Principle #2: Research your target market
This principle is not only true of investment property, but of investments in general. For stocks — you should research the company, the industry, the key factors — and watch the latest news that can effect the future value of your stocks. For businesses,
market research is essential — what are your competitors doing, where are the gaps, opportunities, etc.
For property in particular, you should be able to estimate the purchase price of a property to within $2-3K of the purchase price.
Yes, that’s around 1%! This level of familiarity is not difficult to acquire — you should be able to do it after a month or two of
regular property watching, visiting, etc. in your target area (e.g. suburb).
You should also do ‘due diligence’ in finding out about major changes to the area. A new freeway can significantly increase the
property in an area — and significantly decrease the value of houses right next to it. Similarly, new or upgraded major infrastructure such as shopping centres, public transport, schools, etc. can all have a positive impact on prices. Much of this information is available on council, state and national government websites describing their 5/10/20 year strategic plans.
Other significant factors that can affect the local market include demographics (often available from census data, e.g. the Australian Bureau of Statistics), percentage of owners versus renters (especially for new developments) and zoning (i.e. regulations relating to redevelopment, subdivisions, etc.).