Property Investment is Successful Only If You Focus on Certain Fundamentals
Identify Growth Factors
Property value grows on the back of both macro and micro-economic factors that influence the development and expansion of the market. The addition of civic and social infrastructure in the form of roads, bridges, public transport, schools and colleges, hospitals and other public services in an area tends to induce an almost immediate increase in market growth. Apart from these, factors affecting the state and local economies such as regional regulatory guidelines, tax reforms and interest rates also play major roles in either propelling or subduing market growth.
Study the Pricing Trends
A very useful method of acquiring knowledge about a certain city’s or location’s real estate market is to track the way prices are moving. Get the right information about the existing pricing trends and compare that record with pricing trends in the past – say, over a period of three years. This will help you evaluate the growth that the market has witnessed in this period and allow you to arrive at quite a reliable estimate for the future.
One must study changes in the pricing of a larger cross-section of real estate segments – residential, commercial, industrial and even farmland property – situated in areas and various micro-locations within the market. This will yield valuable insights into the highs and lows that the areas have experienced, and help chart their growth potential.
Assess Buying Activity
Going by the rate at which apartments are being sold and bought, it is possible to establish if a certain locality represents a buyer’s or seller’s market. While it may not be easy to gauge the number of properties on the market and understand how many properties are sold on a regular basis, it is definitely possible even for a layperson to find out how long properties listed by developers or owners tend to stay on the market before being sold.
This trend, called ‘Days on Market’ or the DoM, can be studied with the help of simple Excel sheets over a period of two or three months based on online property listings. It can be applied for several locations at the same time, and is a reliable method for researching existing supply and demand. More importantly, it will help you make a fairly accurate estimate of future buying trends in those areas.
Compare Central Locations with Suburbs and Outskirts
If you have been primarily focusing on properties in central locations, extend your field of research to the adjoining suburbs and even the further outskirts around this area. Often, the growth in central locations stagnates because they eventually reach their peak capacity for new developments. This automatically translates into faster growth of the adjoining locations which still have a capacity for development, both in terms of real estate projects and infrastructure.
Dynamics of market certainly change all the time, but the rules that govern returns on investment do not. Once studying real estate markets in a structured and method-driven manner becomes second nature to an investor, it is only a matter of time before his or her portfolio becomes very profitable.