How To Become a Smart and Successful Property Investor in 2021
What do we need to know about real estate in 2021 that can help us be smarter and more successful investors?
And what can we learn from the past?
When it comes to real estate and what motivates and attracts us as buyers, renters or tenants, the past few generations have seen a dramatic change in what we desire from property.
The economics of real estate and what causes and pushes capital growth for successful investment has also shifted and is not the same as it was for our grandparents.
As far as generations go – Gen X, Gen Y and Baby Boomers probably know more about change, than any other before them. We’ve lived through a huge digital transformation, the birth of the Internet and economic and political movements more quickly than anyone could have anticipated.
So how has that changed real estate and the smartest ways to invest? And what does that mean in 2021?
SPACE: WHY SIZE MATTERS, BUT BIGGER IS NO LONGER BETTER
To understand the change in real estate and space, we have to look at how digital transformations have affected how we live.
Fifty years ago, people needed big houses because they tended to socialise and spend more of their time at home.
People did not go out for brunch on a weekend for smashed avo on toast. They didn’t meet at wine bars for drinks, followed by a restaurant dinner. They lived and socialised at home. They entertained in the home. They invited friends and family over, which meant more space, bigger yards and extra rooms.
People also collected things. Walls of books and encyclopedias, drawers of vinyl records, stacks of magazines. Even 20 or 30 years ago people still needed space for cabinets full of videos, CDs and DVDs.
Today we go out to eat and socialise. Our books are on a Kindle. Our knowledge is one click away on Google. Our entertainment is on Netflix. The need for space inside the home has diminished dramatically and has been replaced by the attraction of the Third Space.
WHY IS THE THIRD SPACE SO IMPORTANT WHEN INVESTING IN REAL ESTATE?
When you buy or rent a home to live in, you’re getting the First Space. This is the bricks and walls and roof under which you live. The Second Space is the garden or yard or balcony that’s within your property.
The Third Space is an important part of real estate dynamics and refers to the areas close to your home. Parks, beaches, shops, cafes – we want a Third Space that offers us a great lifestyle and high liveability factor.
COVID-19 has made the Third Space even more important when it comes to investment. With so many of us working from home, we want our green space, convenient eateries and hangouts with friends close by.
Sprawling houses out in the suburbs, a long drive away from a decent cup of coffee, are no longer desirable.
To better understand what this means for us as property investors we need to look at how areas develop a good, desirable, highly-liveable Third Space. And that’s called Place Economics.
PLACEMAKING AND PLACE ECONOMICS
In simple terms, Place Economy areas are where everyone wants to be. They’re cool, they have a lot going on, they attract wealth, and so property prices rise, and real estate becomes more desirable.
In a city that has maybe 200-300 suburbs, you might find 10 that are Place Economies. They’re expensive to live in, but they’re aspirational and attractive.
These suburbs often transform over time through gentrification or are the benefit of Placemaking i.e. when something happens or changes in the area that makes it much more appealing. This happened in Hobart when the MONA (Museum of Old and New Art) opened in 2011.
Suddenly Hobart was no longer a one-night stay city that had some weekend markets and little else. It offered something cultural, it attracted more people, services and restaurants improved and Airbnb catered to the extra visitors that hotels couldn’t accommodate.
According to an article published by Domain.com.au, Hobart is now Australia’s number one housing market, “offering affordability, lifestyle and lots of space”. One local economist is quoted as saying “MONA has single-handedly changed the way people see Tasmania, where instead of being bogan, it’s about more sophistication, art, good food and hotels”.
The main idea around Place Economics is that the Third Space is as valuable as the real estate itself, and outranks a “dormitory suburb” where people sleep, but there is low liveability appeal.
Smart real estate investment in 2021 needs to offer the right kind of space in the right kind of place to live up to the expectations of buyers and renters.
If you want to know more about how to identify a better than average Third Space or find out if a particular area is a Place Economy, we can help.
Good property investors are nimble and adapt fast. They stay informed and enrol a team of experts to help them excel in times where others can’t. To find out how you can be one of those people, we’re running a free a property investing seminar.
Here you’ll be equipped with the tools, resources and support to thrive, and not fall behind on your path to financial freedom – whatever that may look like for you.
Book your spot now and find out what you need to know about the current market landscape and how you can make it work for the ultimate wealth creation opportunities.
By Sam Saggers