Owner Occupied suburb vs Investors suburb

[sumterrence]

I was thinking about if I should focus on suburbs where there are mostly investors but not much owner occupiers vs mostly owner occupiers but minimal investors.

My thoughts are:

Owner occupied suburbs
Pros:
Owner occupied suburbs, price tend to be higher because people buying their own home with emotions, they are willing to pay premium for their dream home.

Environment seems to be nicer as less units/apartments and the street usually look nicer too, they look after their garden and won't put a bunch of rubbish in front of their front yard.

Cons:
inconvenient as these suburbs are usually further away from train stations and other shopping centre etc. and owning a car is almost a must other wise they might need to catch a bus than change train.

It might take longer to find a tenant but usually the tenants are quality tenants as rents are usually higher.


Investors Suburbs
Pro:
High turn over of properties, extraordinary growth in % in property price due to high demand of mixed investor and owner occupier.

Usually they are pretty close to train stations.

Cons:
Mostly these suburbs are the less desirable suburbs, and because most of the populations are renters it also create the over supply issue when one need to let their property.

Dominos effect when the economy goes down, as most investors tends to leverage to the max, when they are in financial stress they need to start selling off their investments, when a bunch of investors starting to get desperate price will go down and create panic selling for the others.

 

[Peter_Tersteeg]

I think your perceived 'cons' regarding owner occupied suburbs are false. The most desirable locations tend to be close to schools, shopping, public transport. The most desirable locations are dominated by owner occupiers people who can't afford to own there are willing to rent there.

You'll also find prices tend to be higher, but are capital gains which is what makes you the real money over time.

The only real negative for a location that's heavily owner occupied is the rental yields tend to be lower, which means they're probably more in the negative gearing camp than other locations. This does change over time however.

 

[Propertunity]

.... as most investors tends to leverage to the max,

This is a wild assumption, are you sure it is based on fact?

....when they are in financial stress they need to start selling off their investments,

IF smart investors get into financial distress, they usually only need to sell off 1-2 investments quietly and continue on their way until things improve. It just has to buy them a little time.

....when a bunch of investors starting to get desperate price will go down and create panic selling for the others.

The heard mentality can create panic buying as well as panic selling - moreso in the share market than the RE market, as it takes only 3 days to get funds from shares but maybe 3 months or longer to get funds from selling a property - so it is less volatile.

 

[JDP1]

I think your perceived 'cons' regarding owner occupied suburbs are false. The most desirable locations tend to be close to schools, shopping, public transport. The most desirable locations are dominated by owner occupiers people who can't afford to own there are willing to rent there.

You'll also find prices tend to be higher, but are capital gains which is what makes you the real money over time.

The only real negative for a location that's heavily owner occupied is the rental yields tend to be lower, which means they're probably more in the negative gearing camp than other locations. This does change over time however.

Yup..right on.

I have done both
The first was investor suburb, the second was OO suburb

for steady medium to long term low volatility gains, OO suburbs tend to do better. Investor suburbs are higher risk but can pay off if timing is right and price is right. The converse is also true and can be a.real headache if you want to sell amd the market isn't good.

I'd also add that supply can be a factor in investment ssuburbs more than OO suburbs. Oversupply tends yo happen quicker and easier in investor suburbs, a factor mostly out of your control.
Both can work however.. will depend on your goals outcomes.

 

[neK]

Using Sydney as an example, what suburbs would constitute investor suburbs and what would constitute owner occupied?

I was under the impression that Sydney was pretty evenly split for most of the suburbs.

 

[sumterrence]

Using Sydney as an example, what suburbs would constitute investor suburbs and what would constitute owner occupied?

I was under the impression that Sydney was pretty evenly split for most of the suburbs.

All I can think of is St Marys area as an Investors suburb and Baulkham Hills as owner occupier suburb.

and as you can see, St Marys has a lot of close neat amenities where as Baulkham Hills are a bit of pain when it comes to travelling.

Same as Liverpool(investor) vs Cherrybrook(owner occupied)

Cherrybrook was so expensive but then it's not close to any amenities and it's only recently started to build a train station there.

 

[jpcashflow]

Hi

Hello,

I am not sure if i agree totally with the post but i do with a couple of points.

All my investments are located in family oriented areas and always have been. I tend to go for homes that are close to stations, in a catchment area for certain school zoning.
I usually do not invest in areas where I know there is a high number of rentals "etc"

I classic example is a estate called the "Moorookyle Estate" in Tarneit Victoria. When the suburb first got developed there where plenty of marketing companies trying to sell the area for various reasons. 5 years later the areas has declined in value and rental yields have decreased as well. What is more sickening the crap quality of homes being built by builders offering cheap packages.

 

[Ace in the Hole]

In some of the more expensive OO suburbs, you can also get a lot of high level upgrading, additions, and knock down rebuilds of grand proportions.
These can only drag up the existing stock to the similar levels.

