Researching An Area
When looking to buy a positive cash flow investment property it is likely that you will have to look out of your local area. Therefore researching the area becomes extremely important.
When buying your first investment property you want to go into the the deal with as little risk as possible, and knowing the area well will take you a long way in getting a great deal and making some money.
Take Your Time
When looking to buy your first property it can be enticing to just jump right in and buy a property. Waiting sucks, and often you will be researching an area and find what you think is the perfect property.
When I am researching an area I like to take my time, because the longer you have to look at an area the better you can understand it. I like to give it at least a few months before I will even consider buying anything.
Keep An Eye On The Market
Go on www.realestate.com.au and www.domain.com.au on a regular basis and see what properties are for sale in what area. By doing this a couple of times a week, and spending time looking through photos and maps you can begin to gain an understand for what houses are valued at in the area so you don’t get sold a house over priced.
You will gain an understand of the effect location has on the price. You will begin to find out what are the expensive streets (maybe close to the CBD) and what the cheaper areas are like (maybe close to government housing or main roads) and you can begin to work out exactly what is on the market and what kind of home you are looking for.
Do Online Research
Do some online research to find out more about the area/town. Wikipedia is a great place to start, as is Google and the local newspaper for the area.
Recently I was looking at buying an investment property in the tiny town of Bourke, which only had a couple of thousand people living there. I was looking at the property because of the amazing terms I could buy it on. After doing some internet research I found out that Bourke had a large Aboriginal population and extremely high crime rates. Crime rates are so high that they banned the consumption on alcohol in Bourke. Because this town is so far away that was a high risk investment for me and one I didn’t take.
Because I did my research I saved myself for a potential difficult (and financially straining) deal.
Have a look at the growth rate in the area. If it is growing this is a good sign as demand for houses goes up as population increase, if the population is decreasing then this is a red flag. Find out why the population is decreasing and if this will be a long term thing. The less people living in an area the cheaper the houses become (as supply outstrips demand).
Also have a look into the socioeconomics of the area. How high is unemployment? Where are people employed? If everyone in the area is employed by one company (like a mining company) then there is a risk that if that company goes under then people will leave the area in search for other employment.
Visit The Area…Often
One of the best ways to get a good feel for the area is to visit it on a regular basis. For this reason I like to choose areas within 3 hours from home for a first investment. I feel that 3 hours is short enough that you could make a day trip there without killing yourself on the drive home.
Meet with real estate agents and inspect properties. Real Estate agents know the area (as fart as properties are concerned) better than anyone else and they can help you see through the fog, so to speak.
Ask them what the bad areas are and why they are bad. Ask them what people look for in the area when buying homes and when renting. You may find out that people don’t rent homes unless they have air-conditioning or central heating. Tell the real estate agent exactly what you are looking for and then they can do the work for you and email you any suitable properties.
Getting to know an area can be difficult so give yourself time and don’t rush into things. With time you will learn how to research an area quicker and the experience of researching your first area with be vital when investing in future properties.
Before You Start Investing Read These Books
Before you go ahead and start investing in property blindly I suggest you educate yourself by reading books. Often people are so keen to begin investing that they skip the education part and it ends up costing them thousands in lost revenue.
Your education doesn’t have to be expensive. Books only costs between $10-$30 and can contain a wealth of knowledge that can make your extremely rich. Go to my Recommended Property Books page to check out the top 10 must read property investing books. Invest in your education, it will be the best return on investment you will ever receive.
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