Do you know the difference between a superior investment property and an inferior one?
Well, it is – quite simply – due diligence.
Of course, as buyers’ agents, this is the key element of the services that we offer our clients every day.
We spend countless hours researching locations before they are on anyone’s radar before we decide to investment there.
Often, what looks like a solid option, falls over because of metrics that can be tricky for the layperson to understand.
For example, it may have good cash flow for investors because of affordable property prices, but the low buy-in prices are because the area itself has a number of issues that are unlikely to be remedied anytime soon.
On the other hand, a location may look like it’s struggling, but the fundamentals are actually there for future price growth if you know where to look, such as in Geelong several years ago when we started investing there for our clients and for ourselves personally.
Property is the last consideration
Now this might seem like a strange thing for a property investment professional to say, but property selection is the least vital part of the puzzle.
That’s because if you pick the right area – and have completed the necessary deep-dive due diligence – then you will always find the right property.
Unfortunately, novice investors usually choose the property first with the location usually being one that they are familiar with – perhaps because they live there, too, or their parents do.
This often means the capital growth with be sluggish because they didn’t understand the market fundamentals of the location as much as they did its amenities or its simple geography.
Sometimes, they reason, that because they like the location themselves, then it will tick the boxes for everyone else as well.
However, strategic property investment involves much more than just the general “likeability” of a place.
Sure, that plays its part, but it’s well down the list of the market fundamentals that must be met for an area to become a superior investment location.
The availability of online property research has made it seem easier to complete the necessary due diligence, but it’s understanding what the metrics are telling you that makes the biggest difference of all.
Amongst the raft of research that we complete before we choose a new investment location are these 10 questions that must be answered favourably before we even proceed.
The big question is, would you understand what the answers are telling you?
- What is the area’s cash flow?
- What are the area’s days on market?
- What are the vacancy rates?
- What is the historical growth of the area?
- What are its future infrastructure plans?
- What is the population growth forecast and its demographic mix?
- What about supply and demand of dwellings in the area?
- What is the economic vibrancy?
- What is the diversity of industries in the area?
- What is the overall view of the area?
To find out more about the 10 key questions above, download our ebook here.