Good day there. My name’s Ben Everingham and I’m the director here at Pumped on Property, and in today’s video I’m going to talk about how I select a suburb to invest in, so this is some of the behind the scenes stuff as a person that’s bought over 130 million dollars worth of property for myself and my clients in the last three years. This is going to be some of the real tools and tricks and insider information from somebody inside the industry that can really help you make a better decision if you’re looking to identify which suburb to focus on and to invest in, in the next twelve months. So if this is the first time on my channel, welcome, I’m Ben. I’m a property investor and I also run a buyer’s agency business. Please subscribe to the YouTube channel. If you’ve got any questions or you’d like me to shoot any other videos please chalk them down in the comments section below.
In today’s video we’re going to talk about why the suburb actually matters that you’re targeting. We’re going to talk about timing, and we’re going to talk about what happens after you’ve identified the right market. We’re also going to talk about the history, and which suburbs perform better historically for what reasons. I’m going to share some of the resources that I actually use to find out which suburbs I’m going to invest in, and I’m also going to talk about how I actually analyse a suburb once I’ve identified the right suburb. So there’s going to be a lot to go through today, but I’m really, really excited, and this is the stuff that really makes the difference as an investor. And if you can watch this video and then take some notes and actually create a bit of a plan for how you go about doing this, your investing is going to go to the next level, and the returns that you can expect by doing good analysis will exponentially increase over time as well.
The very first thing I wanted to talk to you about today, is why the suburb actually matters. And so, again, like the video I recorded recently about how to select a marketplace to invest in, once you’ve identified the market or the state and the country you’re going to buy in, it’s then about identifying the region and the actual suburb. And so, why the suburb matters is again, no two suburbs are created equal and there’s constant movement in suburbs in terms of desirability, supply and demand, and a whole lot of other indicators that I’m going to talk about in a moment. But if you had of invested, well let’s say you had $400,000 to invest today, and let’s say that you would go buy and existing house, and in once instance you were going to hold that property for the next 15 years and you were to get a 4% per annum increase on average in the value of that property, that would give you an outcome of X amount of dollars in the future.
But if you would have take that same $400,000 today, and invest it in a marketplace that gives you a 6% average annual return per annum for the next 15 years, we’re talking about a net position 15 years from today, by just putting the same dollar down, of around about over $280,000 worth of extra income, or extra gains in your pocket. And so this is why identifying the right suburb is so important, because so many investors take this stuff for granted. They’re so concerned about buying a good property at a good price today and maybe saving 10, or 20, or $50,000, but it costs them often hundreds of thousands of dollars over time by not targeting the suburbs that get the higher average returns. And so the next thing, or the second thing I wanted to talk about in today’s video is really that concept of timing, because timing is absolutely everything.
And again, a lot of investors in Australia feel comfortable buying close to home, and I completely understand that, but if your home is in a regional marketplace, buy your own home there if you’re planning to live there forever, and don’t expect too much out of it, but if you’re an investor, with a limited number of dollars earning a limited income, and you want to replace your income at some point in the next 15 years, or you want to replace your income by the time you retire, you really have to be thinking about what is the best use of my money, and so, timing is a big picture thing. I talk about it a lot more in the video about how to select the right market place, which is also on YouTube, but there’s some really good books around. One of them is The Power in the Land, which looks at timing related to the European and an English market over the last 300 years.
There’s another great book called The Secret Life of Real Estate and Banking by Phil Anderson that looks at the American/Australian markets over the last 250 years in America, and couple hundred years in Australia. So those books will help you understand big picture timing. And then, no two suburbs are created equal. A perfect example of this was in Brisbane in December 2016 there was a new train line opened up in some of the beach side suburbs in Brisbane, and at the time, just before that you could buy a house for $320,000 walking distance to the beach and that house might rent for $320,000. Fast forward now, at the time of recording this video, which is January 2018, you can not buy the same house for under $450,000 because timing wise, anybody that knew that, that piece of infrastructure was going in and that area was dramatically undervalued because it hadn’t really increased in value in 15 years, knew that there was short-term opportunity related to timing there.
And so, long-term, those suburbs in Brisbane have done about just over 8% per annum for the last 20 years, but when they hadn’t done more than 1-1/2 to 2% over the last 10 to 15, it looked like an opportunity, and it obviously ended up being one. So timing is very important too. In terms of the history and what’s performed best in the past, obviously the CBDs of Sidney, Melbourne and Brisbane have been Australia’s top performing markets. Outside of that, the other capital cites and the other major regional markets surrounding those markets, when I’m buying for myself I target high quality product in the CBD within as close a radius to the city centre as I can get, otherwise I target properties on the beach. And for me that has been my strategy because I know that, both the CBD and the beaches in Australia’s three major capital cities, have a limited amount of supply currently available because most of the land has already been built on, which means people long-term will pay a slightly higher premium for those types of properties.
