreciate over time.
Make the right choice and you’ll set the foundations for a successful property investment journey.
