Well, you can trust yourself, and you can trust the facts and thats is what this article is all about. You can make sound, profitable deals without relying on unrealistic forecasts and fly-by-night trends. I am going to show you how to succeed more consistently simply by learning the property fundamentals and basing your decisions and your development strategy on them.



But first, to give you an idea of how unpredictable property values can be, let us take a look at the global factors affecting the market right now:

+ Widespread fear that the US is slipping into a recession has slowed down the global economy

+ Australian banks are feeling the sting from the US sub-prime mortgage crisis; Uncle Sams over-speculation has destabilized markets all the way over here

+ China is developing an increasing demand for Australian goods, a double-edged sword: the influx of foreign money is driving growth while increasing inflation and interest rates

So how exactly are these major issues going to affect your next property deal?

The only honest answer is another question: Who Knows

The bad news: we do not know how earnings, stock prices or property prices will change tomorrow. The good news: we can make good, even great property deals without knowing what the future will bring. The information you need is out there, and if you learn how to track it down and marshal it to your advantage, you will be way ahead of the pseudo-psychics obsessing over the next supposed boom.

Learn your fundamentals

The key to learning fundamentals is simply eliminating what I call "The Unknowns" from your decision-making and focusing on what you can verify and control. Fundamentals include the following:

+ Becoming an expert in a specific area and its prices; this means tracking prices over the last six to twelve months so that you know how much a certain property type yields on average

+ Determining what renovations are necessary in a given market to boost your yield when you sell or rent it, and calculating the expected cost

+ Becoming aware of the factors that drive property growth, like affordability, niche markets and population increase

+ Managing risk. I mentioned this in the last issue, but it is worth repeating: avoid costly and common mistakes, like borrowing too much capital

You might be thinking, "Wait a minute. Yields? Doesn't that still involve some guesswork?" Well, sure. You never know when a natural disaster or market crash is going to hit. But for the most part, you can make useful, viable assumptions about the future worth of your property based on the fundamentals.

Let me give you an example: A developer friend of mine specializes in old cottages in Adelaide's eastern suburbs. I occasionally raise an eyebrow when I see his purchases, some of them look like they'd fall over in a strong breeze. But he fixes them up, using his extensive research into the needs and desires of his target market (twenty- and thirty-somethings eager to make their first purchases) until they're good as new. Since he has identified a demand, he's never wanting for buyers. He has planned and refined every step of the process. And if his chosen path seems narrow to you, I can assure you: he does exceptionally well. That's more important than chasing after the magic deal that never happens, don't you think?

Stay in control

In my article on market research, we'll explore how you can master the property fundamentals in greater detail. For now, let me leave you with this thought: if you use the guidelines I've described in your property dealings, you'll be creating value from the inside out, rather than trusting your hard-earned money to The Unknowns. You will be in control of your investments, creating deals that you can count on because you built them on a foundation of facts. True, learning your trade takes time, and you might not have as many deals going as the trend-followers. But I have a strong hunch that your success rate will be higher.

So don't let the market and the newspapers spook you, and don't let the gurus convince you that greed and speed are good. Choose an area and become an expert on it. Deliver a specific type of property and don't skimp on value. You can't go wrong.