OK, I'm finally back with my list of questions a mile long. lol
However, I am very mindful that you should not have to write a short novel in response to all my questions, so I will try and word them as succinctly as I can... and for now, I will just try and gain a general understanding of your main criteria.
OK
Alternatively, if you can point me in a direction as to where you have learnt this information, if not from real life experience, (such as from a particular book or educator) that would be great. Or, if you tell me to sod off and work it out for yourself, I can understand that too! lol
Basically picked it up as I went along didn't have a mentor or anything like that but talked to other investors whenever I got a chance, I read some books on investment concepts such as Jan Somers "story by story"? and some good books like"wealth for life" and some terrible but nothing really on hotspot criteria or where to buy.
OK, to begin:
1. Rental Returns 7%+: : Is this your number one criteria for regional areas? Or does it need to be in combination with some / all of the other listed factors such as population growth-right demographics?
It is number one but without any other criteria I have found it useless, strong rental returns plus 5-6 other factos have proven winners for me. Darwin, Mackay, Gladstone, etc. etc
2. Population growth - right demographics: What sort of population growth are you looking for? Do you look at in terms of a percentage figure, or as a supply and demand equation? How do you define the "right demographics"?
It used to just be population growth but the only place I have ever invested that did not have quick growth is Hervey Bay, i bought 5 in the area in 2007 and looking back even though population was vastly increasing it was mostly retirees and people in the hospitality industry, ie low incomes not much room to move on rent and serviceability for home loans, my new criteria would have put a line through Hervey Bay, ie 3-4 years flat etc, I love Hervey Bay and would want property there but would have preferred to have timed it better and bought elsewhere and then buy in just on the dawn of the next boom there. I think lifestyle town such as Hervey Bay and many in Victoria such as Ocean Grove and Barwon Heads work on different criteria but I won't bore you with that, I prefer now regional towns with mining and industry wages as the room to move is much higher.
3. Wages to value ratio: What is this ratio?
The percentage of wages it takes to service the home loan based on average price.
4. Market started to move: Are you looking at the medium house price movement, or just a general feel based on being on the ground?
You want to be in 6 months before the median house price is reported to have moved, let me rant for a second, "I think housing statistics particularly median hose prices are the biggest load of cr8p ever reported, an absolute joke aimed at being reported as a headline in news bulletin with very little semblance to the truth" Feel better now. So I rely much more on the "feel on the ground" and by talking to people, I am not a buyers advocate or a government researcher so I only need to convince myself about an area so "feel" is enough for me. R/E.com.au is also a good guide, if properties being snapped up quickly and under contract you know the market activity is on the up.
5. Market flat at least 3-4 years: I actually don't have any questions for this criteria!!
6. Established capital benchmarks: Not sure what you mean by this...could you please expand...thank you
Means there is more expensive properties in the area, for example if you went to a town and the average price was $150k and the most expensive is $200k it is unlikely their is much room to move, town like Mackay , Gladstone and Darwin you could buy for under 20% of the price of what properties 1-2km were selling for, so lots of room to move. Means there is people with money in the area.
7. Industry/Employment: I assume you are taking into account that there is more than one industry within the region, and also planned infrastructure improvements?
Yes Gladstone and Darwin perfect examples of this, heaps of different industries and employment opportunities make them great buying, very reluctant to buy in a town where there is only one industry and/or there is a big infrastructure upgrade that requires workers that once finished they all basically leave.
1. Population growth: is this based on a supply and demand equation, or just based on being, for example, the number one capital city for population growth?
Based on Suppy and demand, does not matter if there is a big population boom but heaps of land and houses available, has to be combined with shortage, Melb and Syd good example of this now, big housing shortgage. Also when we bought in Mackay in 2004 there were 100 new people moving there every fortnight but the local builders were only producing 20 finished homes a month, lead to 70-100% value growth in 12-18 months and rent through the roof.
