Total Members: 155,312

How To Find Good Real Estate Investment Deals - Articles

What’s Best – City, Regional or Rural Property?

Date: 20/07/2017


A common question I’m asked is, “What makes a better investment – city, regional or rural real estate?” As you’ll see, there is an answer, but before I reveal it, let’s cover some investing theory.

Opportunities Are Not Location Specific

To begin with, an important point needs to be made –”Opportunity is not location specific” – good (and bad) deals are found everywhere. 

Indeed, a saying of mine to remember is this: “As long as people live in houses you can make money out of real estate,” and this means that if you can find a problem, whether a people or a housing problem, and solve it cost-effectively, then you should be able to create wealth.

This might be finding a tenant, or allowing someone to buy a house they otherwise couldn’t buy – such as offering carry-back financing, or adding more perceived value than actual cost by doing a cosmetic renovation. The point is that problems are really just opportunities in dress-up, and problems exist everywhere. 

Investor Constraints

We all have a different amount of time, money, investing skill and risk tolerance, and this means an investment that is right for one person may not be right for another.


If you already have a 9-to-5 job, then trying to be a professional property investor in your spare time, like at 9pm after a hectic day at work, is going to be very difficult to sustain. Such investors are probably better off with a set and forget strategy, such as a low-maintenance blue chip growth rental property.

Other investors choose to accelerate their wealth creation by being more hands-on, and this will require more time to find value-add opportunities and solve them. To do this successfully, such investors may need to take extended leave, or reduce their permanent work hours, in order to ‘free up’ the time needed.


As a rule, a city property will be more expensive than the equivalent home in a regional or rural area. Therefore, if you want to invest in the city, you will need more capital for deposits, and the wherewithal to qualify for a larger loan.

You probably know that I started off buying regional properties – in Ballarat to be exact. The main reason for that was two-fold: first, it’s where I could find positive cash flow properties; and second, it’s an area I could afford to purchase in.

Investing Skill

Great investors are made, not born. You become a great investor by first investing in yourself (i.e. in education), and then using your skill and expertise to find, manage and sell real estate. In the absence of skill, an investor must speculate, and the more things you leave to chance, the more chance there is that things will go wrong.

Risk Tolerance

Some people find the idea of bungy jumping appealing. I don’t. It’s too risky. Same with sky-diving, alligator wrestling, snake charming and the like. On the other hand, I’m right at home buying $100m worth of US commercial property, negotiating a tricky real estate deal, and standing in front of hundreds of people at a property seminar. This just serves to prove that we all have a different risk threshold, and one person’s risk is another person’s opportunity. 

For instance, you might think that regional property is risky because the market is smaller. Someone else might feel that city properties are risky because they are more expensive. The truth is that risk is inverse to skill; the higher your skill at a particular endeavour, the lower the risk will be in doing it.

Consider open heart surgery. If I had to perform an operation on you this afternoon, then the risk that the operation would fail and you’d die is very, very high. But for a skilled heart surgeon, who does this operation many times a week, it’s just another day at the office (or, in this case, hospital).

Investor Goal

Different investors have different goals. Some investors want growth. Other investors want income. Some investors want to negatively gear. Other investors want to positively gear.  The diversity in desired outcomes allows for one person to be selling a house (because they feel the property market has peaked) and another person to be buying that same house (to create an income loss and allowing him to negatively gear with the hope of long term capital gains) to both be right.

Investment Outcome

Different properties offer different profit outcomes. By their nature, city properties have very low rent returns, but tend to appreciate faster in value (at least in dollar terms). Regional properties usually offer higher rent returns but may not appreciate in value as fast as city properties. 

Steve’s Six Principles For Deciding Where To Buy

Here are six principles to consider when deciding where to buy:

1. Invest where you can afford to buy.

There’s no point looking to buy property in an area that you can’t afford. If you want to buy a city house as an investment property but can’t afford Sydney then try Melbourne, or Brisbane, or Adelaide, or Hobart. Alternatively, if you must buy in a certain suburb in Sydney, swap an unaffordable house for a cheaper unit, and see if that helps. If it doesn’t then change the suburb until it does.

2. Invest where the return makes sense.

If the city, regional or rural area you want to invest in doesn’t have real estate you can purchase that will deliver your required return within your required timeframe, then look elsewhere.

3. Invest where, and how, you feel comfortable.

You should invest in locations you know something about and feel confident investing in, and your chosen investment strategy should be one that you have been educated in implementing.

4. Invest where the majority of people own.

Investing always carries risk, but if you invest in an area where the majority of people own, rather than rent, then you are somewhat insulated against a sudden price decline like investor-dominated towns like Moranbah and Gladstone experienced.

