What is a property hot-spot? And how do you avoid temporary hot spots? It’s challenging to get a concrete definition; nevertheless, a hot spot is often described as an area that has not attracted the same level of attention as traditional blue-chip locations.
Hot spots are often identified as underperforming areas, usually within close proximity to more popular suburbs. When an area becomes too expensive for people to afford, they typically move to these neighbouring suburbs that are more affordable, causing a positive outward ripple effect.
Sometimes, areas become hot spots because a large company or manufacturing business moved into the area; thus, employed people want to live close to work. But a temporary hot spot would be an area that is close to a significant event or change that may not sustain the market long-term.
Long-term performance or short-term speculation?
However, it’s important to remember that property investment for most people is a long-term investment. Therefore, it is best to make an investment decision based on proven long-term performance rather than short-term speculation.
The fact is hot-spotting – seeking out the “next big boom” location – is nothing more than mere speculation. It’s not true property investment.
The dictionary definition of speculation is, “Engagement in business transactions involving considerable risk but offering the chance of large gains, esp. trading in commodities, stocks, etc., in the hope of profit from changes in the market price.”
The keywords in that definition are considerable risk. We understand that there is risk anytime you choose to invest in anything; however, we would recommend not investing in a temporary hot spot if you’re a first-time investor.
Not all opportunities are great
While buying property in an up-and-coming area can be a great opportunity for equity growth, purchasing in a temporary hotspot can leave you in a financially unstable position. If a property is built heavily on one industry, the location may be popular at the time, but the property would lose value if the industry were to fail.
Let’s take mining, for example. Some of the regional areas and mining towns boomed as investors chased up prices. Unless those investors got the timing right, they are left with properties worth considerably less than they paid and with less rental income than they expected.
Buyers have since abandoned these markets, leaving the owners stuck with properties that they can now not sell.
Being right isn’t what’s important
According to the experts, being right isn’t what’s important when it comes to short-term trends. It’s being right at the right time that counts.
If you are a first-time investor, it is best to buy in areas that have a proven long-term history of outperforming the average capital growth and are likely to continue to outperform due to the demographics of the people living in the area.
Are you looking to invest? We know that there’s more to choosing an investment property than affordability and location. So, if you’d like assistance finding and determining an investment property that’s right for you, we can help!
We can help!
If you are considering purchasing an investment property, now is the time to buy. Why? Because loan interest rates are still low—less than 2%. When the interest rates begin to climb, it will cost you tens of thousands if not hundreds of thousands of dollars more. When purchasing a property, it’s important to have someone with the knowledge you need to make the right decision. That’s where we can help!
Ready to start creating passive income with property? Think you’re ready to invest in one or more properties?
We can help! At OneCorp, we walk you through every step of the process at NO cost to you. We create a personalized property strategy and help you find the best opportunities on the market, so you know you’re getting the best return.
Getting started on your investment property journey has never been easier:
- We start by helping you set clear goals and objectives as to what you want to achieve through property investment.
- From there, we run the numbers through proprietary software to accurately assess exactly what you need out of a property portfolio to achieve those goals.
- Lastly, we find the perfect property to make those objectives a reality!
