So I've just settled my first IP with the help of a BA. For my next one I would like to do the work myself. What is the best way to go about this? How do I systemically find a suburb I want to invest in? Is there any software/ spreadsheets that I can use to compare suburbs?
Hi Garry, All great questions but I'm not aware of any software/spreadsheet which is available to compare suburbs. I would love to see one myself as I'm sure it'll come very handy Usually your next purchase would be limited by budget, so the first step would be to filter out the suburbs which are suited to your budget. You can use the Invest tab in re.com.au for this. It'll give you suburbs' median and the associated yield. Once you narrow down to a couple of suburbs you can then do a more in-depth analysis of each suburbs using sites like Australia Suburb Profile, Victoria, New South Wales, Canberra, Brisbane, Adelaide and Perth, looking at the median price growth for the last 24 months (how much growth has taken place), latest month's days on market (shows how hot the market currently is), suburb demographics (what type of people lives here) etc. Also you can use SQM Research to check the vacancy rate. In addition, do a search of the suburb name in PChat - chances are someone here would've asked the question about the suburb already! All you need to do then is to read through all the related threads and then make a call on the final list of suburbs you want - and start setting up alerts and check out available property listings. Hope this gives you some ideas on how to make a start.
To add to @David Shih's comment, I'd also be buying with the idea that whatever you're looking for, will help with you the next property you purchase...and subsequent ones after that. ie, if you bought a cashflow negative ppty 1st, you might want something more positive to offset that and/or a property that will grow in value (generically or manufactured...or both) to then help you towards the next.
You'll find many BA's are using local knowledge and experience to make their assumptions. You can't get that from a spreadsheet as much of it is based on local sentiment of certain areas. so to DIY, you need a way of interpreting and determining sentiment without experiencing it. To do that, you need some clear structure and parameters that you will look for. Think crime stats, school rankings, transport access, zoning, etc. Many of the questions you need to ask will happen before the spreadsheets come out. they only give you the detail, but you need to answer your personal context questions first. Start off by answering these questions, and then the information you need to seek out will come naturally: what is my long term goal? what resources do i have right now (up front capital, cashflow, stability etc.)? what is the weakness in my portfolio that is holding me back from my long term goal? ie. do i need more cashflow to service loans, or do i need more leverage to take out loans? Once you've answered question 3, you'll know what you are looking for. For example being young in your investment path, you may be constrained by capital to leverage more loans at stable LVRs. If that's the case, then capital gains is probably what you're after. So now your analysis will focus on identifying areas which will provide fast capital gains (over the next say 3 years), sufficient that you can leverage another loan at the end of the forecast period. So you would need to decide for yourself what are the identifiers of capital gains? some possibilities: improving employment low current prices (ie. room for properties to go up as much as you need them to) supply constraint relative to demand (with no wave of supply about to change that) desirability to potential future buyers The fourth point can then take you into a second-tier analysis. Assessing potential future buyers means getting an understanding of demographics. what demographic is rapidly increasing, with finance to buy something? So you may consult the ABS population demographics statistics, as well as the Department of Employment's analysis of changing employment trends by sector and geographic region. At this point, you will get a feel for what areas in Australia are likely to provide you with capital gains. Now you can go into your third stage of analysis, which is getting a local feel for the area. Two ways; ask people on the forums what they think of the area you've found get on a plane and go check it out As you can see, it can get pretty deep pretty fast. so what's important is that you decide what data matter and what do not. start simple, pick two or three things and just focus on them. learn how to do the analysis and ask questions here about things you find. If you can be bothered going through all that, you will do well with your own analysis. if that all sounds too much for you, just read the free reports that economics firms put out and make your own interpretations. then when you have a feel, consider hiring a BA to run your ideas past.
I have always been a fan of the Hotspotting reports (I know some on here are not). They give you some good areas to focus on on a broader scale and then you can use them to focus on specific markets in those areas you like. It is a great tool for seeing where the infrastructure $$ are being spent and saves literally hundreds of hours of DIY research, often wasted trying to locate areas that simply don't stack up.
Hotspotting.com.au - Hot Real Estate, Property Location Reports For Investors Online Australia Here mate. I have bought several over the years and for me they have been quite good.
This is a great post. Lots of knowledge and experience obviously to come to this point. Many people either get paralysed by the amount of information without clear parameters and just get overwhelmed by it, or just don't want to do this effort so want other people to tell them where to buy. Problem with that is the number of opinions out there of the so called experts you might be attracted to, so this also becomes confusing. The clarity of this post reminds me of my years trading. I had to develop very clear rules for entry into a world of limitless possibilities and no rules, gates they were referred to. If something didn't pass one gate, that was it, you didn't go any further. If it did pass that gate you moved to the next gate and so on. Rules and gates were created for exits as well. It's actually very easy to set up a system like this, what is eternally difficult however is to follow your own rules, your own system, as all your human factors come into play - fear, doubt, greed. The book 'Trading in the Zone' is a brilliant look into this fascinating world using gambling as the game of unlimited possibilities, probabilities and very few rules. Reading this, I think JL1 will be a good investor, if he/she can follow these rules. I think most successful BA's simply have a clear set of researching rules and they stick to them. People then buy a piece of their proven system, no different than giving your money to Warren Buffett to invest in shares for you, instead of doing it yourself.
The gate theory is fantastic, an old company i worked for used it to advise development of power stations. Its a great way to test how much emotional sentiment is trying to creep into your decision making process, but does take discipline to follow.
I use a set of measurements as a guide to purchasing property. if an area ticks all or the majority of those metrics then to me it is worth a look at. some of the measures can include: - capital growth over time - rental yield - discount rate - cash flow inflow vs outflow - Supply VS. Demand overtime After an area meets the targets i have set for them, i review the development potential for that area to identify if the area is like to increase or decrease in population over time. For Example, if there are any large infrastructure works in the area that are likely to increase the population.
