Exploring the World of Data: Insights and Analysis.
With what seems like a never-ending supply of readily available information – whether it be from research reports, data and statistics surrounding the Australian property market, how does one begin to decipher what’s relevant?
What information do I look for when it comes to identifying an investment grade area and giving the green light to purchase an investment property you might ask?
As a buyer’s agent and a long-term property investor, I place high importance on the fundamentals that influence both capital growth and rental demand.
At the highest level, I look at three core fundamentals when doing due diligence on an area:
Population growth: Excluding retirement havens, single-industry towns and noting areas that may be experiencing a temporary spike in population due to a one-off event, i.e. workers moving temporarily into an area for the construction of a major project.
Infrastructure spending: Federal, state and local infrastructure projects in the area.
Employment: Unemployment rates and new job creation numbers.
Once an area that meets these criteria is identified, I then focus my attention on local economic and property-specific data, including, but not limited to:
Diversification and overall health of the local economy;
Consumer sentiment;
Demand (each suburb has to currently be or will soon be a desirable place to live through gentrification);
Improvements (planned, underway or recently completed); and
Property metrics – vacancy rates, days-on-market, previous property cycles, renters/owner-occupiers split, stock on market, auction clearance rates, income v debt ratios and rental yields.
Obtaining this information is vital as each of these factors can affect the property market, and ultimately your investment, in a different way.
Once an area is discovered and has passed the above metrics, I then start building what I call the “golden triangle” of an area, which is essentially the prime investment area of that given location.
I identify the “golden triangle” by looking at zoning, dwelling types, identifying the pockets that have a higher concentration of owner-occupiers & higher-income earners, marking local area amenities, public transport options and areas that may have higher social housing density.
The final piece of the puzzle for me is the actual asset selection. The reason for this is that, in my research, all of the above-listed points have a greater influence on the overall property performance than the actual property itself. Sure, the property needs to meet certain standards and be able to appeal to the masses and not the minority while having a certain level of scarcity, but it really comes down to the old adage “location, location, location”.
With so much data to look at, be careful you don’t get stuck in “analysis paralysis” which can happen when over-analysing a decision to the point that action is never taken. As a perfectionist, I learned the hard way early on in my investing journey, but I came to realise that every option has its pros and cons. What I discovered was that it is important to have a clearly defined strategy, a systematic process to follow and then have the ability to execute when a deal presents itself.