Investing Locally

Posted by Luke Graham

Property is such a unique asset class and so heavily engrained in the Australian psyche it can be difficult to treat as an investment as we would with shares, gold, bonds or currency. I’d suggest 99 out of 100 investors would not be interested in living adjacent to the corporate headquarters of the company they have shares in or the mine from which came their gold, yet most of us are more comfortable investing in a property close by so we can feel in control.

The majority of property investors in Australia make their property investments within their locality and often in the same postcode. There can be benefits in doing this, but almost all of them are emotionally driven so it is important to take a step back and consider the reasons behind your investment decisions. Are you investing locally because you know the area? Knowledge of a suburb doesn’t make for a good investment, just as being a bank teller doesn’t mean you should buy bank shares. Are you investing locally to maintain control of the property? Tenancy laws remain the same regardless of how closely located or far away you are from the property.

The prevalence of investing locally is so strong it is the status quo, but would you put your head in an oven just because Johnny did?

The most important state to maintain when investing in property is keeping an open mind. It is far easier to do this with financial assets because they are numbers on a computer screen. Consider the below pros and cons of locally investing:

The above pros can be attractive, yet all of them are characteristics appealing only to a novice investor. The cons far outweigh the pros, which are just for the sake of having ‘comfort’ in your investment, and you have likely forsaken Australia’s best property investment opportunities in exchange for that comfort.

Posted by Luke Graham, on 12th May 2015