The biggest skill an investor can have is to know how to predict the market. Obviously no one has a crystal ball and no one can predict with 100% certainty what's going to happen, but there are ways to form an educated opinion. And let's face it, choosing an investment based on an educated opinion is better than taking a stab in the dark, which is what many investors do.

So how can you predict the property market? The best way to make money in real estate is by investing in the hot spots. That is, essentially, choosing an area where the value of the investment is going to rise significantly in the foreseeable future.

Terry Ryder, director of 'hotspotting' - a property research advisory website, has identified 10 categories that influence the values of any particular location. In order for an area to be classified as a 'hot spot', they have to have at least three of these 10 factors.

1. Sea change

We Australians have always had a fascination with the sea, which kind of makes sense considering we're surrounded by the stuff. However, this trend has never been more apparent than in recent years - it seems the masses are moving from inland areas to secure their own piece of waterfront property. In fact eight out of 10 Australians currently live within 50km of the shoreline, according to a report by Ryder.

2. Hill change

Just because everyone wants a waterfront home doesn't mean everyone can get a waterfront home. Some people opt for more affordable inland dwellings. The key thing here is the location of these inland dwellings. "They need to be in striking distance of the city or the beach," Ryder says.

3. The stayers

There are certain places that always perform well and grow steadily over time. They are typically inner-city suburbs with trendy caf‚s, restaurants and shopping centres with nearby amenities like schools, hospitals and transport.

4. The ripple effect

When there's a boom, it starts with the prime suburbs. When the prime suburbs become too expensive for people to afford, they go to neighbouring areas that are more affordable, and when they get too expensive people move into the next neighbouring suburb and so on. This is the ripple effect.

5. Transport Infrastructure

Accessibility is one of the most important features a suburb can have. The quicker and easier it is to get from a suburb to the CBD and surrounding regions, the more value that suburb will have. So things like trains, buses, bridges and particularly motorways can add big value to a suburb.

6. Blue sky

These are the prime locations of any city, located either on the outskirts of the CBD or on the beaches. They have upmarket retail outlets, high-class restaurants and a generally affluent culture. Usually there's an exclusive school nearby as well. The thing about these areas is that even when the market is on the slide, these areas will be the least affected, if they're affected at all.

7. Lifestyle features

Again it's no surprise that the most valuable lifestyle factor in real estate is water. This means beaches and to a lesser extent lakes, rivers and canals. "The nearest thing to a recession-proof investment is property fronting water," Ryder says. Nearby golf courses are also bonus lifestyle features.

8. Ugly ducklings

As the name suggests, these are the suburbs that were once shunned by property buyers as they were run-down and old. However, if they're well positioned, they can transform into swans and become trendy inner-city hubs. The key factor here is the potential for the suburb to change. "Richmond in inner-city Melbourne has made that change, as has Bulimba in near-city Brisbane, not through a conscious government urban renewal program but through market metamorphosis," Ryder explains.

9. Boom towns 

These are towns that take off for one-off reasons. Examples of this have been particularly apparent in regions in Western Australia and South Australia where mining towns have enjoyed the rub-off effect of the resources boom.

10. Urban renewal and government decisions

These are generally areas that are transformed by government agencies from being run down or even industrial areas into vibrant and prestigious residential hubs. Common examples are waterside industrial areas that are turned into waterfront apartments.