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When someone is selecting a property whether, for investment or ownership, there would be no more common catchphrase than “location, location, location”. 

When it comes to a place to live, the location is not that critical but when it comes to investing the location amongst other macro and micro fundamentals, are essential. 

So, what are the red flags all investors should be looking for in the investment property selection process, to ensure the property has the greatest chance of capital growth?

8 Red Flags

  1. An abundance of property available. The first place to look is at the supply to demand ratio. If there are too many properties in the area this would be shown in the high vacancy rates, low yields, and heightened Development Applications, all making it not suitable for an investment property purchase. To master the supply and demand fundamentals visit our blog here.

  2. Too much land space in the area. Conversely, this point speaks for itself. Be very wary of suburbs that have available acres of baron land, there are always reasons why no developer will go near that land due to the lack of other fundamentals in the area.

  3. Lack of diversified employment sectors. A major characteristic of a strong economy is one that has a diverse range of employment supporting it. Having employment diversity within an area not only drives constant demand for the property but also mitigates potential risk. Learn more about the importance of employment diversity in our blog here.

  4. High unemployment rate. This is taking into consideration the type of sectors of the economy that the suburb supports and assessing the level of unemployment.

  5. No height restrictions. If the suburb has a height or density restrictions it will restrict the chances of an oversupply, particularly if the suburb is in high demand. 

  6. Lack of adequate infrastructure. Infrastructure such as new roads, new public facilities such as pools, shopping centres, sporting complexes, are all key infrastructure drivers for suburbs.

  7. Lack of quality schools. This is desirable for both owner-occupiers and renters. If the area has no schools in it or if the schools are low quality it will likely be a poor option for tenants.

  8. Lack of convenient transport options. Accessibility to public transport options is crucial, whether it's a bus, tram or train system, these should be within walking distance or a short drive away from the property.

Take these 8 points into consideration when you are assessing an 'investment-worthy' area.

If you would like further guidance on the selection process, I'd be more than happy to chat through our detailed research approach. Simply book a call with me here.

Warren Jacobs - Senior Property Investment Consultant at Meridian Australia

P: (02) 9939 3249

Disclaimer: When considering purchasing a property, it's always prudent to seek the advice of an appropriately qualified professional to determine which strategy is most appropriate for your individual circumstance.


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