2. Wages to value ratio: Is this ratio same as region or different?
Important in capital cities, this helped me pick Perth boom starting in 2004, unfortunately it was too early in my investment journey for me to buy as I had maxed out my very limited equity elsewhere at this stage but i did help some others to decide to buy there which was nice Syd was at 41% and Perth 27% a massive difference (Syd went nowhere and Perth doubled next 2-3 years) consider this more important in capital cities because the growth in mostly driven by locals where as in a regional area it can be driven by people moving there for work on higher wages or interstate investors i,e Gladstone boom fueled by WA and Vic investors plus people moving for new high paid jobs so current local wages were not so important.
3. Fallen blue chip: Do you define blue chip based on proximity to CBD or medium house value? Do you look at a particular medium house price % decline?
Consider Bluechip as areas I would be happy to own in forever, close to CBD is a bonus, for example I have a big 2 bedroom apartment in a group of 4 in Elwood Vic , 100m walk to Ormond st shops and 400m to beach great spot and "bluechip" My first property in Newnham Tassie is a terrible area and property on main road ( it did its job but certainly not bluechip)
I hate housing stats so pretty much ignore those as they compare outdated apples with outdated bananas, prefer to research on a much more micro level, for example Black Rock in melb is a great Bayside suburb in Melb, I found a distressed sale during the GFC and bough it for $860k, looking at Residex a house had not sold in the street for over 2 years below $1m,( just got valued at over $1.2m) that is what I consider fallen bluechip much like stock brokers advise BHP the banks etc after they have fallen below what they consider fair value. [/B]
4. Market started to move: As per regional question above.
Easy to tell if you visit an area just dont wait for the housing stats to tell you.
5. Rental returns improved dramatically: Do you look for a particular rental yield or yield improvement?
Nothing in concrete but if you look in Melb at end of 2006 after 3 years of basically no capital growth the rental yield had improved dramatically in that time as excess stock from Docklands and Southbank had been chewed up and then prices took off in 2007, again in Sydney I found some properties last year that sold for less than what they did in 2003 yet the rent return had doubled on those properties, that is a boom waiting to happen when the other factors are also right. Still trying to buy in Sydney, I have been very lazy and now I have to pay much more to get into thye market there.
6. Limited supply: Assume this is based on number of new dwellings being built compared to population growth.
Yes and also on the ability to build them, natural borders for example just check out Port Hedland! ( i don't own any there unfortunately
7. Industry/Employment: Given it is a capital city, assume you are looking at the level of rising or declining unemployment levels for that capital city?
Yes more a feel of what is going on, the vibe of a city, work on city construction sites is always a good guide
General question 1: From the criteria which have you found the most important for both regional areas and the capital city?
They are in order as I outlined them, but number 1 without strong other points are no good so need combination.
General question 2: Where do you source your population growth figures from?
Population forecasts for capital cities are OK but for regional areas you have to be much more active than using raw data, have to investigate an area, I love doing little hit and run missions on areas to check them out
General question 3: Do you take into account general cycle lengths for a particular area?
Yes, generally the bigger the city the longer it can last, much more important to get in early in smaller cities/towns
General question 4: Purely out of curiosity, who were you presenting to?
Property Collectors Club
OK, see I told you I had a lot of questions!!
Currently, I am reading a book by Paul Do, called "I Buy Houses". Paul writes a chapter on timing the market, and has identified what he calls the "buying zone". This is based on a number of criteria using graphical analysis, technical analysis and fundamental analysis. Some of his criteria correspond with some of your points mentioned above. I would highly recommend it if you are looking to get another view of timing the market, and as Paul is often on the forum, if he is around, he might like to add his own two cents worth as well.
I will give it a read but I am much more into "feel" than technical analysis, graphs etc as I am not selling a book or a mentoring program where I can reveal 7 secrets your grandma's cousin never wanted you to know!.
OK, heading out the door again. Will be back later sometime tonight or tomorrow.
Thanks in advance!!!
Cheers,
Lisa