There’s something really nice about knowing a neighbourhood well. We know where to find the good coffee and how to get to the shops, and we even run into people we know in the street.

The best buying opportunities are often beyond your own backyard and property buyers who insist on purchasing locally could be selling themselves short especially when it comes to buying for investment purposes. 

Certainly, there’s something special about becoming intimate with a particular location. Generally speaking, we all tend to love our own little corners of the world.

But when it comes to property investment, a successful investor understand that emotion and all of those warm and fuzzy feelings need to be kept in check when making decisions that will determine return on investment.

Successful property investment really is a business and it is all about creating wealth, not about a particular property in a particular neighbourhood.

So, when it comes to picking a location to invest in, you need to think about it in a business-like manner – and that means considering the full spectrum of opportunity.

Sometimes – in fact, more often than not – the best investment opportunities can be found outside of your own locale.

And while for some investors it might be daunting to invest in an area you don’t know as well as your own, you could really limit your investment prospects if you don’t take the chance to explore.

Think of it a bit like travelling; sometimes a trip will make us realise how much we appreciate home, but other times we find destinations we think are even better than our own.

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Localised property cycles

The national property market cannot be regarded as one big homogenous market, even though that’s often the way it’s spoken about. In reality, the national property market is made up of state or territory centric markets, all moving in their own unique cycles.

The best time to buy in any property cycle is at the bottom of the market, or as close to that as possible, before the market hits an upswing. Inversely, it’s not ideal to buy at the very top of a hot market.

The advantage of investing in locations outside of your own is that you can take advantage of property cycles that are entering the right phase of growth. This is especially attractive if your local property market is at the peak of a growth phase, or offering very limited prospects for future growth.

Diversify for safety

Just as you can diversify across asset classes, you can also diversify your property portfolio by purchasing an investment property in a different location.

From a diversification perspective, concentrating all of your investment properties in anyone particular side of a city or even anyone particular city is not only limiting, it can also increase your risk exposure.

A well-balanced, low-risk investment portfolio often includes different properties and different markets, shielding you from any high concentration of risks that might be outside your control.

It also spreads your opportunity for growth across markets, so that at any one time you should be benefiting from an upswing in property values in at least one location.

If long-term consistent growth and low-risk strategies are high on your agenda, diversification is worth considering.

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This article via Which Investment Property does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.