If you can't afford to buy, try an investment property

Blame is directed at almost every participant in the market - baby boomers for being greedy; later generations for unrealistic expectations; governments for too much tax on housing, too little land supply, and negative gearing; the Reserve Bank for interest rates; and planners for housing that doesn't meet the needs of a changing society. The list goes on. Home ownership and property investment, however, aren't necessarily the same thing.

The idea of buying a property in a cheaper area and renting it out - in effect becoming an investor before a homeowner - has some merit, particularly in the current rental environment.

In a recent statement about returns, Mortgage Choice's Warren O'Rourke says those who find house too expensive may find a way into the market as investors.

"There are good long-term opportunities to be had for those willing to research outside the areas in which they were previously aiming to purchase," he says.

This might seem like a bit of patter from someone in the industry, and it is not a new idea, but let's have a look. Adelaide and Hobart have the lowest median prices of all the capital cities - about $290,000. In Adelaide the rental market is tight, with a vacancy rate of about 1 per cent.

Recently, 40 per cent of the units in the first release of Adelaide's The Palais, a new building in the Alpha Apartments development on North Terrace, were pre-sold.

Buyers were mainly first home owners, and country and interstate people looking for an occasional city base. One-bedroom units started at $210,000 and two-bedroom units at $305,000.

"They are smaller and less expensive than a lot of others around town, bringing them within reach of a lot of people who don't need or want more," says Nick Ploubidis, a property consultant with Professionals Apartments and Residential Projects.

Mortgage repayments are in line with market rents of $300 to $450 weekly. Also in Adelaide, a fully furnished apartment in the Tower Apartments in King William Street is on the market for $270,000. The building is mainly student accommodation and the apartment rents for $400 weekly.

Gross figures don't take into account costs, but they do mean a hefty portion of a mortgage would be covered by rent.

Alice Butler from Allrealty in Adelaide, which has this particular unit on the market, says interstate buyers are usually looking for something affordable. They are unable to buy either a first or second property in the cities where they live. Adelaide obviously isn't the only place where these sorts of values can be found.

For some time, people have been buying investment property in a cheaper area that they can afford while continuing to rent in their favoured area, which provides the lifestyle or work opportunities they want.

Finding investments that stack up requires patience, research, and a bit of a clinical attitude, but it is more fruitful than playing the blame game.