The market might be slowing, but buyer competition is still running high. So, if you want to succeed as a property investor, you still can’t afford to skip any of the market research steps.
Buying a property, for personal use or for investment, is an exciting process, but it can be equally frustrating when you keep missing out on your target properties. As a result, it’s common for investors to cut corners on their market research in order to ensure they’re first to the line with a purchase offer. And whilst this might work out some of the time, more often than not, you’re going to be greeted by unwanted surprises further down the line.
On the Ground Research is Key
On the ground research involves you taking time out of your schedule to get down to the location and see the property for yourself. From this, you’ll be able to get a feel for the environment yourself and see whether or not the surrounding neighbourhood is the kind of place tenants would actually want to be.
On the ground research is one of the most accurate ways of gaining property insight, and as a result, it shouldn’t be missed, as it’ll give you information about your target property that you won’t be able to obtain in any other way. In addition to this, you’ll be able to explore the property itself and find out whether the information mentioned on the sales listing is accurate or not.
How Should You Handle on the Ground Research?
One of the main reasons on the ground research is usually skipped is because it can take a great deal of time. However, it’s essential that you take a systematic approach to getting it done, so you can confirm or refute the numbers you’re being given by the real estate agent on the other side.
1) Drive through the neighbourhood
There’s no better way of getting a feel for the local area, as well as checking its general state of repair, than driving through it yourself. Here are some questions you need to ask yourself:
- How many For Sale signs are there?
- What’s the garden and lawn upkeep like?
- Are there any gated communities, and is this because of social issues or simply for added security?
- Are there skid marks on the street, and are there dogs roaming around?
2) Check out the main street on a Saturday and see if the shops are open
One of the best economic indicators of an area is how well local businesses are doing. Ask yourself these questions:
- Are the sidewalks busy?
- Are the shops half-closed, and are there a large number of To Let signs up?
3) Hit the same street at 8pm on Saturday night
Now, it’s time to find out what the area is like during the evening:
- Are the shops shuttered?
- Are there many people walking around?
- Are there any open restaurants and cafes?
4) Speak with local property managers
You should ask local property managers the following:
- The rental property types
- Rental demographics
- Average vacancy periods
- Average length of stay
After you’ve done this, ask each property manager what the average vacancy rate is in the area, and compare your answers. If they have a waiting list of tenants, that’s good news. However, if they have a waiting list of properties, that’s not a good sign.
5) Work out the area’s over-development potential
If the neighbourhood you’ve settled on ticks all of the above boxes, the last piece of the on the ground research puzzle is over-development.
As a property investor, your worst nightmare is a long vacancy period as a result of over-development in the area. And whilst development in the neighbourhood can be a good sign, too much of a good thing can have a negative impact.
Find out if there are any development plans, then work out the target audience that these properties are due to be marketed to. For example, if you’re buying a 2-bed apartment, a luxury condo development with monthly rent starting at $2,500 isn’t going to be much of a threat. If there’s a large block of compact units going up, however, it could spell disaster.
How to Assess a Suburb’s Over-Development Risk
You need to ensure your suburb isn’t a potential victim of over-development, as this can have a truly negative impact on your rental returns. Here’s what you need to consider:
1) Investigate on foot or by car
As you head around your suburb, look out for the following:
- Large pots of unused land
- Roads that end out of nowhere, that have obviously been stopped mid-construction
- Empty shopping strips on main roads without To Let signs
- Derelict houses amidst larger tower blocks and high-rise units
2) Check local listing sites
Look into the details. What might initially look like one listing could actually turn out to be hundreds of similar-looking properties within the same block.
If you find any of these, head over to the developer’s website and check up on any plans for future development.
3) Speak with the council
After steps 1 and 2, speak with the local council to find out about any development applications in the area, the types of dwellings that have been proposed, as well as the number.
If there’s a large number of projects kicking off within the area, you need to work out who they’re being marketed to, the asking price for these dwellings, and the quality of the new stock over any existing stock.
On the ground research isn’t about finding properties to buy – it’s about weighing up the pros and cons of an area you’ve singled out, so you can go into a deal with all the knowledge you need to make the best decision for you.