Can you really predict the future growth of a suburb you’re considering? You may not be able to predict the future, but you can look at certain...
In Episode 9, we talked about suburbs and where you can afford to buy.
Now, if you are someone who’s a first-time buyer, an investor, someone who’s going for the First Home Loan Deposit Scheme, then you would not want to know where your money is going to be the best spent.
If you are going to buy under the FHLDS, there are some property purchase caps, depending on whether you’re in capital cities or regional areas, and they change state by state.
We covered that off in the full episode https://www.investorschoice.com.au/FHBSEp9
Let me tell you what we did. A number of the community members in the First House Buyer Facebook group nominated some suburbs for me to have a look at.
Now, I looked at three suburbs, one in Sydney, one in Melbourne, and one in Brisbane.
I used different techniques to look at each of those suburbs, but I was looking at all the same things. So, in the very first suburb that we looked at, I used all the free software that is available.
We then went to Census as well. We gathered all the information from all the different areas, and the information we’re looking at is information that’s going to give us an indication about whether that suburb is going to perform well.
Now, first and foremost, we were looking for pricing pressure.
This is sometimes called the ripple effect, and the ripple effect just means that when people can’t afford to buy in one area, they kind of move to the next area, and that’s when the prices start going up.
We looked at ripple effect. We then looked at some of the filters that I have used as I’ve been investing over the last 20 years, and what I have done in looking at the last 20 or 30 years of pricing in different suburbs.
I try to work out what suburbs have outperformed the others in some of the filters. And then, I’ve applied some low risk categories as well.
Some of the filters that we were looking at, I want to have at least 30% renters in the area. So, we jumped over to census, and we found that. I want to see how many sales are happening as well in the year, because I don’t want to be wasting my time in areas that haven’t had a lot of properties for sale.
If there’s only two properties coming on the market every single month, am I going to spend every week in there, hoping that the property’s going to come up?
No, so I look for a minimum of about 60 sales. I then also looked at vacancy rate.
Now, vacancy rate is another measure of demand for rental properties. It is accepted that 3% is considered to be equilibrium. So, when the vacancy rate is 3%, there’s as many people looking to rent as there are landlords putting their properties on the market.
So, if we want an in-demand rental property, we want to be below 3%, so we look for vacancy rates below 3%. And you can pull all that information from all those different websites. But then we went to the second suburb that I reviewed, and when we looked at the second suburb, I used my proprietary Suburb Selector Software, which I have available in my location masterclass, and we have links to that.
What I wanted to tell you about, that is, I kind of got a bit lazy. I thought, I’m going to all these websites, I’m trying to find this information, so I thought why not just get it all and put it in one spot?
I buy data from SQM Research, I get all the data from census, I add it all together, I allow you to put filters in there such as, this is what I can afford to buy, and very quickly I can have a look at the information. It gives me an idea of pricing pressure. It gives me all the data that I need to know, even down to the amount of public housing, which did come up as a concern in one of our suburbs.
All the information in one place. And as you can see, in the analysis, if you go back to the full episode of episode 9 in The First Home Buyers Show, you can see it took a lot less time.
And then we looked at what the typical property is. So, when we went into suburb number three, we once again, quickly did some analysis, but then I looked at another paid tool, and this is RP Data. And RP Data Professional, which is $150 a month, allows you to go in, and once again, you can create alerts, which I showed you how to do.
Now, you can do that in Domain and Real Estate, which are free, but some of the things you can do in RP Data which I just love, is that you can also go in, and you can have a look at the area, making sure it’s a typical type of property. You can have a look at comparable sales, you can have a look at recent sales, but you can also go in there and you can generate your own valuations.
Now, this is the same tool that a lot of the banks use for valuations, so you’re ahead of the game. So, not only are you going to be notified when the typical property, well, let’s say it’s a three bedroom house, comes on the market, and you get that information from census or from my Suburb Selector Software, you get that information because you want to have the typical property. And why is this so important?
Well, I’m glad you asked. It is so important because we need to have the typical property that most people want to buy and most people want to rent, if you want to rent it out, because we want to minimise our risk, and not having property that is so obscure that you’re going to have a really limited market to rent or sell it to. So, we want a property that the typical people want. So, there you have it, I have covered off a lot of information.
We looked at three suburbs. Now, these three suburbs were actually on my list as well. We looked at the pricing caps for the First Home Loan Deposit Scheme, and another thing that we did is, I actually shared with you, the suburbs that have come up when I’ve done my analysis over 8,500 suburbs, in the month of December, 2019, that I think are worth a second look for a savvy investor or a first home buyer.
Please, go into the website, check out those suburbs, have a look at the analysis, learn how to do it, because this is something you can do yourself, and it gives you the information that you need, so that you can be ahead of the game. And if you like this information, please, go over to the first house buyer page, check it all out.
I really encourage you to get your lending assessment, eligibility assessment done if you are looking for the First Home Loan Deposit Scheme. Head over to firsthousebuyer.com.au, where you can have a two-minute quiz to work out if you are going, how you’re going to assessed by lenders.
Go over, also, to that firsthousebuyer.com.au website, because I have a link there to the grant eligibility quiz as well. So, both of these quizzes take about two minutes each. It gives you an idea whether you’re going to be eligible for the grant and for how lenders are going to look at you.
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Links shared in this episode:
Lending and Grants Eligibility Assessment http://firsthousebuyer.com.au/
Real Estate www.realestate.com.au
Suburb Selector Software https://www.locationmasterclass.com.au/join
RP Data http://www.rpdata.com.au