Researching investment properties in Australia can be a valuable endeavour without breaking the bank. To begin, leverage online resources that offer free access to property listings, sales history, and suburb data. Websites such as realestate.com.au, Domain, SQM Research and the Australian Bureau of Statistics (ABS) provide a wealth of information, enabling you to explore various properties and assess their market trends.
Begin your property investment journey by learning where and how to access crucial property investment data for free. Our comprehensive guide unveils essential steps and tools to kickstart your property investment research.
How to Research Investment Properties For Free
Vacancy Rate
Vacancy rates refer to the percentage of rental properties that are available in a particular area compared to the total number of rental properties available on the market. A low vacancy rate may indicate future property price growth, as increasing rental rates may encourage tenants to buy instead of continuing to rent because it becomes cheaper to own a property in the area.
A useful guideline for vacancy rates is:
Less than 2%: Tight rental market (demand exceeds supply)
Between 2% - 3%: Balanced rental market (demand = supply).
Greater than 3%: Oversupplied rental market (supply exceeds demand).
SQM Research offers free access to vacancy rates for each suburb.
Gross Rental Yields
Rental yield is a key metric that every property investor should understand. It's a measure of how much income a property investor can expect to earn from a rental property. Essentially, rental yield is the annual rental income expressed as a percentage of the property's value. A higher rental yield translates to higher cash flow.
Calculate the rental yield by dividing the annual rental income by the property value and multiplying the result by 100.
A rental yield exceeding 7% (considering today's interest rates) typically indicates positive cash flow, especially for free-standing homes. However, it's essential to note that townhouses, units, and apartments may require a higher yield to offset additional costs like strata and body corporate fees.
Avoid the pitfall of solely seeking properties with high rental yields. It's crucial to
build a balanced property portfolio that focuses on both cash flow and capital growth.
Let's consider an example:
The purchase price for the property is $500,000, and the expected rental income is $500 per week.
First, we need to calculate the yearly rent:
$500 per week multiplied by 52 weeks = $26,000
Second, divide the yearly rental amount by the purchase price and multiply by 100:
$26,000 divided by $500,000 = 0.05 multiplied by 100 = 5.2%
Inventory Levels
Refers to the amount of time it would take to sell all the properties in a given location if properties kept selling at the current rate and no additional properties were listed on the market.
Inventory levels are calculated by taking the average number of properties sold per month over the past year divided by the current stock on the market (SoM).
A higher inventory level indicates fewer homes are being sold. This can point to a real estate market that is less competitive because properties remain on the market for longer.
A low inventory level suggests buyers are purchasing more properties than real estate agents are listing. This is an indication of an active real estate market, where property prices are increasing due to demand exceeding supply. The lower the inventory, the tighter the supply within the relevant property market.
A good rule of thumb is that markets with 1 quarter (3 months) or less of inventory levels represent a tightly held property market.
Finding this data for free can be challenging without a paid subscription. However, you can manually calculate inventory levels. The suburb profile section on realestate.com.au provides the market data for free.
Let's consider an example:
In this market, there are 23 listings over the past month and the average monthly sales is 7.4 (89 annual sales divided by 12 months).
We have 23 listings, with an average monthly sales volume of 7.4. This indicates a market with 3 months of inventory (7.4 divided by 23).
Days on Market
The term "days on market" refers to the time between the initial listing date of a property and the date of its sale. A low number of days on the market means that the properties are in high demand and being sold quickly. Conversely, a high number of days on the market suggests low interest from buyers. This can be due to unsuitable pricing or undesirable property offerings. Properties that have been on the market for a longer period than usual are often avoided by potential buyers.
Over 12 months, if 'days on market' are declining, this suggests properties are beginning to sell quicker due to heightened buyer demand.
SQM research offers free access to days on market for each suburb.
Vendor Discount
Vendor Discount refers to the difference between the initial listed asking price for a property and the amount for which it is sold.
A lower vendor discount indicates a higher demand for property, as vendors are not willing to sell their property at a discounted price.
The free version of Property Value provides vendor discount data for free. However, if you want to view trends over the last few years, you will need to upgrade to a paid subscription.
Dwelling Approvals
Represents the upcoming level of new housing supply expected in the location. If large estates are being developed within the area, this means there will be a large level of incoming supply onto the market. This is why it is important to be cautious when considering new house and land packages. Often, these estates contain significant amounts of surrounding vacant land, which may be developed in the future.
Increased supply typically leads to decreased demand as higher stock levels provide buyers with a greater array of options.
This data is accessible on the official Australian Government website and is segmented by council area.
Demographics
Demographic and economic data can be found on government databases like the Australian Bureau of Statistics (ABS).
These statistics can offer insights into population growth, employment rates, and other factors influencing property values.
Local council websites are also valuable sources, providing information on upcoming developments, zoning regulations, and infrastructure projects that might impact property values.
Many websites summarise these data sets into easy-to-read graphs:
To summarise, using these metrics, you can begin to research investment properties in Australia for free. Remember to build a balanced property portfolio that focuses on both cash flow and capital growth.
"Ninety per cent of all millionaires become so through owning real estate" - Andrew Carnegie.
If you would like to know more about how we can help you build a property portfolio give us a call on 0423 344 286 or email us at hello@mindsetproperty.com.au, or simply connect with our Director Peter Theodorou.
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