Real estate is big business and many people have made their fortunes by investing wisely in the right areas before they shot up in price. There is no time like the present to start investing in your future wealth.
Before plunging blindly in to the real estate market, you have to pull back, do some research, and find out which house is going to give you the best return on your dollar. These simple tips will help you identify the key signs that a region’s housing prices are on the up-and-up.
Trust your head not your heart
This may sound self-evident, but you would be surprised how many real estate investors have a bias against areas they are not familiar with or that have a “bad” reputation. Sound property investment is all about putting your emotions aside and crunching the numbers to find where your money will work hardest. Take the long view and monitor property price trends and auction clearance figures in a wide range of areas, by comparing these figures you will soon see trends emerge and will be positioned to buy-in early when an area is on the rise.
A good sign that and area is undergoing gentrification is to study the demographics of an area, if the median age of residents is dropping, it’s a sure sign that the area is becoming popular with high income DINK couples (double income, no kids) who can afford to pay higher prices to move to an area that suits their lifestyle.
Another sure sign of this is an increasing number of new shops, cafes and restaurants sprouting up in a previously quiet area to serve the needs of the new, younger, high-spending demographic. Other signs include seeing may houses in an area undergoing renovation or landscaping improvements.
Good infrastructure is a key long term indicator of the house price growth in an area. If plans are underway for a new rail line, highway or shopping center, you can be assured that house prices in that area will increase quicker than most. Likewise in regional areas, if a new primary industry project is slated, soon enough there will be workers flooding in to take jobs, putting demand on the existing housing market and driving prices up.
Supply and demand
Another simple rule of investing is understand the forces of supply and demand in the market you are researching. If the supply of land is dwindling in an area, house prices will rise correspondingly. Another key indicator of demand is rental price growth, this can often increase faster than house price growth and can indicate an increasing demand for properties in a particular area.
Additionally, home loan interest rates are another factor in the demand for housing, low interest rate loans like the Clear Path Home loan from BOQ enable more buyers to enter the market and can help ramp up demand for property in a growth area.
Look for the “worst” in the best area.
Once you’ve considered all of the above criteria and identified an area with a good potential for growth, you have to take the next step into looking at variations in the housing stock in the area. Every area has its prime spots where the houses are above average, identify these spots and fan out, you may find a less glamorous house that still have all the other advantages of the more valuable ones, and lower your entry costs while maintaining a good return on your investment. As an area grows in popularity, the nicest houses get snapped up first, by getting in early on the less appealing ones, you can even see better returns in the long run.
As with so much in the real estate industry, identifying a potential growth area is all about doing your research, start with an overview of a whole city or state and whittle your way down to the key areas that demonstrate these positive signs of growth.