John Lindeman?s formula, what do you reckon?

[ericproperty]

John Lindeman?s formula, what do you reckon?

Went to a workshop over the weekend, run by Results Mentoring, apart from their usual sale pitch, they raised a very interesting point --- how to determine the stage of particular suburb.

They first locate the sales number for the past 12 month from a property magazine (API, ect). Then they go to realestate.com.au to find out the current listing (house and townhouse only, untick the surrounding suburbs box).

Next, compare the 2 figures:

Ratio = current listing / number of sales for the past 12 month.

If the ratio < 1 means: seller?s market,

Ratio >1 means: buyer?s market.

Ration =1 means neutral market.

They reckon the best ratio to buy is between 0.5 ? 2.

For example, let's use Arana Hills QLD 4054 as an example, the current listing on realestate is 306, API indicates number sold is 137. Thus the ratio is 306/137 = 2.2, more sellers than buyers, conclusion: good time to buy.

What do you reckon the idea of ratio?

 

[Scott No Mates]

Simple ratios can be misleading - to say that there are twice as many units on the market as last year doesn't mean that it's a buyer's market but that otp or recently completed projects have hit the market. You also need to look at the average number of sales in the area whether supply is above the norm.

 

[ericproperty]

Hi Scott

the ratio thing only considers houses ( and townhouses), not units.

I gusess the formula is for a snapshot of a particular market at a particular time, not a trend.

it is better if we can have histrical data or a trend of data to see the movement of a particular market.

 

[LeoT]

To be honest I don't think its a very useful ratio and I agree with the above posts that block ratios are usually misleading.

you can get charts for free that show the cycle of suburbs and where it is now in terms of trends . (not that I would solely use this chart).

This is actually an accurate example of North Bondi trend last 3 years:


Personally, In terms of looking at a particular suburbs stage, rather than the ratio provide by Mr Linderman, I would look at SOM, Discounting rate, past growth, recent growth (generally if its had super growth in the last 2-3 years its unlikely its going to continue). Besides, when there is huge discounting in a suburb its pretty much an easy sign that its a buyers market. But there are many other things to look at too before you make a decision, so i wouldn't place much faith in a simple ratio, and definitely not in isolation to other data/research.

Leo

 

[arashi87]

John Lindeman?s formula, what do you reckon?

Went to a workshop over the weekend, run by Results Mentoring, apart from their usual sale pitch, they raised a very interesting point --- how to determine the stage of particular suburb.

They first locate the sales number for the past 12 month from a property magazine (API, ect). Then they go to realestate.com.au to find out the current listing (house and townhouse only, untick the surrounding suburbs box).

Next, compare the 2 figures:

Ratio = current listing / number of sales for the past 12 month.

If the ratio < 1 means: seller?s market,

Ratio >1 means: buyer?s market.

Ration =1 means neutral market.

They reckon the best ratio to buy is between 0.5 ? 2.

For example, let's use Arana Hills QLD 4054 as an example, the current listing on realestate is 306, API indicates number sold is 137. Thus the ratio is 306/137 = 2.2, more sellers than buyers, conclusion: good time to buy.

What do you reckon the idea of ratio?

Umm i went on realeastate and searched arana hills house and townhouse , only 32 listing at the moment ....

 

[arashi87]

To be honest I don't think its a very useful ratio and I agree with the above posts that block ratios are usually misleading.

you can get charts for free that show the cycle of suburbs and where it is now in terms of trends . (not that I would solely use this chart).

This is actually an accurate example of North Bondi trend last 3 years:


Personally, In terms of looking at a particular suburbs stage, rather than the ratio provide by Mr Linderman, I would look at SOM, Discounting rate, past growth, recent growth (generally if its had super growth in the last 2-3 years its unlikely its going to continue). Besides, when there is huge discounting in a suburb its pretty much an easy sign that its a buyers market. But there are many other things to look at too before you make a decision, so i wouldn't place much faith in a simple ratio.

