Property Investment & Wealth Creation Australia | The Michael Yardney Podcast How to Research the Property Markets Like a Professional
Have you ever wondered how property professionals do their research?
If you're interested in finding properties that will outperform the market, this episode is for you.
The most research many property investors do is finding a property that they already like, then looking for information that confirms their biases. However, sophisticated investors take a more strategic approach.
Today, Kate Forbes, National Director of Property Strategy at Metropole, gives us a detailed picture of how the professionals at Metropole do their research.
Metropole's top down approach
This starts with examining the macro factors affecting our property markets and drills down to the micro level.
- Start by looking at the big picture – the macro-economic environment.
- Look for the right state in which to invest – one that will outperform the Australian market averages because of its economic growth and population growth.
- Within that state, look for the suburbs that will outperform with regards to capital growth. It's all about demographics. These suburbs tend to be areas where more owner-occupiers want to live because of lifestyle choices and where the locals can afford to and will be prepared to pay a premium to live because they have higher disposable incomes.
- Look for the right location within that suburb. Some livable streets will always outperform others and in those streets, some properties will always be more desirable than others.
- Then within that location look for the right property. And finally, only buy at...
- The right price, but I'm not suggesting a "cheap" property – there will always be cheap properties around in secondary locations. I mean the right property at a good price.
6 Stranded Strategic Approach
Only buy a property:
- That would appeal to owner occupiers. Not because you plan to sell the property, but because owner occupiers will buy similar properties pushing up local real estate values. This will be particularly important in the future as the percentage of investors in the market is likely to diminish
- That is below intrinsic value – that's why you should avoid new and off-the-plan properties which come at a premium price.
- With a high land to asset ratio – that doesn't necessarily mean a large block of land, but one where the land component makes up a significant part of the asset value.
- That is in an area that has a long history of strong capital growth and that will continue to outperform the averages because of the demographics in the area as mentioned above.
- That has a twist – something unique, or special, different or scarce about the property, and finally;
- Where you can manufacture capital growth through refurbishment, renovations or redevelopment rather than waiting for the market to do the heavy lifting as we're heading into a period of lower capital growth.
By following my 6 Stranded Strategic Approach, you minimise your risks and maximise your upside. Each strand represents a way of making money from property and combining all six is a powerful way of putting the odds in your favour. If one strand lets you down, they have two or three others supporting their property's performance.
When you look at it this way, buying a property strategically takes a lot of time, effort, research and something most investors never attain – perspective.
What I mean by this is you can gain a lot of knowledge over the Internet or by reading books or magazines but what you can't gain is experience. It takes many years to develop the perspective to understand what makes an investment grade property.
Links and Resources:
Michael Yardney's Mentorship Program
Some reading:
- Your Essential Guide to Property Research
- 5 Important Research Topics for Property Investment Success
Some of our favourite quotes from the show:
"We're not looking for properties that are affordable to everybody, we're looking for areas where people have got a high disposable income and can afford to, but more importantly are prepared to, pay a premium." – Michael Yardney
"If you buy a property to which you can add value through renovations or refurbishments, that will allow you to add some capital growth." – Michael Yardney
"Understanding the neighborhood is not the same as understanding the market. You may understand where the shops are and where the school zones are, but that's very different to understanding the depth of the market." – Michael Yardney
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