When you purchase an investment property, a rough rule of thumb is that about 80% of your long-term price growth and rental growth will be determined by the quality of the location, while 20% will be determined by the quality of the actual home.

Where you buy, then, is more important than what you buy – especially when you start investing. However, once you’ve chosen a location, the decision of what you buy can make or break your investment performance.

So before we explore the best type of investment property to buy, let’s focus on where to invest in property in Australia.

First, though, let’s bust a myth. Despite what you might’ve heard in the media, there’s no ‘Australian property market’, just as there’s no ‘Australian stock market’.

If you invest in Australian equities, you can buy shares in more than 2,000 different companies, which operate in different industries and report different financial results.

Similarly, if you invest in Australian real estate, you can buy property in hundreds of different markets around the country. For example, the Southbank market in inner-city Melbourne is very different from the Alice Springs market in the Northern Territory desert. As a result, all these different markets rise and fall at different times and for different reasons. And some of them don’t rise at all.

That’s why, as a first-time investor, it’s very important you think carefully about where to invest in property in Australia. Not all locations are created equal.

You can research locations yourself. Or if you want to make sure you find the best beginner investment locations, you can outsource this challenging task to an experienced buyer’s agent. Either way, the best place to invest is in a location that’s likely to have a diverse, sustainable economy over the long-term. That way, you’re likely to maximise your price growth and rental growth over the decades to come. Here’s why-

People want to live where the jobs are, so if your investment property is located in an area with a consistently good economy, it will consistently be in demand by owner-occupiers (which will put upward pressure on prices) and tenants (which will put upward pressure on rents)

The stronger the local economy, the more money the council will have to invest in services and amenities, which will also stimulate demand by owner-occupiers and tenants

So where are these diverse, sustainable economies located? You can find them in parts of Sydney, Melbourne, Brisbane, Adelaide, Canberra and Hobart. It’s more challenging to find diverse, sustainable economies in Perth and Darwin, because those cities are heavily tied to the resources industry, which tends to operate in boom-bust cycles.

You can also find diverse, sustainable economies in parts of regional Australia. As with the Perth and Darwin examples, it’s generally best to avoid investing in regional communities that are heavily dependent on one industry, such as mining, agriculture or tourism, because a prolonged downturn in that main industry could devastate the local economy.

To repeat the point made earlier- not all locations are created equal. That’s why instead of investing in all of Sydney or all of regional Australia, you should focus on select pockets. In Sydney, for example, an affluent market like Double Bay is very different from a working class market like Campbelltown; in regional Australia, a diverse community like Ballarat in Victoria is very different from a resources community like Karratha in Western Australia. So choose wisely.

With all that in mind, here are some locations that, as of April 2022, are among the best options for a first-time investor-
Investment help for beginners – best type of investment property to buy

Once you’ve identified where to invest in property in Australia, your next challenge is to think about the best type of investment property to buy.

So, are the best beginner investments likely to be houses or units?

The answer is houses, if data from the Australian Bureau of Statistics is anything to go by. Over the 15 years to December 2021, median prices throughout Australia increased 110.0% for houses but only 82.2% for units.

That doesn’t mean an apartment can’t be a good investment. It just means that history suggests the average house is likely to outperform the average unit.

That’s why the table above, showing some of the best places to invest right now, focuses on house markets.

But just as not all locations are created equal, not all houses are created equal. The best beginner investments tend to be houses that can be rented out immediately, require minimal upkeep and have strong resale potential. So, as a first-time investor, some of the questions you need to ask yourself when looking for a house include-

• Does it have structural defects?
• Does it have an unattractive internal layout?
• Does it contain termites or other pests?
• Does it receive minimal amounts of natural light?
• Is it located in a noisy, dusty or smelly area?
• Would it flood during extreme weather events?

Building and pest inspections will allow you to check for some of these potential problems. For the others, you’ll either need to engage an expert buyer’s agent or conduct your own thorough due diligence.