Most investors have a story to share about their property and tenant experiences and have travelled the highs and lows of the market. However, there is more to successful investing than just buying properties. Following are five statistical indicators that smart property investors keep a close eye on when growing their portfolio.
1. Demographics and people: Know how and why the general population does what it does, so you can have a greater insight into the type of accommodation that is popular or in demand now and/or in the future. For example, research has shown that more people are choosing to marry later, in favour of climbing the corporate ladder, which has resulted in an increased demand for inner-city property developments.
2. Number of properties for sale and comparable properties: Know your investment market sales activity and number of comparable properties for sale, so you are educated, informed and confident when negotiating to buy your next investment or selling a property. Property prices often fluctuate with supply and demand. The greater the supply (or number of properties for sale) the stronger negotiating power you will have. Sales activity statistics can also reveal important data about vendor behaviours, market conditions and prices.
3. Time on the market and the actual sold price: Know the real results, so you don't pay too much and ensure that you list your property at the right price. There can be a vast difference between the vendors requested list price advertised and the actual sold price. An average long-period time on the market statistic, could reveal a downturn/slow market or a steady market with low vendor urgency/ motivation and a reduced list price statistic compared to the sale price could reveal a seller's market.
4. Vacancy rates: Know the vacancy rate in the area you are looking to invest, so you are aware of any underlying concerns and reduce your potential risk of financial stress due to long-term vacancies. A high vacancy rates can be indicative of several factors and you need to know why. It could be an over-supply of properties, increase in local property developments, a down-turn in the economy, seasonal influences or other local contributing factors.
5. Rental yields and medium property price comparisons: Know the status of the current market. If median house prices are steady, but yields start to decline, it could be a reflection that the tenants are not paying as much for rental properties because too many investors are buying in the area creating an accommodation oversupply? If rental yields are increasing, this could mean that there are more owner-occupier sales rather than investor sales.
Knowing the rental yields, medium property prices and other defining statistics over a period, can provide valuable insight into the market you are looking to invest in and assist with smart investment decisions.
Climbing the ladder of property investment success is a step by step experience of learning, adjusting, researching, connecting and never giving up on your wealth creation dream.