You might be reading my blogs and think I sound like a broken record. However, I do think it’s so important for budding buyer and vendor agents to understand that switching from real estate sales to property advocacy requires an extra level of skills and knowledge above and beyond what you’d need generally in sales.
Today I’m talking about property fundamentals: how to identify them, understanding what fundamentals are most important to investors or to home buyers, and also how lending institutions rate properties based on various property market fundamentals. You should also be aware that some real estate sales agencies disguise the true fundamentals of properties for sale. This isn’t necessarily deliberate; often it’s because their marketing is flawed.
Understanding property fundamentals for investors and home buyers
Investors will generally have a specific end goal but all of them are looking for growth and/or income. Home buyers will also want capital growth but their primary consideration will be livability and whether or not their dream home will be approved for a mortgage.
The factors that could affect the profitability or viability of their investment include:
- Property cycles
To help your clients, be they property investors or home buyers, you’ll need to understand – in depth – the property market cycle and where it’s at when you recommend a property.
- Population drivers
Is the area in which the property is located set to grow? How will that affect demand for different property types? Who is migrating to the suburb? Who is leaving? And why?
- Infrastructure spend
Are there new roads, bridges, rail or transport hubs planned for the next five to ten years? Is there a possibility that the government could choose to resume the property? Is a hospital or roadway nearby expanding? Are large companies likely to relocate to the area because of better planned transport links? Are there any new schools planned or under construction?
- Local infrastructure and lender risk
We know that banks often refuse to lend for a property that is close to overhead power lines, for example, as they know that these properties are harder to sell. With so many people now working from home, home buyers and investors want to know if nbn™ has been rolled out in that suburb or region. Banks can also refuse to lend for properties in areas with an oversupply of certain types of housing.
- Dwelling density
The State Government housing strategy plays a key role in understanding the risk of any property. For our purposes, you need to investigate whether or not there are plans to increase the housing density in the suburbs you and your client have bookmarked. You should check for amalgamation of sites where older homes or warehouses will be demolished for the construction of medium-density townhouses, or high-density tower blocks.
- Local government stability
While many of us might discount local government, it’s this level of government that helps to make our suburbs more livable. So what is the local council vision for the area? Are they planning for more green space? Are they maintaining and upgrading existing facilities? Livability plays a huge role in the desirability of one suburb and its homes over another.
- Quality work opportunities nearby
Potential renters and home buyers will seek quality work opportunities in their local area, even if they will work from home some days.
Downsizers, upsizers and those with families are usually eager to connect with their local community. Those suburbs or cities that have a strong sense of community are more appealing to both renters and buyers and so tend to have higher capital growth and yield potential.
- Local economy strength
Sometimes it’s hard to say which comes first; the strength of the property market or the strength of the economy. Suffice it to say that a slow economy isn’t healthy for rents.
Learn more about property fundamentals with Property Mavens
Join us at Property Mavens for ongoing training and mentoring that includes learning in-depth information about property fundamentals. But don’t leave it too long; we’re limiting our elite group of Mavens to the best of the best, those of you who are motivated to succeed with the guidance of an expert who is active on the ground in the buyers’ agent and vendor advocacy market.