WA 20 Must Ask Questions research-Perth Results?

Hello all,

Just wondering if anyone had done Margaret Lomas’ 20 Must Ask Questions research on Perth recently (within the last year)? Or had done it Australia-wide (which she recommends) and yielded any results from Perth?

I’m about to start the research process across the Perth metro area and I’m interested in other people’s experience if they’ve done the same (or another methodical shortlisting process).

Happy to hear anyone’s thoughts on Lomas/20 Questions in general as a way of identifying investment grade suburbs.

FYI I’m actually looking for a new development site (to develop and hold) within the Perth and am thinking of using the 20 Questions as the basis (but not only tool) for identifying the best suburbs to be looking for sites in. I acknowledge that not all the questions apply to development sites, but I figure on the whole the system is a good way to identify suburbs with growth potential (the next step being to work out of any of these actually stack up for development profits).

 

In Perth, you would have to consider the impact of MetroNet. Are there any opportunities in the vicinity of planned stations?

Otherwise, just pick a couple of suburbs such as Gosnells or Thornlie. Select a couple of candidates that are perhaps walking distance to a train station then run your numbers on those sites. It will be obvious fairly quickly whether these suburbs have potential. If they have potential, dig deeper. If not, move on.

 

Thanks @Perthguy. Agreed, infrastructure is key (and is indeed one of the 20 Questions).

It’s an interesting point you raise about starting wth a few suburbs and just testing them for dev feasibility. However, just because Thornlie stacks up on the dev feasibility, how can I have confidence it meets my capital growth criteria? As I’m planning on holding long-term once developed, I’m was thinking I ‘should be’ a bit more methodical in my location research this time to create that list of possible suburbs. Otherwise, well, how do you come up with that ‘list’ and have confidence in the results (the other ways obviously being going off forum advice and/or purchasing reports from ‘professionals’).

I will definitely post my budget/project goals etc in a separate thread and get some thoughts on possible investment areas, but I still feel like I should be researching from scratch myself to either verify the common favourites or (possibly) discovering a lesser know spot myself.

 

Have a look at the suburb, amenities provided (shops, parks, etc), public transport, proximity to the cbd and see if you assess the suburb to be under valued or over valued. To do that you can compare prices to other suburbs the same distance to the cbd and compare.

If you think a suburb is undervalued then it is a good candidate for potential capital growth. The other clue is if it is next to a more expensive, better suburb. Compare Queens Park, East Cannington and Beckenham for prices of comparable properties. Beckenham looks like it could be undervalued although it has good access to the city and the redevelopment at Carousel.

When prices start increasing, people will be looking for the better valued properties. This means there is potential for well located, well serviced but reasonably priced suburbs (now) have potential for growth.

 

The reason why checklists don't work is that markets are unpredictable to some extent. When I invested in Melbourne, I picked the slummy suburb (Heidelberg Heights) next to the expensive suburb (Heidelberg). I ruled out Heidelberg West because it didn't have the things on the 20 questions check list. Between then and now, Heidelberg West has outperformed Heidelberg Heights although both have been highly profitable. It's difficult to predict "the best" because things change over time.

 

Dont you love boom cycles, can throw a dart at just about any area/suburb

I never understood the importance of proximity to transport until I started investing in Melb

MTR

 

Proximity to transport doesn't seem to be as important in Perth in the past. Not sure if that's changing.

Looking at the Metronet map, you'd think suburbs like Thornlie and Kenwick would benefit. Plus proximity to Cannington being an activity centre in direction 2031. How does these suburbs stack up with the 20 questions?

 

When i started investing 7 years ago i joined Destiny Financial Solutions (Margaret Lomas company) i spent thousands of dollars and i did learn a lot, but now realise there was a lot that they didn't teach you. I should also add the area's that Margaret recommends generally don't do very well. To cut to the chase stick to blue chip area's close to the CBD.

 

I know very little about Perth and developing there but if it were me, i'd be choosing 1 or 2 Perth developers from here and ask them "20 must ask questions" re developing in Perth and picking their brains. I'd even be happy to pay them.

 

Its also a fallacy that blue chip out performs.

Better still chase markets that are already rising and throw a dart

 

Interesting (on both accounts) @Lawrence Barnes. Can I ask in terms of ‘a lot they didn’t teach you’, were there any specific factors you recal that were lacking from the Lomas/20 Questions theory?

