Six steps to successful property investment
In last months edition of Peninsula Living, we examined the first step to successful property investment – education - and how being educated about the property market will help you make informed decisions on ways your money can work for you.
Equally important to education is the second step to successful property investment - research.
Step 2: Research - the smart way to high returns
Property, whether you live in it or not, is an investment asset and should be treated accordingly. Anyone looking to buy property needs to research the market if they want to buy well and ensure they buy at, or even under, market value.
Spending hours scouring through property on real estate websites or reading real estate articles in the newspaper is simply not an effective way to research property. To achieve reliable and strong returns in the property market, you will need to undertake targeted macro and micro economic-based research.
Macroeconomic property research
This looks at the bigger picture of the property market. It covers the economy as a whole and looks at and compares property trends in larger cities.
There are a number of companies that provide highly useful macroeconomic research specific to property. BIS Shrapnel and ANZ Economics are two of the best providers of macroeconomic research in Australia. Both regularly provide their research results and forecasts to the public through their websites and the media.
Good macro level research can give you a huge head start in property. It could have helped you buy in markets like Perth, Darwin or Queensland about six years ago (which subsequently grew by 90 to 150 per cent) instead of Sydney, which had anywhere between a negative 10 per cent growth to a positive 10 per cent growth in the same period.
Such differences in growth make an incredible difference to your medium and long-term property returns, particularly when you know how to use that equity to buy into the next growth market. When you know what research to use, you will find it is not too difficult to identify the growth areas.
Microeconomic property research
Microeconomic research for property is more about how a particular region, suburb or street performs in the market. It can even help identify which side of a street is likely to perform the best.
Micro level research can also help to identify any investment or infrastructure that is underway or planned for a particular area. It covers major highways and rail lines, new businesses and industrial projects such as mines and timber mills. Major roads and highways can have a significant effect on a suburb as it can effectively move the suburb significantly closer to a CBD, beach or other important region.
Other things you can find out from effective microeconomic research include demographics and proximity to schools, shopping centres and recreational facilities – highly important factors when determining market value.
Effective microeconomic property research can be a bit more difficult to find than macroeconomic data. This is where a good property investment adviser or research-based investment property buyers agent are worth their weight in gold. They spend a great deal of time researching property cycles and the market in each geographical area and can give their clients the best chance of high returns.
Of course, no forecaster can offer guaranteed returns, but it is far better to work with the odds than against them. In next months Peninsula Living, we will look at the third step to successful property investment – strategy – and discuss the different strategies to consider when you decide to invest in property.
Richard Sheppard is the Managing Director of inSynergy Property and Finance Solutions. Located in Brookvale, inSynergy provides professional property investment advice, property market research and specialised mortgage broking services to help everyday Australians achieve better returns with lower risk from property.