When considering the purchase of an investment property, you should (hopefully!) be going through a lot of property data about the property itself, and the area that it’s located in.
Population growth in an area, property prices in an area, supply vs demand for rental properties, rental returns, and more.
But what questions do you need to have answered when looking for qualitative and quantitative property data, and are you sure that you’re getting the full picture?
Let’s take a look at a few examples of information you may come across when looking to invest in property, and where the issues can be:
Example One: “This area is going to see a population growth of over 700%”
Positive population growth is certainly a great indicator of an area that may be a sound investment decision. But that standalone population growth figure isn’t enough. You need to ask (or research!) what base is the growth starting from.
Looking at the outer-Melbourne suburb of Truganina North as an example:
Area | 2016 (actual) | 2021 (forecast) | Average Annual % Change |
Truganina North | 1,207 | 8,477 | 702.55% |
(Source: home.id.com.au)
This area is projected to have a population growth of approximately 702% in the 5 years between 2016 and 2021. Pretty phenomenal, but that 702% increase isn’t on a population of 1.1 million like Adelaide, it’s on a population of a mere 1,207 people.
To give you some perspective, Salisbury in Adelaide’s North has a current population of 8,441 (Source: id.com.au).
Example Two: “This area is really popular with investors”
Proceed with caution! An area that is ‘popular with investors’, or called a ‘property hotspot‘ doesn’t necessarily mean that it’s a great option for you to invest in. In actual fact it could mean that most of the properties have been sold to investors as they are at a cheap price point and had a slick sales pitch. High volumes of investors in an area can have negative repercussions over the long-term, as it can create what we would call a ‘rental ghetto’.
Loganlea in Queensland is one such example, where the current rental population sits at 49.87%:
At Equidel we look for areas for our clients to invest in where the number of investors that can purchase are limited.
Example Three: “These properties are giving great rental returns”
Positive rental yields can be yet another great indicator of a sound investment property. However, buyer beware!
Tara, located in South East Queensland, had had high demand for rental properties back in 2011. This pushed rental prices up, and investors could ask as much as $450 per week for an investment property that cost them just $320,000. Things were looking peachy, until the local industry – a coal seam gas mine – began decreasing staffing levels after about 2 years. Workers and their families left the area in droves, meaning that rental demand decreased, and investors were forced to drop their weekly rent to as little as $250 per week in some cases. That’s if they’re lucky enough to have a tenant!
If there appears to be a high demand for rentals and rental returns are looking good for an area, this is the time to ask why the demand is being driven up. Is the industry driving this sustainable? For example, is it a new hospital being built, or is it just another mining town?
Example Four: “Location, location, location”
Have you ever looked on RealEstate.com.au or similar at a house that looks just perfect, but upon attending the open inspection you realise it’s actually located next to a caravan park, power station, or dump?
It’s important to look past the glossy brochures when investing. If you can’t do a drive-by of the location yourself; do a Google Map search instead, use Street View to see if you can get a look around, and visit the local Council website to see what information you can glean about the area.
Equidel clients have the peace of mind knowing that we personally visit every area that we recommend to our clients. We get to know the local amenities (school, child care, medical centres), the main roads versus the quieter streets, how built up an area already is, and more.
Whether you are looking at investing on your own, or using the services of an investment property consultant, make sure you always dig deeper. You owe it to yourself and your financial future!
If a property developer or consultant gives you data about a potential investment property or the area you’re thinking of investing in, ask where this data has been sourced from originally and look up the websites yourself. This ensures that a) the data is real and recent, and b) they’re not just cherry picking the ‘good looking’ data to paint the picture they want to make a sale.
If you’d like help – research is what I do best! Drop me a line via email and let’s have a chat.