5. Invest where a ‘pathway of progress’ is emerging.

Another Steve saying: You buy in an area as it is today, but you’ll sell in an area as it will be tomorrow. It makes sense to buy in an area that people will want to live in more and more as time goes on. The perfect situation is an area that is in what I call a “pathway of progress”. That is, better job opportunities, improving infrastructure, amenities, transport, etc. that will make the location more desirable.

6. Invest where the trend is your friend.

I often say the fastest and easiest way to make money is to find a fast moving trend and jump on it. That way – just like paddling downstream – the market momentum will carry you, and your profits, along with little effort. The alternative is to invest where the trend is not your friend. This too can be lucrative in time, but you may need to wait a while for the trend to reverse, and in the meantime, you risk losing money.

So, Where Should You Invest – City, Regional Or Rural?

The answer – any, and all!

For some it will be a regional area because they know it well, it’s affordable, and because it provides the return they want, when they want, and how they want. For another investor it will be a city property, or rural property, for exactly the same reasons.

In my case, I started off investing in regional areas, but nowadays I buy commercial property in city locations.

So, you see, it doesn’t matter where you start. Just pick somewhere that works for you.


Profile photo of Steve McKnight

By Steve McKnight

Steve McKnight, the founder of, is a respected property investing authority as well as Australia's #1 best-selling business author.


  1. Jamie

    Hi Steve
    One of your best posts ever – there are some people out there charging $1000s and $1000s for ‘information’ that is ambiguous and flawed. In my humble opinion, people could follow just your advice in this post and they would become successful investors. Thank you as always for doing what you do, and I look forward to saying Hi! at MegaConference in September.
    Cheers! Jamie
    [For the cynical types who might read this, I don’t receive a cent from Steve, I’m just saying that in my opinion there is no better or more altrusitic property educator out there.]

    • Profile photo of Steve McKnight

      Thanks for the vote of confidence Jamie. That article took me a few hours to write, so hopefully it provides value to the members. It is true that some of what is written is common sense, but time and time again I find that people overlook the basics for something unnecessarily complicated. The harder something is to understand, the harder it will be to implement; simple concepts applied consistently lead to more sustainable profits.

      See you at Mega Conference!

    • Profile photo of Steve McKnight

      Hi George,

      It’s been a while since I last looked closely at the Perth market, but I understand that property prices aren’t strong based on what I am reading in the press. If so, this means that momentum isn’t your friend, and thus one of the six principles mentioned in the article is missing. If you decide to invest now then there may be some ‘down time’, figuratively and literally, until the market picks up. Balanced against that is that once the market recovers you won’t be able to buy at such low prices.

      So, to your question… I don’t know, and we’ll only know once the bottom has passed and prices recover. Another question to try and answer is “does the expected investment upside outweigh the expected investing downside by enough of a margin to go ahead?” You’ll need to make your own call on that.

      An alternative opinion to mine is Warren Buffet, who said aptly that you should buy your straw hats in the winter (when they’re cheaper). Applying this to Perth – not only is it winter in season, it seems it is winter in the property market too. Time will tell if it is a short or long winter…

      – Steve

  2. Mark

    Hi Steve,
    Your opinion would be appreciated please. I am reading a growing volume of opinion that our debt-fuelled global economy combined with central bank money-printing will lead to an inevitable crash at some point (maybe in the next 2 years). My amateur understanding of economic history is that a sharemarket return to long-term median values (60-90% fall) and property price correction (30-50%) is long overdue. I imagine the safest financial position is cash but I’m thinking the next best is to at least own my property portfolio debt-free. What do you think about these predictions and the smartest course of action ?

    • Profile photo of Steve McKnight

      Good morning Mark.

      When I studied economics at Uni, historical attempts to stimulate an economy by printing cash inevitably led to inflation. At the moment this hasn’t happened, but it is being closely watched which is why interest rates are creeping up.

      As far as market commentary goes, at the extremes you have people predicting continued prosperity, and others predicting financial Armageddon. Only time will tell which will unfold…

      If you believe that there will be a financial melt down, then cash may not be your safest asset given the risk of bank failure. Typically people look to precious metals, rare gems, etc. in such times; items that are scarce and hold intrinsic value. Since you hold the opinion about potential market downside risk, it would make sense that you research what types of investments are prudent and invest accordingly. Just be careful about being ‘all-in’ and ‘all-wrong’. A few years back, after hearing Harry Dent predict the S&P would crash, I made a small speculative investment in a manged fund that shorted the S&P. After losing 40% of its value because the market did the opposite of what Dent predicted, I cut my losses and sold out. Since then the market has continued to go up, up, up.

      Normally you would put the capital you want to protect in low risk low yielding assets (government backed bonds, etc.), but still have your at-risk capital in higher yielding higher risk assets. You adjust the mix as you see fit and according to your risk tolerance and in response to your read of the market.

