How to predict the next property hot spots

Property is also considered a safe investment. It’s a tangible asset, unlike bonds or shares which only exist on paper. That makes investors, particularly private investors, feel more secure about investing their hard-earned cash.

However, buying the wrong property in the wrong area could end up being a drain on your finances, much less a profit. Smart property investors know that to maximise the returns they need, they need to buy properties at the right time and in the right area.

This raises the question, how can new investors accurately identify the right areas to buy? Well, in this blog, we are going to explore the tips experienced property investors use to identify the next property hot spot.

Engage with the local market

The most successful property investors are those who are most engaged in the market. By keeping a close eye on developments that can affect house prices, they get a heads up on where to buy next.

Specifically, you should keep an eye out for developments that have the potential to generate jobs. A large company relocating to the area, a new shopping mall or a regeneration project are good examples of the type of things to look for.

You should also monitor sale prices in a few local neighbourhoods. Keep a lookout for areas where properties are consistently achieving sale prices well above the reserve. This is a sure sign of pressure in the local market and will give you a heads up on other investors.

Look for opportunities where others see risk

Despite the Australian property market consistently delivering excellent long-term returns, there are still short-term retractions in localised markets that smart investors can take advantage of.

Identifying these areas can be difficult for a beginner. Get it wrong and you could end up buying in an undesirable area that may not recover for a decade or more, but smart investors have learned how to identify short-term weakness from long-term decline.

This means looking for opportunities in areas where others see risk. For example, during the COVID 19 crisis, property prices in major metro areas such as Sydney and Melbourne crashed and vacancy rates soared as people moved out of the city to avoid restrictions.

On the face of it, investing in a major metro area such as Brisbane during this period of decline would seem like financial suicide, but smart investors looked past negative headlines to see the bigger picture.

Brisbane has seen billions of dollars invested in infrastructure over the past decade. This has regenerated areas such as the Queen’s Wharf Precinct and is set to create thousands of well-paying jobs over the next few years.

The city also avoided most of the restrictions which affected other major metro areas. As a result, Brisbane property prices outperformed the market in 2020, with median house prices reaching a new high of $616,367.

4 principles for profitable property investment

Finding suitable investment properties can be a daunting task for beginners, but the process can be made easier by following these four tried and tested principles:

1. Location, location, location

Look for properties that are located no more than a 30-minutes drive from the Central Business District. Properties located close to major employment centres and transport infrastructure will always outperform properties located off the beaten track.

You can further improve your chances of success by identifying properties that are located close to good schools, open parkland, upscale shopping areas, and a healthy café scene.

2. Get your finances in order

Before looking for a property, you need to make sure you have your finances in order. In most cases, you should get pre-approved for a mortgage. That way you’ll know exactly how much you can borrow.

And don’t be tempted to stretch your budget. You should always ensure that you have enough cash to cover yourself in the event of a change in circumstances. As a rough guide, you should aim to have at least four months of rental income, plus two to four months of personal income available in cash for peace of mind.

3. Buy the properties most in demand

When buying an investment property, you should keep in mind that this is an investment, not a place for you or your family to live. So look for the type of properties that are most in-demand.

In a major metro area, the most in-demand properties are small one-bedroom flats suitable for young professionals. If you are buying in a university town, student accommodation may be the most sought after. Do your research and invest in what the market wants, not what you desire.

4. Speak to a local agent

The most experienced property investors build strong relationships with local real estate agents. This allows them to get the low down on property prices and key developments in areas before anyone else.

All local property markets have markets within them. On the face of it, one neighbourhood may look like it's performing well, but that may be because a small area or even a single street within the area is outperforming the others.

Building relationships with local real estate agents practising in the area is key to identifying the best value properties. A good real estate agent should be able to provide you with recent sale prices, average rental yields, vacancy rates and more.

It would be foolish not to take advantage of this gold mine of information, especially when it is available for free, so start building relationships with trusted local agents early in the process. That way you’ll stand a better chance of finding the best value properties before anyone else.

We are here to help

If you are looking to build a profitable property investment portfolio, Sparrow Real Estate can help. We are one of Brisbane's leading independent real estate agents, with plenty of experience in the Brisbane market.

We are professional and highly approachable, so don’t hesitate to get in touch to discuss your investment ideas. You can reach us on (07) 3054 7050 or complete the contact form here for more information