THE STRATEGY DNA PART 2: Where - Where you should invest (supply/demand/economy)

As part of our info series on the Investor Property DNA on creating successful property investment strategies, we proudly share the second installment now, understanding how we use data to determine ‘where’ to invest.

When we talk about research in terms of property investment, essentially what we want to know is: “If I build or buy this type of property over another investment, what’s going to make me more money?” 

As an investor, you have every asset class, business, idea or opportunity in the globe to invest in, so why should you buy property on the Sunshine Coast? This is why the research is so important.

At Investor Property, we are constantly staying on top of what is happening in the property market through a range of data sources, and undertaking comprehensive comparative reviews each year in the creation of our acclaimed Sunshine Coast Property Market Update. We then use this information to help our clients work out the WHERE and the WHAT for their individualised strategies.

It’s one thing to know about statistics and strategies but it’s another thing completely to truly understand them and how they can be applied to your circumstances. Knowledge is power and our team is here to empower you and work alongside you to build a property portfolio that maximises growth and yields potential.

Key to your strategy is understanding every property you purchase will either enable or limit what you do next and/or you achieving your end goal. The finance structure you put in place has the same effect.

To understand the properties that are right for your strategy, to enable your goals and not limit them, we have to start considering property as a financial asset. Not just as somewhere you would live, or not.

The right assets, in the right location that are matched to your strategy is how you create the greatest opportunity for success. What must be considered in your strategy is how each property impacts the outcome.

If you’re looking proportionately at any investment opportunity, what’s likely to grow more than anywhere else in a sustainable and protracted way is the Sunshine Coast’s residential property market. Why don’t you see it explained anywhere else is because circumstances like these have never happened before. A confluence of investment, infrastructure, game changing projects and economic accelerators creates an exponential impact on the region’s economic, social and cultural future.

Many research models are rearward looking and analyse data with some assumptions (generally those that create a negative bias) and are very generic in coverage and light on specific market nuances. Few take into account deep research and consideration around major changes in the market, much less where there isn’t a historical precedence. For us we look at all  the potential outcomes that could occur then we look for the indicators for the direction the market is going.

Would you buy a lotto ticket based on the winning numbers from last week? That’s what so many people try to do in property investing by using historical data. However, we are looking at the odds and the insights to tell us what the future “numbers” could be. Sometimes past performance has no relevance for the future at all.

We have a well-developed and robust way of grading sources and information before it enters our modelling when we make our predictions (see our video about our research here). We assess each source based on the quality of the source in the context of the information and such things like past performance. We also grade each piece of information differently. We break down data sets and look for patterns and indicators across a range of industries and sources and dig deep into history. We use our multiple businesses (explore them here at www.direct-collective.com.au) who are actively engaged in various areas within the property market to test and measure real time information. We test the assumptions, we test the models, we constantly check against the real time indicators against our predictions and look for changes of direction. We check, we cross check, we ask (so!) many questions, we compare, we assess, we review and then we share.

Because of our process and our unique insight, our research is in high demand and has reached many parts of the country and levels of government. We know that our message quite often goes against the grain and we are happy to defend our position… though we don’t have to say too much these days as our reputation for proven accurate predictions speaks volumes.

THE WHERE – THE SUNSHINE COAST

People focus on ‘location’ as the simple answer to an incredibly complex question around what you should buy, but there is so much more to developing a strategy as you’ll see in this article series. When we look at the ‘where’ to invest, deep research helps us to identify the right location that presents three key factors:

• Economy – an expanding economy that will increase incomes and drive population growth
• Supply – an existing undersupply with persistent impediments to supply, especially in high demand categories
• Demand – sustained or increased demand in excess of, and despite, supply limitations

All prices are a function of demand and supply. In terms of property, price is a function of the desire of people to buy in an area, their capacity to pay through disposable income, the availability of credit and the relative supply of property in that area to meet that demand.

Growth (capital or yield) is therefore a function of the positive and persistent change in these factors. The key to getting this right is being able to consider all the possibilities for the future at one time, consider the most likely course and then build a plan for that, while watching all the indicators for change to allow you to be adaptive.

There are global, national and state decisions and circumstances that will impact economic drivers such as:

Infrastructure: Is it sufficient now? Is it changing into the future? Will it be better or worse tomorrow? Are there any game-changing projects happening? Is there anything happening that is going to have a positive or negative impact on the economy going forward?

Diving into this data we can then understand what the future impacts are: Why will people come or leave? If they come, are they going to have less or more money? Where are they going to live? Why do they want to live here? What are the drivers?

Understanding the economy and the future impacts helps us know what is driving supply and demand. It gives us a formula around where the economy is going and we can then put that into a property sense. It’s looking at what is the most plausible (not possible, because anything is possible) and likely outcomes that are going to evolve.

Then we consider:

• What are the indicators?
• What is most likely?
• What happens if things change?
• What if something else comes up?
• What else could happen?

Drawing out the data we can then see the geographic areas that show the strongest promise of growth backed by strong economic factors that give confidence to investment decisions. Right now, the economic conditions of the Sunshine Coast shows an incredibly bright future for property investors. (Read more about the specific economic insights in our Sunshine Coast Property Market Update here).

Now we know the research behind how we choose the ‘where’, our next article will dive into ‘what’ property type to invest in.

If you don’t want to wait each week to hear about our strategy breakdown, you can start today by contacting our expert coaches and booking a free consultation.