I don’t hotspot personally, I don’t chase mining booms, I don’t chase short-term returns. I’m not really interested in what happens on my properties in a one or a five year basis. For me I’m really looking at the 15 to 30 year play. I don’t like to buy regional markets. That’s my personal preference. You know, I’m talking about small regional markets. I’ve got no problems considering places like the central coast on Newcastle, Sunshine Coast or Gold Coast, but again, if I can afford the CBDs, and it’s right timing in their cycle, then I’d much prefer to buy that product. So some of the resources, and this is the fourth thing I wanted to talk about in today’s video, is that I personally use, that you can go out and use that will really help you identify the right suburb.
Some of them are paid reports, and you know, not everybody wants to pay for something, but again, if you think about the example of the 4% versus the 6% return over time … just laughing at myself because I’m watching myself put my fingers up in the monitor here. But one of the great reports that I like is the Residex Top Suburbs Prediction report, which looks at how certain suburbs are predicted to perform over time. RP Data just recently bought Residex, so I hope they continue to produce that report, but that’s been an exceptional report with pretty good accuracy over last 17 years. There’s also another analyst in the Australian property market called John Linderman and he, again with a high degree of accuracy, has a really high success rate in identifying suburbs based on supply and demand, and which suburbs are predicted to do well in the short-term.
He doesn’t so much look at that long-term picture, but if you overlay quality metro markets or major regional markets on top of timing, than those reports can be really, really valuable. There’s also another company called DSL, which produces a demand to supply ratio score relating to specific suburbs in Australia. Again I think that is a paid service now, they used to provide it for free, which was fantastic, and it just looked a whole bunch of different indicators, and then it put it into an algorithm and spat out a number, which was a percentage based on how hot or cold a market was at that point in time. RP Data produces some incredible information, so does Real Estate Investor. So there are some of the sources. Again a lot that data is stuff that you have pay for. [inaudible 00:09:02] the property magazine and a bunch of website too, the hotspots and all that sort of rubbish. You know sometimes those areas do well, sometimes they don’t. Again stick to your fundamentals and make sure that you research your suburbs.
The fifth and last thing I wanted to talk about, is just how I personally analyse a suburb and consider if I’m going to buy there or not. Once I’ve identified the market, the region, let’s say the state is Queensland, the region is Southeast Queensland, the marketplace is Brisbane, which is where I’m personally looking to buy bat the moment, then I get to the suburb level. And before I start jumping on realestate.com or domain, and wasting my time looking at houses, I really want to narrow it down to one, maybe two, maximum suburbs that I’m going to target. And this is a big mistake a lot of investors make because they’re straight onto realestate.com or domain, thinking they know anything about the market because they’re looking at property prices for sale, which most of the time don’t sell anywhere close to what they’re advertised for in a particular market, as opposed to doing the due diligence leading up to actually being able to jump onto a suburb and know with confidence what’s really going on there.
Once I’ve identified the marketplace I’ll then start looking at suburbs, and I might look at 10 or 20 suburbs worth of data, and then I’ll pick out the one or two best suburbs from there that I’m going to really start focusing on. I look at a bunch of different things, and I’m going to rattle them off. I don’t mean to overwhelm you, but all of these things can be found basically online for free. You can just Google them in, figure out what they are and then go find them in Google. I look at suburbs with low vacancy rates because, as an investor, I don’t want my property sitting vacant. I look at the average days on market and how that’s been trending over time. I look for strong rental returns, because I’m not just an investor who focus on capital growth and hopes that everything is going to be cool in the future, I also want good rent returns now.
And I don’t buy anything that doesn’t at least break even before tax for me based on higher interest rates than today because, again, I really want properties that cover themselves and provide me with a good strong cash flow position too. I look at suburbs with a good strong historical price growth. Not all suburbs are created equal. Some in the same market place, for example, Brisbane right now, there’s been suburbs that have grown by 8% in the last 10 years, where Brisbane, on average, has grown by 1.1 or 2%, and then there’s other suburbs that have grown by 1%, there’s other suburbs that have grown by 4. So if in a flat market a suburb is performing well, and in a positive marketplace, as long as those strong underlying owner/occupiers are in the market and there’s that strong supply and demand factors relating to that particular suburb, then those suburbs have good chances of performing well in a good market as well.
