The 3 Key Things You Need to Know to Invest in Profitable Property. 

Most of us haven’t been investing in property for long enough to have actually experienced the broad patterns of change that consistently drive capital growth.  This makes us very dependent on the quality of the advice we receive.  That can make us nervous because property investment advice, is not regulated, nor are property claims.

Many of us have seen capital growth from the perspective of our own home.  We bought it many years ago and it has gone up in value significantly.  Most of us aren’t really sure of what drove the changes.

Our experience of home price growth is often manipulated by property promoters.  They encourage us to choose whichever property we like, because that strategy worked well for our own home.  The fractured logic is that, the more we like the property the more likely it is to do well.  This usually drives people to pick prestige property.   It is also what these property promoters usually have to sell. 

Many investors who have bought from property promoters have not done well.  Last week a broker told us about his client who bought two apartments about four years ago.  One was in North Coogee in Perth and the other in Inner Brisbane.  Both were prestige properties and looked fabulous.  Both markets have had issues and his client estimates the value of these properties is now down $250,000 on what he paid for them.

In comparison many of our clients are consistently achieving $25,000 to $30,000 per annum per property outside of Sydney and Melbourne at affordable price points.  Over the same four years many of them have achieved $200,000+ capital growth on two properties.

So What do we do differently?

Property investment selection starts with facts from three key areas that give us much greater predictability for price growth. 

  • Trended data for supply and demand.  This shows us the current state of each market and an insight into each property cycle.

The chart below shows an example of trended data for Loganlea in QLD : it shows a graph of Days on Market (green) and Median price (blue). The graph shows trended data from Oct 12 to Jun 16.

Notice how the DOM have dropped from around 89 in Apr 2013 to around 52 in Aug 2016 . This coincided with an increase in capital growth 95K over the period. Of course knowing this and selecting the right type of property can enhance this result.

  • The five drivers of capital growth. These are the trends in data and policy that drive supply and demand.  When we study these we have an insight into what is coming.  We can also evaluate the strength of the conditions each change will create.  This gives us incredible insights into the length of time each driver will be active.

  • An understanding of median price and its information about buyer behaviour.

"In comparison many of our clients are consistently achieving $25,000 to $30,000 per annum per property.  Over the same four years many of them have achieved $200,000+ capital growth on two properties."

These three key sets of information give us robust comparative property information.   The sort a property investor needs to make an informed decision.

We consistently see several patterns of factors that support growth.

Next week we will share the story of gentrification. Where we can identify an opportunity based on under valued property m​arkets within undervalued areas that sit in growth markets.