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A seasoned investor will be able to discern certain features of a market that could mean the difference between a poor investment and a fantastic one – features that would be entirely missed by a novice.
Blogger: Sam Saggers, CEO, Positive Real Estate
Understanding a property market involves more than just knowing the facts and figures about a certain marketplace.
One of the key pieces of the large puzzle of property investing is dissecting the synergies of a marketplace. Synergy can be defined as “the interaction of elements that when combined produce a total effect that is greater than the sum of the individual elements, contributions, etc.”
The market has synergistic indicators, and it's synergies which need to dictate the way we invest. People, places and consumer habits are synergies that underpin an area.
For example, if you look at North Ipswich below, you will find an affordable marketplace and see most people live in houses and not unit complexes and the typical household demographic is around a three-person household.
Obviously then, why would you ever buy a one-bedroom unit in Ipswich?
Conversely, if you research most suburbs in the 4 - 5km radius from Sydney’s CBD you will find that house prices are generally unaffordable therefore millions of people in Sydney shop within the unit market and the demographic is heading towards single - double person households.
Ask yourself then, would a house be a riskier investment in Sydney’s CBD areas than a unit?
The idea is to understand the connection - the community trend. We need to look into considerations such as “do houses rent faster than units in a certain area,” or perhaps “three bedroom properties grow better than two bedroom properties.”
Find out, what are the living trends of people, places and habits in the area you are investigating? If you buy within these synergies, you will always have an available exit strategy because people within the immediate community also desire that investment – it resonates well with them.
One of the key educational lessons we help investors with is to understand the synergies within a particular marketplace – a valuable and must-know piece of the property investing puzzle. Once you understand a markets synergies you will easily distinguish between opportunities which are truly promising and those which you probably should not pursue.