So I look at a strong historical price growth. I look at high supply and demand, and you can check that out on realestate.com by looking at how many people are actually looking at a particular property in a particular suburb versus the state average. You can also get that from DSL like I mentioned before. I look for a strong star rating, which I can find on homely.com.au. I can punch in the suburb that I’m looking at and I can get a star rating out of 10, and then I can see what people are saying positive and negative about that area. I look for an area with high income, because high income earners have more disposal income to one, increase the value of their properties and two, pay more rent, pay more to buy properties in the future. I look for low percentages of renters. There’s a lot of people in this industry that really focus on 30-40% renters, but for me I want as many owner occupiers living in the suburb as possible.
There’s some suburbs that I buy in and own that have literally like 8-12% renters, everyone else is earning good money around them and lives in them, because I want the value of my property to increase as much as possible in the short and long term. So, you know, people with rental properties generally don’t look after them in the way that people who have disposable money and high incomes look after their own houses. I look for good schools, transport, transport and infrastructure. I look for areas with very strong population growth and strong job growth. Now one of the cool things, I subscribe to [Seeks 00:13:43] monthly updates and, yeah like, why would someone in the property industry subscribe to a job service site, and that’s because they give you these updates, and one of the updates they provide about once a year is really around how job advertisements are trending in certain markets around Australia, major, regional, and metro markets.
And from that I can see that, for example, right now job advertisements on Seek are now at the highest point that they were; this is 2018 at the time of recording this video, since prior to the last year of seeing, like 2006, I can see that construction and engineering and mining relating jobs in WA, based at the time of recording this video, are up like 180% on the same time last year. And I can see in Melbourne, Sidney, and Brisbane that job advertisements are significantly up. So that says to me that the economy is in an okay position, that jobs are being created that weren’t there last year. And I always look at the number of full-time jobs, as opposed to part-time jobs, as a percentage. The other things that I look at is the same stuff as everyone else, the median prices, the median rents et cetera, but they don’t really tell me that much. And then I really go into the sales history data.
So if you don’t want to pay for that through someone like Real Estate Investor or RP Data, you can access that data now on Domain and realestate.com. It doesn’t have everything, but it does have quite a lot. And what I do, so this is … I only started doing this once I’ve really identified a couple of suburbs based on all those other indicators that I want to target, then I’ll start getting into the sales history and I’ll start looking for little opportunities. Like maybe, I can buy a three bedroom, one bathroom, un-renovated home. And if I was to turn it into a four bedroom, two bathroom, renovated home, it might cost me 60 grand, but I might be able to make 120 thousand dollars doing it. Or I might be able to buy a piece of land and build for the same price as buying an existing house at the moment, so that says to me, brand new product should always be worth more, there might be a short-term opportunity to manufacture some value.
And I really get my head around it, so I print out a map, and I put dots on the map based on price ranges. So let’s say property is selling for 400 to 450, 450 to 500, 550 plus, and I map the suburb out based on this sold things in realestate.com and Domain, and I begin to get an idea of where the suburb sits in terms of the good pockets and the shitty pockets. And then I overlay things like flood maps, bush fire maps, obviously housing commission maps, and I really start to wrap my head around it. Now I have the luxury of being able to do this 40 to 50 hours a week. And I’ve been able to that for a long time now, but I get every investor doesn’t have the time to do this. To do all of that, as much as that sounds like a big deal, when I’ve identified the market, it might take me four hours to look through 20 suburbs.
And then, once I’ve gone through those 20 suburbs, it might take me another two to three hours to look at the one to two suburbs that I’m really going to focus on and become a specialist on, because all I’m trying to do here is give myself the best opportunity to make a good investment now, and make a good investment for the long-term, because I know that effect of that extra 2% compounded per year, especially when you start owning a bit more property. Like imagine you had one million dollars and you can get an extra 2% on that one million dollars per annum compounded over the next 15 years, the difference on 2% on a million dollars is literally like $600,000 in your pocket. So if you already own a few properties this is even more important, or if you’re going to own multiple properties in the future. But I hope I haven’t over complicated this. This is all very easy information that you can learn how to interpret, and then find.
For those of you who are seriously considering buying a property and need some help with this stuff, please jump over to my website www.pumpedonproperty.com and book a free strategy session where me and my brother Simon will catch up with you, and we’ll talk about where you are right now, where you’re looking to go, which markets we like, and which areas we like in Australia right now. For those of you who are looking for someone, like myself who’s a buyers agent, to help you try and obtain that extra couple of percent per annum, I’d love the opportunity to continue the conversation in the free strategy session and see if we’re the right fit for each other.
Thank you so much for your time today and your attention. I hope you got some value out of this video and good luck with your investing. Bye.