Property Investment: Locating Hotspots Using Real Estate Data

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Selecting the exact suburb to invest your money is becoming all the more challenging with the property costs and rent expenses staying rather fixed in most cities in Australia. Thus, it is a bit of a gamble now to make repayments on an investment property.

Thus, if you’re into short-term trends investing – remember that what’s important Is being right at the right time, rather than just being right.

Sadly, not many can do this. So, past experiences will show that seeking to search for the next hotspot is flooded with individuals who get the facts right but still fail to deliver a good outcome.

What’s the key to creating and building an extensive portfolio? It is to make your property leverage into your 2nd property, and then using these two properties to make a leverage into additional investments, and so on.

One best skill an investor should have is the knowledge in calculating the market. Apparently, no one is a clairvoyant who can foresee with complete confidence what might happen in the future. But it is a fact that there are means to make an informed decision. Frankly, it is better to apply an informed decision in choosing an investment option, than taking a shot in the dark, which is something that most investors do.

In general, risks are higher when you are catching the market at its peak. And it’s highly probable that when you hear about a certain hotspot, their property prices have already reached unpredictably their highest in the market. Either you’re buying when it is the peak, nearing the peak or worst, at the market turn. If you go through buying like this – it just appears like a falling knife cutting through your net worth.

What is a hot spot?

A hotspot is a place that has not been as popular as the traditional blue-chip areas. They are usually recognised as areas that are underperforming. They’re generally located within a close distance to the more well-known suburbs. When one area becomes too costly for many to afford, what do they do? They typically move out to the nearby suburbs which are more reasonable or within their means, as this results with the so-called positive outward ripple effect.

Why most investors are getting it all wrong

Australian real estate consumers are specifically ignorant. Ill-timed poor buyers and sellers have not done any true research. Where do they acquire their information? Just by grasping sound bites and click-bait titles and captions from the conventional media.

Most of what is being engaged by consumers are auction clearance rates and median prices, these two are packed with flexible numbers. Most of the data is on median prices’ activities and is usually inadequate or lacking in nature (one number to describe a whole city or nation).

This information provides us about the most recent past (plus, statistics from a source are usually opposed by another), but rarely apprises the future.

There are far sounder means. Consumers can find hints about price performances in the future by projecting rental movements, vacancy rates and sales volumes in pursued or targeted locations.

Identifying a Suburb with Huge Growth Potential

Do a shortlist of your investment properties by classifying suburbs and postcodes where most of these factors are existing, in particular:

  • Sales volume changes are often a forerunner to patterns of price. When levels for demand are modified in a market, prices react longer. For Melbourne and Sydney, for example –sales activity summitted lengthily before this was reflected in 2018 and early 2019 price corrections.
  • Escalating property values, ideally steady growth in house prices in a fairly brief period – usually a few number of years, though it will really depend on how long you wish to invest for.
  • A weakening Days on Market (DOM) metric – is a solid indicator that there’s a great demand in an area or suburb since properties do not stay in the sale listing for a long time. It is necessary for you to have knowledge of the local market, as DOM changes generally by location and market.
  • Increasing rental yields – which points to how much income/property rent could make over a period, as a fraction of its price. Growing rental yields are an important sign that there is a strong demand for rental properties.
  • Soaring auction clearance rates as defined in detail as a percentage of the quantity of properties sold over a week or month.
  • Minimal vacancy rates imply that there is a huge demand for rental properties in the specific location or suburb

You may also monitor other economic statistics, such as job creation efforts, government infrastructure projects and investments which will give a lift to the local economy.

How to Find High Growth Suburbs within Seconds using SuburbsFinder

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Before buying into a hot spot area – what you need to know:

  • Choose a hidden gem – Select a property situated in an ideal location with a good buying value. A property that’s not renovated most likely will be bought in under market value thereby giving you an opportunity to increase and grow equity over a period. And if fully supported by infrastructure and lifestyle facilities/amenities, then the chance of having a good investment return is higher.
  • The less expensive property is not always the best. What you need to pay attention is the question on what similar properties are typically selling for in the location to understand if a property is either of these: overpriced, valued at under market or has met the present market.
  • Your concern is purchasing a property and not the whole suburb, thus, the spotlight should be on the property. The goal is to recognise probable areas for rental returns and capital growth. Once this is well-situated, then, the appeal factor increases.

Recognising Areas with Instant Capital Growth

Check for Areas Undergoing Gentrification

Look for those areas which may have had bad status in the past but now getting new residents moving in, thus, altering the suburb’s landscape. Plus, with more of the affluent checking and eventually living in the community, one thing is certain – property prices generally escalate.

How to locate these areas? Look for reasonably-priced areas in a region that appeals to you. Once you discover that its property prices have been on a steady growth rate for the recent 2-3 years, that is a positive sign. Next, shift your attention to the demographics – with emphasis on the stats of young people with appropriate income who have recently transferred into the area. This is one strong sign that the suburb is about to gentrify.

By extending and expanding your analysis further, checking out if there are new or recently upgraded homes in the area, with new restaurants and coffee shops burgeoning in the area – this actually presents a firmer validation on what the suburb is currently experiencing.

Find Infrastructure Development Projects

Infrastructure development? Yes! This is one of the most powerful indications for capital growth in the real estate industry. It’s a worthy sign that the area is expectedly seeing a jolt in the demand for housing as workers gather for work. Projects which have been initiated are highly-anticipated, as potential projects may fail as governments switch and budget priorities change.

Search for the ripple effect

In case you can’t afford to go into a high growth area, you may still be able to purchase into the same location by looking at the neighbouring suburbs. Timing is essential, if you are aware what the phase of the local market is in, then, it is most likely that you will be able to capitalise on the opportunities of making a beneficial gain from the growth.

Assess property values by matching the median prices of the surrounding suburbs. Once you get a >5% variation, it is possible that nearby suburb will pick-up. Watch closely and track median price trends every 3 months. If you are confident that the cycle has already commenced, search for properties that you can afford, yet has looming capital growth.

There is really so much to learn in property investing and SuburbsFinder is here to help you. We offer our services to help you find the best location to buy investment properties and more importantly, identify the right property to have.

Take advantage of our fully customisable tool to help you soon to be Hotspot areas and utilize it to be on top over the less-knowledgeable property investors, local real estate representatives, developers and owners. It lets you narrow down 15,000+ suburbs by combining all 40 data points as filters. It also lets you compare suburbs historical & current performance. And once you identified the best location our tool also lets you do feasibility studies on 5 properties all at the same time. Save time, budget, and cover the full cycle of your investment property research workflow.

So, if you think what we’ve built will drastically decrease your time researching for the best location and finding the right property based on your goals and financial situation, why don’t you sign up and give it a try.

How to Find High Yield Suburbs within Seconds using SuburbsFinder

It is the most comprehensive location report of all 15,000+ suburbs in Australia – with linked state, suburb, and postcode. It’s the perfect tool for property investors looking to buy a property to rent out rooms individually to have a positively geared portfolio.

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