The Ultimate Guide To Renovation Course - Module 2: Research, Research, Research

It's all about research, research, research. To dig into finding a property market, you'll need to be able to complete 90% of your research and analysis at home before you pound the streets looking for the best deal. When you do finally leave home, you'll be armed with your own custom checklist that will soon serve you as a reminder of what you're looking for. If a property doesn't meet your criteria, the one that you've set, then pass it by. Yes, really don't waste your time. So let's have a look at median value. As I mentioned before, we also minimise risk by buying in the median value of the area that we're looking at. We use the median value to give us a measurement, something we can track as one of the tools for our toolbox which allows us to work out what is happening in an area. However, as you'll see, we need to know who is telling us what the median value is. And when we record our data, we need to record who it came from. Note the more sources, the better the data, the higher the integrity of your data. Each magazine actually provides data from different sources, so note down the magazine and the data that they're providing now. Medians, although handy as a first pass measure, have limited assistance in allowing us to gauge capital growth rates, that is the percentage of rate a property changes in value. So be aware of the following if developers start reducing the sizes of land allotments, then you might find that over time the values in an areas start dropping due to the new sales of the smaller land values. This doesn't really represent a fact that the median properties are losing value, it just means the type of property is changing. And although the results look like a decline in the capital growth, in fact it isn't. If there's a new first Home buyers grant for instance announced, then you might see the lower end of the market pick up, that is the increase of the cheaper properties. This could mean that the median in the area is reduced, but the reality is that property values are not going backwards, they are just reflecting that there have been more sales below the median price than have been seen before the announcement. You need to put this information into the context of all your other research. Sales in different geographical areas can also affect growth. For instance, if there are more houses in the western suburbs of Sydney in the mortgage belt, traditionally with lower prices than the more expensive eastern suburbs, then it may not mean house prices are falling. If you look at a bell curve, most activity 80% of it takes place in the middle of the bell. Some people buy high, some people buy low, but most people buy in the middle. The median. The same goes for those who are renting and selling. You need to keep the median in mind. Because. Because if you need to get out of an investment quickly or minimise your out of pocket expenses by renting your property quickly, median will have a huge effect on your profitability and your cash flow. Why? Because this price range is where most people are buying, selling and renting. If you purchased a median property but you got it for $250,000 and the median in the area is $300,000, the property is more likely to render a profit if you have to sell it quickly. Hence, we want to find a medium looking property and then be able to buy it for less. So how do you hit the target? Make sure you know the median price and what the median property looks like. Once you've got that, you'll need to know the characteristics of the average person who wants to live in the median property. Now that's demographics and we're going to get into that a little bit later. Now to conducting your research. You'll need to pick up a copy of the Smart Investor magazine, your investment property magazine, or the Australian Property Investor magazine. Better yet, for the best research, get them all. Each of these magazines uses a different data source, so you'll have the best information combined if you grabbed all three of them again. Now here's the important thing. Make sure in that spreadsheet that you record where you got the information from. Remember, we're tracking 3 year old, 5 year, 10 year past growth. We're talking about rental vacancies and rental yields. So you might actually list them by magazine and put down what the data source is. Australian property monitors Residex or RP data. Now here's what you're looking for if you want to ensure low risk investing. In my opinion, buy in areas with positive population growth. People want to live there. I'm also looking for good pricing disparity between unrenovated and renovated properties because I want to make money. I'm looking for areas where people want to live because I want tenants. I'm looking for limited new developments. I don't want a wash of huge apartments. If I'm looking at buying an apartment, I'm looking at scarcity of land or what people want. So, so maybe views. For instance, I'm looking at infrastructure plans and improvements that could make my place the next hotspot. I'm looking at good past growth because I need some evidence that people have wanted to live there and want to buy there. But also, more importantly, I'm looking at the future growth. Remember the Trident strategy. Check also the average length of time a property has been on the market before it sells. An area where the average is 45 days would be a really in demand area compared to an area that takes 90 days to sell. This is a key factor to put in your spreadsheet. We're all about narrowing your search down. There's 14,000 suburbs and towns in Australia. We want to come to 3 to 5 so you can find the property. To effectively narrow your criteria, you'll need to get to know the suburbs you've selected and test if they're a good fit for your own individual strategy. Assuming you have eight 10 suburbs, for instance, on your spreadsheet, we now want to get to know them intimately and narrow them down so you can identify the best of the bunch. After further research, you'll want to narrow your search to no more than three to five suburbs. Any more than that is an overkill for now. Although you won't be sure until you physically begin to walk through an area and its representative properties, you'll get a pretty good idea with what I consider only a 10% margin for error by doing the research first. First, before you leave home, there are a few basic facts and figures we need to cover. But you also need to make sure that you look into the positives and negatives for each suburb. Is the area located next to a highway? That's not always a good location and may make it more difficult to rent or sell. Was the suburb voted best for growing families? That's good. Has the suburb recently experienced a rise in crime? Not so good. Does it have community programs that are viewed as friendly? Good. See where we're going with this. What to look for in a suburb. Now, here's my criteria. I'm looking for predicted strong capital growth. Why? Because the experts have been looking at population changes, council plans, infrastructure announcements, and they've made an assessment that says that there's predicted growth for this area. They've done a lot of research for you. I'm looking for an area with positive population growth. Now, you need demand from people wanting to move to this area. You need to make sure that the new population growth fundamentals exist. That is A new hospital is being built, a new port facility, a new Westfields. After all, if growth is being led by a baby boom, there won't be as many new houses needed by the new babies as there would be if the growth is due to a new industry in town. Now determine the pricing disparity, which is between the unrenovated and the renovated properties, because obviously we need that to make a profit with our strategy, which is renovating. I'm also looking for past evidence of strong capital growth. Now we can only with certainty use figures from the past to help us frame the future. And the past is the past, but it gives us an indication of where people have wanted to live in the past. I am looking at high rental demand, which is a function of population demand. For example, if the capital growth is increasing in a new area because new owner occupiers are moving into the area, that is there's new developments, there may be in fact a low demand for rental accommodation. So look out for this kind of trend when you're assessing an area for rental demand. I'm looking at limited supply of properties in the area to ensure demand remains strong. Councils who have strict rulings on many new high rise unit developments help to create the market demand for older style units. I'm looking for properties that fit with the area and the demographic. It's important to know who your demographic is and make sure your property suits them. We'll get into that a little later. I'm looking at an opportunity to create equity in the short, middle and long term. Remember the Trident strategy through renovating, buying below the market and with good capital growth. So let's drill down on the facts and figures. When considering supply and demand, think of it this way. Areas that are in high demand are more likely to produce a profit for you than areas where no one wants to live. That makes sense. Right? So slow regional economies and closing industries indicate that an area is likely to be experiencing less growth and thus less demand. Also, when you think about supply and demand, think about how existing industry is likely to affect supply and demand in the foreseeable future. For instance, mining towns are currently experiencing growth for now. But a simple change in policy or commodity markets may stop this growth in its tracks. So look for industries that are likely to sustain growth for a long period of time.