 

[Deltaberry]

Why not buy somewhere that has demand from both?

 

[TMNT]

in my experience, too many investors is not a good thing,

a lot of agents say a suburb with a high proportion of investors means most are rented out which means more competition for landlords renting out, therefore rents are softer and dotn go up as much or as quick

which does make sense

and I would assume OOs hold on to their properties longer and harder so supply is low so prices can rise due to demand outweighing supply

 

[neK]

Environment seems to be nicer as less units/apartments and the street usually look nicer too, they look after their garden and won't put a bunch of rubbish in front of their front yard.

I think this just comes down to demographic of people and relative income levels.

 

[chilliblue]

Using Sydney as an example, what suburbs would constitute investor suburbs and what would constitute owner occupied?

I was under the impression that Sydney was pretty evenly split for most of the suburbs.

Being an investors market: Epping NSW
Predominantly owner occupied: North Epping NSW

 

[albanga]

Personally I would simply not base my investment decisions upon whether the dwellings are predominantly owner occupied or investors.

I think there are far more valuable resources available to base decisions on and would have this way down my list of considerations.

 

[hugh72]

Suburbs with a good mix of o/o and rentals are probably ideal but I hate suburbs with lots of new build NRAS stock with rents 20 % below the market. Your property cannot compete and it seems to slow down rental growth considerably over the years

 

[Big Will]

I prefer higher OO as they look after their properties better than renters, which increases the appeal for more people buying.

Also less competition when the lease runs out..

 

[JohnHenry]

Why not buy somewhere that has demand from both?

Where is that located ? only God knows where... :-/

 

[sumterrence]

Where is that located ? only God knows where... :-/

Actually you don't need God to do that, RP Data is capable of doing that

 

[jkat]

All I can think of is St Marys area as an Investors suburb and Baulkham Hills as owner occupier suburb.

and as you can see, St Marys has a lot of close neat amenities where as Baulkham Hills are a bit of pain when it comes to travelling.

Same as Liverpool(investor) vs Cherrybrook(owner occupied)

Cherrybrook was so expensive but then it's not close to any amenities and it's only recently started to build a train station there.

Cherrybrook is OO not because it is a PIA to travel to (they have buses and train station 15min away). It is OO because it has good schools in the area, reasonably safe/crime free. The people that live in that area value certain things higher than public transport so that is what councils focus on.

Liverpool is not full of people who rent because it has public transport but because it has cultural communities/central hub for services so people requiring support (medical, social support) want to be near to that and will rent (or buy) to be near that.

I'm sure there are plenty of suburbs that would be a PIA to travel to that have a high amount of renters (i'm thinking northern beaches, eastern suburbs)

 

[JohnHenry]

Actually you don't need God to do that, RP Data is capable of doing that

Whoa, but you need to pay for that unfortunately.

 

[willister]

I was thinking about if I should focus on suburbs where there are mostly investors but not much owner occupiers vs mostly owner occupiers but minimal investors.

My thoughts are:

Owner occupied suburbs
Pros:
Owner occupied suburbs, price tend to be higher because people buying their own home with emotions, they are willing to pay premium for their dream home.

Environment seems to be nicer as less units/apartments and the street usually look nicer too, they look after their garden and won't put a bunch of rubbish in front of their front yard.

Cons:
inconvenient as these suburbs are usually further away from train stations and other shopping centre etc. and owning a car is almost a must other wise they might need to catch a bus than change train.

It might take longer to find a tenant but usually the tenants are quality tenants as rents are usually higher.


Investors Suburbs
Pro:
High turn over of properties, extraordinary growth in % in property price due to high demand of mixed investor and owner occupier.

Usually they are pretty close to train stations.

Cons:
Mostly these suburbs are the less desirable suburbs, and because most of the populations are renters it also create the over supply issue when one need to let their property.

Dominos effect when the economy goes down, as most investors tends to leverage to the max, when they are in financial stress they need to start selling off their investments, when a bunch of investors starting to get desperate price will go down and create panic selling for the others.

Don't know enough about Sydney suburbs to really comment but for comparisons sake:

Forest Hill Melbourne (I read somewhere it has the highest rate of O/O and held on the longest). Price has appreciated heaps since 2013, my friend said it took him 2-3 weeks to find a tenant.

Clayton (has P/T but no nearby schools) - mainly student accommodation and hospital workers. Price rise is OK since 2013 but not as much as Forest Hill. Tenants easy to find - my sister has 2 places there - both on streets where as much as 50% of the street is tenanted properties.

Conclusion from my 2nd hand experience: O/O probably a better bet, always demand somewhat, but most are pretty exxy these days vs. Investor suburbs.

I think in terms of determining price these days:

1. Schools, especially if "good schools".
2. Public Transport Access.
3. Other amenities - e.g. shops, proximity to large shopping centres.