That’s an interesting point about Margaret’s suggestions not doing very well - she certainly seems to have no shortage of examples/stories of exceptional growth in areas she ‘started hyping years before anyone else’ when you listen to her on Your Money Your Call! (#fakenews?!). If that were the case (ie her suggested suburbs not performing well) that would certainly throw using the 20 Questions into question as even part of a strategy. I am a bit surprised though, most of the theory seems sound (areas with planned infrastructure, Good employment, high demand, increasing wages, etc, etc).

 

Possibly easier said than done in Perth atm... which I guess is your point @MTR !?

 

Whilst I like this idea (and it is something I have already been thinking about) one thing that occurs to me (but not nescessarily in relation to PC members) is that: just because a developer knows about what areas will turn a profit right now, doesn’t mean they have a good knowledge of what areas a primed for good capital growth in the long term. Many do, but many also don’t.

 

Unfortunately there is more stock coming onto the market, its like catching a falling knife.

For me its a buy when I see the fundamentals change and stock starts to tighten

MTR

 

Not as yet but I believe will be a bigger consideration as time rolls on and congestion increase ala eastern states cousins.

 

Imho no one really can 'know' what areas will have good future CG, best anyone can do is speculate and make an educated guess. I would think developers who are familiar in the Perth market would have a decent understanding of this. Though for me it really is not all that important. Since you are looking to buy a site now, I would want to know what is stacking up (if at all) in today's market or at the very least stacks up partially now with some good anticipated future growth. That is a higher risk approach imo though.

Just my 2 cents.

 

I have not done her courses, but recently read a few of her books. Really useful information and I am lucky to have had the chance to find it and it has definitely helped me understanding a few major concepts that totally passed by me by until then.

However there was a number of times when she clearly omitted information to make herself look good, and there is no way she didn't know what she was doing and to me that's no different to blatantly lying.
One example in a book I recall is her saying that she found a great location using her rules in outer Perth and 'indeed she was right' because it tripled in value.
Anyone who has seen the stats of Perth from 2000-2008 would know that the entire city tripled in that time. You could have thrown a dart at a map of Perth and it would have performed well.
Her location information might have been useful, but using that as an example to show that she is right is a blatant misuse of information to falsely build up her own credibility. I lost a lot of respect when I read that. If she really is good, there should be no need to do that.

In fact, if you take a look at how the property cycle works, the more in-demand locations tend to hold there value much better through the slump, while the lower demand locations fall more. The really interesting thing to me is that you can see that right now in Perth. I have noted down a list of stats for about 20 suburbs in Perth and the cheaper ones have dropped a higher percent from their peak than the better locations. There is just more of a swing to the lower demand locations throughout the cycle.

What's even more interesting is that if you buy in a lower demand location at the very bottum of the cycle, it has dropped so much that when the boom comes, the percentage gain is higher than more in-demand locations. This can be a great strategy and one that is used by someone on here, but he is very aware that for this strategy to work you need to sell it before the boom ends because it will drop back down again during the next slump. This person sells and then uses the proceeds to pay down his debt on blue chip properties which he holds long term. If you buy these low demand locations any time other than near bottum of the market (below the previous 2007 peak) and if you plan to hold long term, you will be in for a nasty shock, and it will be lot of years that you won't get back to recover from the opportunity that you missed. This was one concept I failed to understand until recently when a couple of the books I read plus finding a post on the forum from last year all came together for me to understand it. It seems such a simple idea, but very hard to piece together and I can imagine that the droves of people investing in Logan who are planning to hold long term instead of sell at peak are going to suffer from their unfortunate lack of understanding this concept.

I am currently reading the completely opposite view in the Yardney book 'Rules of Property' and he goes through a lot of the concepts and gaps that Lomas completely left out while at the same time offering a very different point of view. I think both are essential reading.

Also there is a thread on Lomas somewhere. Worth a read imo.

 

Well cash flow was a major part that was not taught. Back in 2010 she set up a new office in Brisbane which was franchised out and the owner was supposed to teach us about cash flow using Margaret's program that her husband created. It never happened. She didn't cover property cycles or how leverage or compounding worked etc etc. The office in Brisbane went under and all the clients were forced to move to the Gold Coast would you believe. Her strategy does not work in the real world.

 

No it's not. Blue chip suburbs consistantly perform, and do not boom and bust like regional area's that don't have the demand to support them. So you are telling me suburbs like Bondi have not made heaps of money in the past 30 years?

 

I don't think @MTR is necessarily referring to regional areas, just other areas that may not be blue chip but have other growth drivers/reasons of why they may outperform. I know a lot about Bondi as I have real estate in the area and surrounds. I also have real estate in western Sydney and over the most recent boom, Bondi did very well however my WS properties out performed %age wise. You need to look at what is driving different markets at different times.