How do I 'measure the temperature' of where my investment properties are located? Wealth-creation webinar postscript

By Michael Laurence
Thursday, 29 November 2012

In other words, what is the potential for future capital gains and growth in rental yields in the location of your investments?

The answer to this straightforward question may guide your decision whether to hold on to the properties and whether or not to buy another in the same suburb.

Bernie Mitchell of Focus Property Management suggests that you first look at the levels of stock for sale and rent in your area. And also try to ascertain how long properties tend to be on the market before being sold. This can provide a vital key to the possible future capital gains and growth in rental yields.

“Say about 100 properties a year are sold in a suburb, and there are 300 properties on the market,” Mitchell says. “Basically, there is three years’ of sales stock on the market now.” [Of course, unsold stock levels can vary significantly with the state of the overall property market.]

The same principle applies with the stock of properties to rent. If a suburb has a large stock of properties to rent – in other words, a high vacancy rate – it will be tougher to earn your desired rental yield.

Investors can do much of the basic research into the numbers of properties for sale and rent by searching real estate websites and by speaking to local real estate agents as well as buyer’s agents.

Signs of a strong area for property investments can include solid population growth and improving infrastructure such as the building or planned building of motorways. Quality of public transport can be a valuable indicator.

Mitchell warns, however, that strong population growth in, say, a regional area can be for a specific reason that may not lead to long-term benefits for your property investments. So do your homework.

For more questions to ask as to how your residential property portfolio is performing, download our free eBook.

To find out where residential property should sit within your portfolio, watch our free webinar