Using a buyer’s agent will not only save you massive amounts of time, it is also likely to produce a better result, because a professional in any field – whether a doctor, lawyer or buyer’s agent – will almost certainly outperform an enthusiastic amateur. The downside, though, is that you’ll have to pay a fee for this real estate investing research.
Alternatively, you can do your own investment property research. The upside is that you won’t have to pay anyone. The downside is that the investment location you ultimately select might not deliver the same long-term capital growth and rental growth as one chosen by an expert buyer’s agent – which, of course, would cost you money in the long run.
Regardless of whether you opt for the do-it-yourself option or the outsourcing option, the best ways to research investment locations are for either you or your buyer’s agent to analyse data on:
Let’s discuss where you can find all that information, so you know how to research investment property locations yourself.
Thankfully, most of this information is easily accessible on the internet. Here are some of the websites you can visit as part of your real estate investing research:
The moral to the story is that if you want to learn how to do property research in Australia, you need a good internet connection, a lot of spare time and a love for crunching data.
Experienced buyer’s agents will tell you that, as a very rough rule, about 80% of the capital growth and rental growth a property enjoys over the long-term is based on its location, while only 20% is based on the home itself.
So your choice of investment location will significantly influence your long-term results, with different locations potentially generating very different outcomes. For example, in the 10 years to March 2022, the median house price rose by an average of 7.7% per year in Marrickville (Sydney) but only 0.6% per year in Kingsley (Perth), according to Suburbtrends.
That’s why it’s vital for property investors to learn the best ways to research investment locations.
One of the most important lessons to learn as a property investor is that there’s no ‘Australian property market’. Rather, there are hundreds of small markets spread across the eight states and territories, all of which perform differently. As we saw a moment ago, the Marrickville market in Sydney performs differently from the Kingsley market in Perth.
The reason property investment research in Australia is so challenging is because you need to research many markets, not just one, if you want to buy the right property in the right location.
Price growth and rental growth is based on supply and demand:
Levels of supply and demand differ from market to market, which is why Marrickville and Kingsley produced such different price growth outcomes over the decade to March 2022.
When you do real estate investing research, your goal should be to calculate both the current and future levels of supply and demand in different locations. That will help you calculate whether a location is currently undervalued, overvalued or fairly valued, and how its property values are likely to change over time.
So the best way to research investment locations is to visit the websites mentioned above and let the data guide you. Of course, using past and present data to forecast future trends involves an element of guesswork. But the better your research, the more educated your guessing will be.
Many investors make the mistake of focusing solely on demand when they do real estate investing research.
For example, they assume that if a location is receiving above-average levels of population growth or new infrastructure, that will lead to above-average levels of demand for local investment properties and therefore deliver above-average levels of price growth.
However, as we discussed above, price growth is based not just on demand; but on both supply and demand.
So if a location experiences strong growth in demand but even stronger growth in supply, that will place downward pressure on prices.
That’s why, when you research investment locations, you need to pay close attention to supply-side factors such as:
The best way to research investment locations is to look at a diverse range of data points for a diverse range of suburbs. That will give you a feel for how the balance between supply and demand is playing out.
What if you don’t have the time or skill to do all this real estate investing research?
In that case, you can get help from a buyer’s agent who can do the data analysis for you and recommend an investment location (and then help you buy a property in that location).
Alternatively, if you have a location in mind, but you don’t have the time or skill to buy a quality home at a fair price, you can engage an experienced buyer’s agent to:
The downside of using a buyer’s agent is having to pay a fee. However, if you work with an expert buyer’s agent, rather than going it alone, you should be able to get a handsome return on your investment by:
Suburb Help can connect you to a skilled, ethical buyer’s agent in your area.