Everyday property investors looking at purchasing rental homes in cities and suburbs that they have never seen for themselves need to be careful about getting the right information on their intended investment locality, according to independent property advisers Herron Todd White.

By examining rental market relativities for a ‘standardised' rental home in different locations across Australia, Herron Todd White has concluded that there is a wide variation in rental market conditions, average rent levels and corresponding investment returns across individual cities and suburbs.

The study showed that rental yields on investor housing can range from 2.5% in some capital city areas to 6.5% in some regional locations.

Jon Butler, Wollongong Herron Todd White Director, said to demonstrate the difference, a basic three bedroom house was considered in three different Wollongong localities.

"In Bulli, a predominantly a family area with the beach close by, transport facilities, local shopping facilities and schools all in the locality, the value of the property would be around $750,000 - $800,000," Mr Butler said.

However, Mr Butler suggested property investors spend an extra $100,000 to build a larger home that suits the market place, thereby reducing the selling period and associated selling costs.

According to Mr Butler, if the same property were to be placed in Horsley, a newly developed residential suburb to the west of Dapto, it would be worth somewhere in the vicinity of $370,000 - $400,000, and show approximately a 4 % to 4.5% gross yield p.a.

Finally, if the property were to be placed in Warilla, an older suburb to the South of Wollongong characterised by government built homes that were built circa 1950's and a scattering of 1960's and 1970's dwellings, Mr Butler said it would be over capitalised in this area.

"Our hypothetical home would likely rent for about $290/wk which shows a yield of approximately 4% gross p.a.. It would suffer from high vacancy rates as there is a limited market for this rental in the area in comparison to areas like Bulli and Horsley," Mr Butler said.

Mr Butler said it was paramount for property owners to understand the local market place and the buyers' needs and wants within that market sector, and advised property investors to consult with a professional who is knowledgeable about the market place in that area.

Herron Todd White is Australia's largest independent property advisory and valuation firm with 44 offices across the nation and more than 500 staff.