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Perth property investment: investing in new outer suburban estates

When considering an investment property in Perth, homes in outer suburban estates are often an attractive proposition. Why? Because generally the properties are cheaper than inner city real estate and they are new, which along with the lower rents, appeals to tenants.

Investors are lured by the benefits of negative gearing their Perth property investment as well as the prospect of capital growth as the new estate flourishes and is further developed.

But there are also a number of potential pitfalls investors must weigh up before adding a new, outer suburban Perth property investment to their portfolio.

Tenants are the lifeblood of any property investment. When investing in new land estates in outer suburbs, I recommend against being pioneers and purchasing the first, often cheapest, lots with the view to achieving maximum capital gain. It is important to see some sales traction and evidence of consumer confidence in the estate before you purchase to make sure the estate is going to flourish in the years to come.

Good tenants are only going to be attracted to the area if essential amenities are already in place. These include schools, established transport links, shopping centres and lifestyle amenities such as cafes, restaurants and bars.

Waiting until these services and facilities are in place, or there is a confirmed (and reasonable) timeframe for delivery, could mean the difference between a vacant property and regular rental income. This may mean the purchase is slightly more expensive but it is dramatically offset with the security of a tenant and lower vacancy levels. It can also dramatically reduce your risk and exposure when purchasing a property investment in Perth.

Established estates such as in Ellenbrook, Baldivis and Piara Waters very rarely have rental vacancies because of the high level of amenities within the neighbourhood and always make sure you purchase in an estate from a reputable developer. Bigger developers such as Stockland have many years experience developing award-winning communities and can often offer land at more competitive prices with attractive incentives.

A good investment consultant should understand what the client hopes to achieve from their Perth property investment. Very few investors should simply buy a property to maximise negative gearing or capital growth at the exclusion of other factors.

Most mum and dad investors need rental income to help with mortgage repayments. To try and reduce the initial purchase cost of a property investment in Perth I would suggest having finance approval in place to give you better bargaining power. Building a dwelling (ie. house and land) is a great option for investors and if you are buying a brand new dwelling, make sure you are not buying at full retail price from a developer who has placed a considerable ‘mark-up’ on the property to try and maximise development profits.

Reputable developers and WA’s larger home builders are able to offer new dwellings at a more competitive (or wholesale) price due to the large volume of builds they do. Buying or building a new home through the right channels can save you as much as $20,000 before your first tenants move in providing you with a significant upfront saving.

Investors with a minimal deposit, where mortgage insurance would be required, are advised to avoid high risk outer suburban properties and are encouraged into a savings regime before purchasing a property investment in Perth. Tailored programs such as ‘My Home Plan’ from our partners at BlueBay Finance can greatly assist with this task.

This category of investors can ill afford any extended periods without a tenant. Nevertheless if they were considering investing in suburbs such as Ellenbrook or Baldivis (or suburbs which demonstrate consistent growth and high rental demand), they should at least proceed to a feasibility stage and then analyse the risk.

There is no denying many outer suburban suburbs can provide positive opportunities for Perth property investors. The key is ensuring you choose the right suburb, at the right time, at the right price.

If you would like to know which suburbs in Perth are currently providing the most exciting opportunities for Perth property investments, contact an Investor Assist Property Investment Specialist or browse the list of properties currently available for sale on our website. These properties will immediately show you which suburbs are the ones to watch!