The most common mistake investors make is where they buy their first investment property.

A lot of people buy close to where they live because that makes them feel comfortable. I was having a conversation with a client the other day who wants to buy a unit in the same block as hers because she knows everything about the block.

That should allow you to buy at the right price – but it doesn’t make it a good investment.

Similarly, just because you live in a nice area, doesn’t mean that it’s a great place to invest. I had another client who bought a unit in the same area that they own their home.

Very nice unit. No tenant for more than 6 months. Not a great decision.

For a great investment property, you need to ask, first and foremost:

WHO is my tenant?

What is their demographic? Are they single, a couple, kids, no kids, professional, tradies, single mums, middle aged divorcees? What’s their income level? You can get a good snapshot of demographics in an area/suburb by looking at suburb profiles or census data.

Once you have a good idea of what your tenant looks like, you’ll know what sort of property will fit that demographic. If renters are looking for 4 bedroom houses, there’s no point buying a 2 bedroom apartment or a bedsit. Families generally prefer houses, singles and young couples look for units more than other groups.

WHERE are they going to work?

What employment opportunities are around that are going to bring more people into the area to ensure you have a constant supply of tenants? Employment growth is important, so think about what are the factors that are going to drive employment in the area. Is there infrastructure growth (roads, hospitals, shopping centres, business centres etc) that will create jobs?

WHY are they going to be drawn to your property?

Is it close to schools, transport and shopping (or the particular facilities that your tenant demographic is looking for). Is there other additional community infrastructure planned that will create more amenity for the community and make it a more desirable location?

There’s no coincidence that when the big retail brands start planning new stores, they look at developing demographics in specific areas and put stores where they KNOW people are going to be.

So – look for development plans for the major retail stores, franchised takeaways and hardware. You can bet they did their homework already!

If you run all these filters over the area in which you live, and everything checks out, by all means, invest away!

The ‘comfort’ that we have by something being close can sometimes make us careless, and make decisions without actually running the rule over the factors that should drive an investment decision.

Start with determining what your objective is in buying an investment property.

Then do your homework, and get advice.

Most people go out of their way to avoid discomfort, but discomfort just means you have to do more due diligence, and that’s not a bad idea.

You need to find if there are any pieces missing in your puzzle.