Speaking on a recent episode of the nestegg podcast, mortgage broker and managing director of Atelier Wealth Aaron Christie-David has warned investors not to chase hotspot areas or bargains, “because it’s not necessarily this shiny object to be chasing after”.  

“Yeah, sure, there might be a bargain, but as an investor, is that the place you should be investing in?” the broker queried.

“Maybe they’re not in desirable suburbs as an investor – does it suggest that maybe there’s local stress with an employer pulling out that’s going to impact that local economy?”

He flagged mining towns as “a good example of that right now”.

“You go back in time, and mining was the hotspot to be in [before] it became a bargain. But would that necessarily warrant an investor jumping in to that type of market?”

Another aspect that’s worthy of consideration, according to the broker, is that if a property is a bargain now, how long will it actually be before the local market does experience capital growth, “which is ultimately why investors get into the market”.

“Yes, cash flow is great, but we also want to see growth on the asset,” Mr Christie-David said.

“If that’s a bargain area and a bargain property, will that be a slower burn to try and get some capital growth?” 

It led him back to emphasising “the tried and true tested principles of investing in property”. These include: a great area, a great property, and the presence of other macro-factors that hint at continued capital growth such as infrastructure and future development.

That’s not to say that investors can’t be lucky, and properties can’t be found under market value in good areas.

“You genuinely know when the buyer has done their due diligence, when there’s the intersection between a desperate real estate agent and a desperate vendor to try and close the sale,” Mr Christie-David did concede.

“Then you come along at the right time and you play your cards really well is when you probably pick up a bargain.”