It can be unnerving to invest in property for the first time due to the abundance of information and jargon surrounding the topic. From demand and supply indicators, to rental yield, to capital growth potential, there’s plenty of concepts to get your head around in order to invest wisely.
Knowing where to find reliable property market data and most importantly how to interpret the data are two of the most important things to keep in mind when searching for the perfect property and location.
In the meantime, here’s some practical advice to help you find the right investment opportunity for your portfolio.
- Devise a checklist.
Any strategic plan should involve a detailed roadmap that outlines how you’ll reach your desired outcome, and property investing is no different. The first point of call is to create a property investing checklist of must-have features for both the property and the location.
For instance, you may decide that you want to invest in a 3-bedroom apartment in an area that’s no further than 5km from the CBD. The more specific your checklist, the better chance you have of finding a property and a location that matches your investment needs.
- Cut through the jargon (and get a great time on side).
Before you begin your fieldwork, make a conscious effort to understand property investing jargon. Whether you subscribe to property investing newsletters, join online forums such as Property Chat or more general personal finance blogs, or speak to professionals like a property investment advisor or a tax accountant, there’s many educational resources you can lean on.
Join the property investing community, ask questions, and soak up as much information as you can so you can expand your investing knowledge.
- Get your hands on reliable market insights.
From Residex to Corelogic to APM PriceFinder, there are several reliable sources of property market information you can use to help locate a good investment property. Many of these providers offer free suburb profile reports which you can use as a starting point.
These reports feature a breakdown of median property values, the demographic profile of the suburb, distribution of property type (e.g. 70% of properties are apartments) and consumption behaviour (e.g. the majority of residents rent within the area).
During this stage, you’ll likely choose 3-4 suburbs that you think would be a potentially strong investment.
- Practise what you preach!
Once you’ve learnt about property investing and the typical signals to look out for, it’s time to put your knowledge into practice. This means interpreting property investing information to shape your decision-making.
Making sense of economic factors such as employment growth, disposable income, or finance trends, identifying capital growth potential, or reviewing the market cycle, is a crucial part of the process.
You can review current market activity within the area, such as days on market (DOM) and the number of sales within a given timeframe. These indicators will help you understand the nature of demand within the area. For instance, a DOM of 90 days and 60 sales in the past three months shows there is relatively strong demand within the area.
- Be rewarded for your investment.
Securing capital growth isn’t the only way you can be rewarded for your investment, as there are unconventional ways you can use your existing financial accounts to be rewarded for your purchase. If you currently have a rewards credit card you can earn frequent flyer points when you list your investment property with LJ Hooker.
Bessie Hassan | Money Expert at finder.com.au
When done with caution, property investing can be a great way to build long-term wealth, but the success of your investment is often reflected by the preliminary research you’ve undertaken. Take your time during this research phase and speak to professionals and you’ll be one step closer to being a property investor.