Welcome to Part 1 of our Grow Your Portfolio Series with Wealthi
Learning how to research the property market is the most effective strategy to boost your chances of real estate investing success.
Ultimately, making a smart property investment is all about understanding what potential tenants are looking for and finding properties that match their selection criteria to reduce the chance of vacancy or poor rental returns.
That’s why it's crucial to search out reliable demographic data to inform every investment decision you make. This data will help you understand the needs, income and level of demand in different locations to ensure you pick a property in an area that will drive stable, long-term rental returns.
To help you make an informed decision about where to invest next, we chatted with Domenic Nesci, Co-Founder of Wealthi, to bring you this investor series designed to help you decide where to invest next.
In this first part, we’ll reveal how to use demographic data to research the property market, and set you up with a bank of suggested resources to help you start conducting your own market research today.
The 3 key demographic mixes you should be researching when determining the best investment property locations
Before selecting your next investment property, you need to have an informed understanding of the suburb and the type of people who want to live there.
The most successful investors will use demographic data to scout out the best investment property locations and learn what tenants are looking for, as this ensures they only invest in properties with the highest chance of security high-quality, long-term tenants.
Specifically, you want to be on the hunt for suburbs that boast high population growth and strong employment opportunities to attract tenants with high disposable income. To help you do that, here are the three demographic mixes that need to be at the top of your research list.
1. Population growth
When we talk about population growth, we’re really talking about the level of demand for properties. The more people that are flocking to a certain suburb, the higher the demand (which ultimately drives up the price and how much you can charge in rent).
One of the best ways to assess the rate of population growth in a certain area is to conduct suburb comparisons. To do this, you can easily download free suburb reports from CoreLogic and check out detailed demographic data from .id Community Profile.
This is the question Domenic suggests you consider:
“What's the population growth relative to the state or city average?”
This will help you identify high-growth areas that offer strong opportunities for reliable rental returns.
But, it’s important to assess what factors are driving this increase in population and demand. In some cases, selecting high-growth areas that are reliant on one primary industry or employer may leave you vulnerable to big losses if work dries up or the company moves elsewhere.
“Over the long term, picking smaller regional markets where there's a population of fewer than 50,000 people means that you can run into issues, because you may be relying upon a gold mine or a couple of coal mines, or upon one or two key industries to support that little township. Now, if those industries go away, then that township basically disappears.”
Plus, it’s also important to consider the type of people looking to rent in these high-growth areas, and the kind of properties that will best fit their needs and lifestyle. For example, are they young families looking for extra space to grow, or are they young professionals wanting a low-maintenance apartment close to public transport?
"You'll want to understand the people, these are inevitably who are driving demand."
2. Income changes
Next up, it’s time to consider the suburb’s residents and their income profile.
The best places to buy investment properties in Australia show strong signs of increases in income rates over time. The more people are earning, the more income they have to spend on where they live.
Income growth is important because it can help you identify potential investment opportunities. Rising income rates can indicate a change in demographics in a previously low-income area, as more high-income earners move to these emerging suburbs.
Domenic reveals income changes are often linked with suburbs experiencing gentrification.
“Obviously you want to see the incomes getting bigger over time because if you're seeing that, it's a leading indicator of gentrification and it means they have higher disposable income to spend on rent.”
When you’re doing your own research, you’ll find it helpful to use .id Community Profile, which has useful data on household income by region.
3. Employment opportunities
Tenants ultimately want to live in close proximity to where they work. That’s why smart investors scout out the level of employment opportunities in each suburb before making their next property move.
In practical terms, that means scoping out the distance from potential properties to the CBD or nearest employment hub.
“You want to see how far it is for people to commute to work. Is there a bus or train nearby? Are they driving?”
It’s also worth researching if there are any new offices or places of employment planned for the suburb, as this can indicate strong potential growth in demand for the area.
Domenic offers a range of examples for investors to look out for. Consider things like:
- Are there any interesting employment opportunities that are going to be popping up?
- Is there a new industrial park?
Bug again, be wary of any locations that are reliant on a single industry as this heightens the risk of vacancy rates and rental losses over the long term.
“The young working people will follow the work, even if they haven't got ties to that area. So if an area is dependent upon a couple of key industries, that's a big red flag for me.”
Again, head to .id Community Profile when you’re researching for suburb-by-suburb breakdowns of the income and employment status of residents in that neighbourhood.
How to use demographic data to determine the type of property you want to be investing in
Now, let's put this demographic data you've collected into action.
You want to decide the best place to buy an investment property in Australia. That's all about finding properties that suit the needs of prospective tenants in that area.
It’s all about finding properties that suit the needs of prospective tenants in that area.
“It leads back to people, their income and how much they can spend over time.”
This ensures you secure the type of property that is in high demand to secure tenants quickly, safeguard your rental returns and potentially charge a premium for your property, too.
Let’s show how this process works in practice. We've created two suburb profiles depending on the population findings you have from your data, and we'll explain what is important to them and how you can adapt.
Suburb profile A: High density of young families
If you’re searching in an area with a strong presence of young and growing families, your sights should be set on standalone houses with 2+ bedrooms (bonus points if there’s a backyard, too).
For this demographic, space and convenience are key, which means looking for features such as:
- Easy access to local schools and amenities (such as parks, grocery stores and pharmacies).
- Multiple bathrooms to support growing families.
- Extra living spaces or rumpus rooms for the kids.
- Spare bedrooms that parents can turn into a home office.
Suburb profile B: High density of students or young couples
In contrast, suburbs with a high prevalence of students or young couples means looking for low-maintenance apartments or townhouses close to the city centre.
As this demographic won’t have a high level of disposable income, convenience and cost-efficiency are key.
But in order to stand out in competitive markets, you want to look for affordable apartments with desirable features such as:
- A ground-floor position.
- Alfresco spaces (such as a balcony or courtyard).
- A second bedroom (to use as a home office or guest space).
- A secure car space (preferably with a storage cage). Suppose your unit or apartment lacks secure parking. In that scenario, you can consider renting a designated parking spot, which has an average monthly cost of $719.09 in Sydney. Alternatively, you could look into storage options in Sydney, which usually charge around $445.19 per month.
Properties with these features will appeal to a wider pool of tenants, increase the desirability of your rental and potentially allow you to charge a premium to maximise your rental returns.
Download free checklist: What Tenants Wants
This way, you'll make sure you're buying a product catered to your future customers - local tenants.
The top resources to streamline your property market research
You might have asked how you're actually going to find all this data to enable the data analysis. We've got you covered!
Here are four resources to ensure you secure the best type of property investment.
For population demographics research
Your best bet is going to be .id Community Profile.
This residential population tool gives you access to Census data with detailed snapshots of population size, land area and population density in suburbs across Australia.
You can easily search by suburb name to also find detailed breakdowns of demographic information, including age, education, employment status, income and more.
For suburb reports
We can recommend using CoreLogic Suburb Report. Though not free anymore, it gives you access to a premium suburb report where you can compare suburbs based on the demographics of their residents.
For assessing upcoming developments
You can use Corelogic's Cordell Connect.
You can get an overview of upcoming construction projects in specific locations with this resource. That way, you'll know where new infrastructure is being planned, which is your first clue to investing in a high-growth area.
For reliable property data
Here you really can't go wrong with CoreLogic.
CoreLogic offers the most comprehensive bank of property analytics and data in Australia and is a powerful resource to inform your investing decisions.
From forecasting property cash flow to identifying investment hotspots, CoreLogic has a huge bank of resources that can help you immensely in your property investing journey.
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