      The downside to cash though is that, if you’re wrong and the economy continues to expand, then you will lose
      buying power. For instance, if cash earns a 0% and property earns a 10% return, then after a year your cash buys 10% less property.

      Now, to my thoughts… a saying: all markets overshoot on the upside, and overshoot on the downside. My opinion is that, with new highs being recorded on stock markets almost daily, we are probably in ‘overshot on the upside territory’. That said, there may still be more to come before it corrects.


      – Steve

    • Profile photo of Steve McKnight

      Hi Sam,

      Thanks for the post. I haven’t kept a close eye on Ballarat for a while, and not at all over the past 12 months while I was living in the US. That said, I was told the local council opened up a lot of land in there and that prices had struggled since given the extra supply.

      Speaking about regional areas in general though, pay careful attention to jobs and infrastructure. You would want a higher rental yield to compensate you for (usually) a lower capital gain return.

      Ballarat was always of interest to me because it was affordable and within 70 mins train commute to Melbourne, which is less than a car commute from Cranbourne.

      Do you have a property on your radar? Reply with the url and I’ll give you a first impression.

      – Steve

  3. Profile photo of Erwin

    Hi Steve, Your books have helped me understand the different aspects of property investment. I haven’t found property investment books that are as informative and detailed as yours. Unfortunately, I read them after I have already made unconditional on 2x properties here in NZ which have been signed under my name. I setup a company name with the help of my accountant and would like to have the investment properties under the Look through company while the residential under my name. However, my lender advised my accountant just today that they couldn’t do this as part of their lending policy either all of the properties under the LTC or under my name. Now I feel stuck as both my lawyer and accountant have advised to keep all under my name which goes against your advise in your books.

    Will you be able to advise on how to go about this problem in NZ?

    Thanks and regards,

    • Profile photo of Steve McKnight

      Hi Erwin,

      I don’t think there is stamp duty in NZ, is there? What would be the ‘cost’ of selling them to a new entity? I’m expecting you would still have to be a personal guarantor to the loan in the name of the new entity, but I would have thought the lender would be happy with that? I imagine there would be some loan fees to investigate too.


      – Steve

  4. Hi Erwin,
    Ahead of Steve’s reply, I just wanted to share a couple of thoughts re this :-

    Erwin>>>>……. However, my lender advised my accountant just today that they couldn’t do this as part of their lending policy either all of the properties under the LTC or under my name………..

    First, I’d be seeking the services of a good Mortgage Broker to suggest another lender. Why? Because it “sounds” like this lender might have cross-collateralised all of your properties – just a guess, or why else would they want to do it “their way”?

    Second, I always kept my home with a separate lender – never with any of the banks that had my IP’s. And I would suggest that to be a good way to gain future security.

    Third, it is interesting that your lawyer also said to keep them all “under your name” – that could be for other reasons, and, of course, it might be a NZ thing (my investments were all in Australia). This might be one area you would need to clarify before doing too much else.

    I hope some of those thoughts might have helped. I’ll now await Steve’s comment too (he has invested in NZ previously, so will likely have some useful thoughts for you).


  5. Profile photo of AustIndCorp

    Hi Steve,
    It’s great to read your above article which provide a direction to be decisive when investing in property. However, I would like to know how do you measure your last three principles?


  6. michael

    Cash is definitely not the asset class you want to be heavily invested in if you fear a monetary collapse…which I believe is coming as all fiat currencies in history have all collapsed due to massive printing by governments. Especially the US dollar with its gazillion-trillion national debt that is simply cannot reduce or repay, thus printing more and more money to just stay afloat. If we print false money we get arrested. The government gets a free ride. Its like if you get another credit card to use to pay off the first credit card. Eventually its unsustainable and it collapses.

    When the next GFC hits, the American economy implodes and China emerges as the next dominant power….GOLD/SILVER will emerge as the best investment. As Steve says, it has held its value forever, the major players in the world are stockpiling the precious metals as they know the economy is on life support. Anything linked to the dollar is big trouble.

    Look into Mike Maloney and others who go into this situation in depth. Very scary and important information to have

Got something to say? Post a comment...

Step 1 - 0% Complete

Fill Out Your Member Profile Below

Fill in the required fields below to complete your registration.

Registration not only grants you full access to this website, but will also enable us to send you our newsletter, latest investor tips, strategies and information about events/products relevant to investors. You can opt out at any time.

For correspondence purposes. Will not be visible to anyone.

Used to log in to the website and for targeting with messages. Alphanumeric characters only. No spaces allowed..

Receive Emails (required)

Member Login
Lost your password?

Register Free To Unlock Unrestricted Access To

1-Day Millionaire Mastermind Workshop - Only LIVE Training in 2019!