Tips for Successful Real Estate Investing in 2023

Tips for Successful Real Estate Investing in 2023

Model house on top of a large pile of gold coins

In my 2023 Melbourne Property Market Forecast, I told you what to expect from real estate in 2023. And in my property market trends piece, I identified the key trends that will define the market and what they mean for investors.

Now I’m here to share my tips for investing in real estate in 2023. Some of these tips will reinforce real estate investing fundamentals and others will be specific to what I see happening in this year’s market. But all of these tips are based on my years of experience as a Melbourne buyers advocate, property investment advisor, and real estate analyst, as well as the historical and emerging data that I use to make investment decisions every day.

My name is Andrew Stone from Property Analytics, and here are 10 tips for successful real estate investing in 2023.

1. Understand What Kind of Property Market You’re Walking into in 2023

Successful investors walk into each situation with their eyes wide open, and the 2023 Melbourne real estate market should be no different.

The property market has been incredibly disruptive and unstable for the last 2-3 years, with significant price rises in 2020-21 followed by a historic property price downturn in 2022.

Many experts are promising nothing but doom and gloom in 2023, and while certain changes will be a harsh reality, there are opportunities for investors.

The Melbourne property market in 2023 will be marked by:

  • Lower property prices – including further drops in the rolling 12-month median property price
  • Further interest rate increases
  • Inflating construction costs and further development delays

But this year’s market will also bring:

  • Greater stability in the property market compared to the massive swings we’ve seen in recent years
  • Interest rates will likely stabilise after some rises in the first half of the year. And stable interest rates – no matter the level they stabilise at – is a good sign for house prices
  • Strong demand in buying and rental markets. Expect increased rental demand for townhouses and apartments, and growing buyer demand for turnkey-ready houses and high-yield apartments
  • More investment-grade properties coming on the market – both unfinished developments and quality dwellings
  • Signs of a strong future for Melbourne’s property market, including returns to pre-pandemic migration levels and strong population growth.

See my property market forecast and emerging trends analysis for more information about the 2023 market. 

To summarise, there are many opportunities for real estate investing this year, both for first-time investors and those looking to bolster and diversify their portfolios.

Additionally, many Australians have three times more savings than they did at the start of the pandemic. If this applies to you, now could be the perfect time to act.

2. Audit Your Real Estate Investment Performance for the Last 12 Months

Now that you understand the market, it’s time to understand what you did right – and wrong – in the last 12 months. Consider all the investment opportunities that were open to you in 2022 and the property decisions that you made (or didn’t make).

Where were you successful in 2022 and what situations could have gone better for you?

When reviewing your performance, it’s important not to write off missteps completely or blindly replicate what has worked in the past.

As I just explained, the property market is changing. Your decisions to buy and flip property may have seemed sound when the market climbed by 30% during 2020 and 2021. But you would need to be much more discerning if you made the same decision now.

Similarly, your decision not to make an investment move in 2022 may have proved wise, but inaction in 2023 could be costly. If you’re ready to act, talk to a buyers advocate in Preston or Kew East about the best areas and properties to invest in. Consider making a move now before the market settles and prices start to rise.

3. Recommit or Renew Your Investment Goals for the Coming Year

Telling a real estate investor to set clear goals is investing 101, so I won’t labour the point. But I will tell you to set your goals based on the previous two points – what the market is doing now and what position you find yourself in after the last 12 months of investing.

Essentially, all investors should actively review their investment goals in line with the state of the market and their previous performance, rather than blindly recommitting.

Do you need to generate more passive income? There are opportunities in the 2023 market to secure rental properties that promise steady rental income and strong returns. It might be wise to secure this type of property to stimulate cash flow if you’re investing for the first time, or if you need to diversify your portfolio and alleviate your current debt position.

If you’re doing a bit of damage control, your goal might be to release some debt by selling off assets. If you have purchased properties with strong fundamentals, do what you can to actively add value to your investments before selling in 2023.

I will always tell my clients to keep one eye on long-term capital growth, as this is where you will see the greatest potential for massive wealth generation. Look for properties with a strong land-to-asset ratio that can be developed or renovated to add value. Make sure you pinpoint the perfect areas to buy, looking at factors like proximity to hospitals, universities, and other high-income-producing activity centres. Consider also the huge impact that favourable school zones can have on the future capital growth of real estate, but keep in mind that school catchment areas can and have been rezoned in the past.

4. Research Local Markets Like the Back of Your Hand

The idea of the “Melbourne Property Market” is a bit nebulous. Yes, there are trends and data points to paint a picture of what’s happening across the city, but it’s more important to understand what’s happening on a hyperlocal level.

This year, it will be more critical than ever to look at where your investment properties are located – or where you’re looking to invest – and understand what THAT market is doing.

Things like median house price, median unit price, average rental return and overall demand for housing can swing significantly between outer suburbs and inner suburbs, capital cities and regional towns. Sometimes, whether or not you’re in an attractive suburb, a buyer’s market, or a seller’s market can shift from one postcode to the next.

The deeper your knowledge about local markets, the more successful you can be in 2023.

5. Build Your Professional Network

Man touching a model house on a touchscreen that connects to many different contact points

But how do you build your market knowledge on such a specific, local level? You’re already a busy professional – you might have the means and funds to invest, but you don’t have the time or desire to make it your job.

If you’re stepping into the market in 2023 or you’ve been going it alone in the past, make this the year you build your real estate contacts.

