5 Questions new investors don’t know to ask (but definitely should)

When you first take the plunge into property investing, there are some obvious questions you’ve probably asked yourself.

Housing Market Question Mark SymbolIn fact, you may have even turned to some of the more experienced investors around you for tips and advice.

Questions like: “What state or suburb should I buy in?” and “Should I buy a family home or an apartment?” are the obvious ones… but what about all the things you haven’t thought to query?

As the saying goes, you don’t know what you don’t know – so if you’re a newbie investor with no idea how the property game works, where do you even start when it comes to asking those less obvious, yet equally critical questions?

Here, I’ll walk you through some of these must-know tidbits, so you can start your property portfolio off on the right foot:

1. What are the other stats beyond the median sale and rent figures – and why do I need to know them?

It’s easy to be swayed by big numbers.

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High rents and strong sales price growth are important – but these stats only tell part of the story.

To be sure you’re making a sound investment decision, you need to look beyond these obvious indicators and pay attention to the big picture macro economic factors that will lead to capital growth.

How is the local economy faring? Is it leading to jobs growth which will encourage population growth and in turn rental and capital growth of properties?

What is the local demographic like? Are they high income earners with considerable disposable income to spend on properties.

Is the area gentrifying with old homes being renovated or replaced by new homes, townhouses or apartments.

Then it’s time to dig into market metrics such as auction clearance rates, median days on market, market depth and rental vacancy rates.

For investors, vacancy rates are especially important – they are essentially an indicator of the supply and demand ratio of tenants to rental stock.

2. If a property seems like a bargain, is this a good thing?

Sometimes you’re lucky and you can jump on the bandwagon of an up-and-coming suburb before other investors cotton on to how great it is.

House PriceBut this is pretty rare.

So if the price tag were suspiciously low, you’d be right to question why this is.

Is it the area that is turning people away and driving down prices?

Does the region suffer from low employment levels, high crime or a decline in population?

Or is it the property itself that you need to be wary of… does it lie in a flight path, on a main road, or in a street full of troublesome neighbours?

Fluctuation in the market is normal, but big price dips or an abnormally low price when compared to the rest of the suburb may indicate a systemic problem that could derail your investment plans.

Remember…price is what you pay – value is what you get, so a secondary property today will most likley be a secondary underperforming property in the long term.

3. What are the risks?

Nothing is a sure thing, and if a deal seems too good to be true, there’s a good chance that it could very well go belly up.

Property Market Risks FeatureBefore you invest a cent into any property deal, make sure you run through all of the worst-case scenarios, and put plans in place to mitigate them should they occur.

Does this property fit in with your long term investment strategy?

Do you have financial buffers in place to “buy you time?”

What are the market risks – is there a chance of oversupply in the region?

4. What’s my exit strategy?

If your best-laid plans do fail – and this can happen to even the most prepared and thoughtful amongst us – do you have a contingency plan?

Wealth StrategyPerhaps in developing your investment strategy, you’ve wagered that the regional property you’ve purchased will make a great family rental, but then the local manufacturing sector takes a hit and families move out of the area in droves.

Could transform the property into a student share-house, or lease it on AirBNB thanks to the amazing wineries and wilderness close by?

Having an exit strategy is like having a safety net to ensure that when one door closes, another one opens – without leaving you broke.

5. Do I have a competitive advantage?

It’s always wise to know your own weaknesses, but sometimes we forget to take our strengths into account too.

Repair RenovateIf you are a talented DIY-er who can bring the property up to date on a shoestring budget, that could give you a distinct advantage over neighbouring property owners, who have to factor in labour costs when planning a renovation.

Do you have a tonne of equity in your own home, or a stash of cash in the bank to bolster your chances of obtaining finance?

Can you act quickly if a vendor is eager to sell, beating other investors out for the property?

Or perhaps you’re a local with an intimate knowledge of the area?

Don’t sell yourself short – use these strengths to your advantage, and it could see you build a profitable portfolio sooner rather than later.

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

If you’re wondering what’s ahead for property you are not alone.

You can trust the team at Metropole to provide you with direction, guidance and results.

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In “interesting” times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.

If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now!  This will give you direction, results and more certainty. Click here to learn more
Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3.5 Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property.  Click here to learn how we can help you.
Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.

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Read more: propertyupdate.com.au