Yes, real estate agents will bug you until your phone explodes. But the more specific information you give them and the better you get to know them, the more likely it is that they will point you towards your next investment opportunity. Just don’t take anything they say as Gospel Truth. They are the seller’s agent after all. 

You can also partner with a buyer’s agent if you’re looking to find a strong investment property or development site. These professionals can do everything from shortlisting properties that match your real estate strategy to helping you negotiate the sale.

The great thing about finding a good buyer’s agent is that they can be the connective tissue between all the other real estate contacts you need – from estate agents to town planners!

I know this because I am a buyer’s agent, and Property Analytics focuses on finding properties specifically for investment and development purposes.

6. Explore Off-Market Opportunities This Year

In 2023, an influx of quality dwellings and development sites will hit the market due to a combination of factors.

Many fixed rates will expire and revert to a much higher rate than investors and owner-occupiers expected. The result is overleveraged and overburdened property owners who will need to sell – many of whom can be considered distressed vendors.

At the same time, many developers have become heavily leveraged both due to changing economic circumstances and the ongoing delays and price hikes in the construction industry. These development projects remain profitable but may not be financially viable for the current owner.

All of this means there are opportunities and bargains to be had in 2023. Secure a middle-ring or inner-city development site, or find a quality investment property that’s ready to rent and appreciate.

To leverage the best available deals, you will need to look at off-market opportunities. Many homeowners, investors, and developers will be looking to unburden their debt quickly and quietly, which means they may want to avoid a full sales campaign wherever possible.

Proactively pursuing off-market sales will help you find and secure the best of these opportunities. You can find off-market deals by partnering with a well-connected buyers advocate in Brunswick, Northcote, and across Melbourne, or by searching for off-market opportunities yourself.

7. Become an Expert Negotiator

In good news for real estate investors, rental income is expected to climb in 2023. This means your source of passive cash flow will be in a strong position if you have made wise rental property investments. Similarly, if you’re looking to enter the market this year, higher rental yield could soften the impact of increasing interest rates. 

On the other side of the coin, the combination of increased rental prices and softening property prices is likely to result in more competition for those who are looking to buy.

Would-be buyers and first-home buyers will see 2023 as the perfect time to ditch the weekly rent and finally enter the housing market as an owner.

As an investor, you’re going to need to master the art of closing the deal to outcompete both owner-occupiers and fellow real estate investors.

This means being able to execute auction bidding strategies and knowing what sort of moves to make during private sales, pre-auction offers, or when a property is passed in.

Vendors understand that rising interest rates, falling property prices, and shaky consumer confidence mean fever-pitch auctions won’t be as reliable as they have been in the past few years. But this just means that vendors and their selling agents will be savvier when handling private offers and negotiations. 

So you need to be savvy too!

Either sharpen your own skillset around bidding, private offers, and negotiations or hire a Melbourne buyers advocate to help secure the assets you need for successful investing in 2023 and beyond.

8. Go Green with Your Development Projects

The trend of sustainability in residential developments is set to stay, so if you’re pursuing development projects in 2023, keep eco-friendly considerations in mind.

Going green with your development projects offers excellent resale value, as future buyers and investors are increasingly looking for features like solar, heat pump heating and cooling, and all-electric homes.

Rebates may also be available when retrofitting homes with energy-efficient appliances and features. This could be an easy way to increase your capital gains and ROI, with the government subsidising the cost of your value add!

9. Value Adding Is a Strong Option in 2023

Renovation Concept: Before and After Apartment Refurbishment

For those who are considering selling or leveraging equity, it is important to stimulate strong capital growth in 2023, and this requires an active approach.

The best way to do this is to make your investment better through either renovation or development.

While the construction sector is hurting, there will be some cost stabilisation in 2023, meaning there are many steps you can take to renovate your property and increase the value of your investment. 

Boost first impressions by rendering and re-working front yard space, creating usable outdoor entertainment areas, and renovating wet areas like kitchens, bathrooms, and laundries. The simple act of ripping up carpet and polishing natural floorboards could be all you need to add value to your investment. 

In a property market that’s trending a bit flatter, now is the time to make these smart improvements.

10. Renovated and New Properties Are Safe as Houses

The current property market is one where you need to understand and respect the fundamentals.

As I said in my 2023 Forecast, you can still expect strong results from new and renovated properties. Conventional blocks, future potential for development and renovation, and residential properties in high-demand areas will also serve you well.

But if you’re targeting oversupplied apartment projects or “character homes” with limited appeal, the market will be less forgiving to you now than ever before.

You should see 2023 as a window of opportunity – especially in the first half of the year while the situation is yet to settle.

Yes, you will still need to pay handsomely for quality homes and rental properties that offer strong yields for investors. But the current state of the market means you might just secure these quality investments for somewhat more affordable property prices.

Most importantly, the right properties will repay you by continuing to pay handsomely in the years to come – both through annual income from rent and long-term capital growth. And you can expect a slight bump in house price growth as soon as interest rates stabilise.

So, it just makes financial sense to get in now. Secure property with good fundamentals and great growth potential while dwelling values remain flat!

Learn more about Property Analytics

My name is Andrew Stone, founder of Property Analytics. Together with my team, I can help you navigate the property market with confidence in 2023.

As buyers advocates, investment advisors, and development consultants in Melbourne, Property Analytics offers an end-to-end buying service. We can shortlist, negotiate, and secure investment properties, and help you put profitable property development plans in place.

To discuss successful real estate investing in 2023, simply pick up the phone. Let’s have a coffee and a chat, and see what your next move might be.

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