Leo

May i know where u got that graph from? Haha

 

[LeoT]

May i know where u got that graph from? Haha

Simple google search my friend

But i'm happy to supply suburbs trend graphs at say..$10 a pop

 

[LeoT]

 

[willair]

John Lindeman?s formula, what do you reckon?

Went to a workshop over the weekend, run by Results Mentoring, apart from their usual sale pitch, they raised a very interesting point --- how to determine the stage of particular suburb.

They first locate the sales number for the past 12 month from a property magazine (API, ect). Then they go to realestate.com.au to find out the current listing (house and townhouse only, untick the surrounding suburbs box).

Why not go back 5-10 years that would give you a better idea,or look for the areas within Brisbane that don't have high turn overs in sales,there is a reason why there a high turn over sales rates in several areas..imho..

 

[ericproperty]

Hi Willair

I am looking to buy a IP in Brisbane soon, would you pls shade some lights on which area to avoid, and which area to look for?

appreciate your advice.

I am currently looking at Wynnum, Arana Hills, Everton Hills, they are for different buyers. Arana Hills and Everton Hills are more or less for young professional families, Wynnum is a bit of mixed bag (million $ house with sub $400k)

 

[LeoT]

Hi Eric,

This could be 1 way to approach it:

1. What's my borrowing power to determine price bracket to look at (get a finance broker unless you are certain you know, never, ever assume)
2. What is the goal of this next purchase and how does it fit into my portfolio
3. Isolate areas that are within your price search bracket and also fit into the goal reasons for this next purchase
4. Choose 2 suburbs and do some DD on them
5. Do dwellings DD in those 2 suburbs
6. Make offers on properties you think fall within your goal parameters and buying criteria rules.


p.s you can always get feedback from SS during any of those steps.

leo

 

[ericproperty]

thanks LeoT. I am pretty much at the step 4. like other investers, I am chasing captial growth as the primary goal. difficult to decide which suburb to choose.

 

[LeoT]

Hi Eric,

I would definitely go house, with at least 600sqm, 3 bed, nothing new (scope to add value), and if it can be developed then its a huuuge bonus. I would be looking 8-12km from cbd, but it depends on your finance etc. I know in the last 6-9 months there has been a spurt of growth, but I think there is still a lot left. Personally for CG, I wouldn't go for units if you want decent growth in medium term. yes, yes I know there are always exceptions.. but I don't bank on exceptions so if you can I'd stay away from units in the Brisbane market.

good luck.

 

[MTR]

If you review this group and what they achieved with their previous predictions its been pretty ordinary IMO, this information is available just need to ask.

Did this group capture double digit growth in the early stages of the cycle in West Syd??? Did they identify the boom markets at the beginning of the cycle, I don't believe so.

My home State in Perth is a good example, their predictions that I reviewed over the last 2 years did achieve growth but they did not identify/target the areas that seriously boomed and by the way it was a rising market, in other words throw a dart. Why? because they only looked at stats, there are other considerations which need to be reviewed.

I so recall they are recommending Georgraph Bay, WA for growth?? perhaps in 2-3 years who knows, but certainly not in 2014. Once this group identifies an area specifically for growth by their numbers, what then ?? do they actually find out what is happening on the ground? contacting and networking with locals? Do they identify government policy which may change zoning??

By all means look at the areas they identify for growth but do your own research on those areas.

 

[willair]

Hi Willair

I am looking to buy a IP in Brisbane soon, would you pls shade some lights on which area to avoid, and which area to look for?

appreciate your advice.

I am currently looking at Wynnum, Arana Hills, Everton Hills, they are for different buyers. Arana Hills and Everton Hills are more or less for young professional families, Wynnum is a bit of mixed bag (million $ house with sub $400k)

Sorry I don't know much about those areas,i 'm in the inner southside but a guy post in the site Andrew he knows a bit about those areas,just do a search..

 

[ericproperty]

thanks LeoT, I completely agree with your advice and suggestions. I pretty much followed the path you just drawn. still think a second opinion is helpful.


Hi MTR

like yourself, I do not 100% believe what the Result Mentoring group has marketed, but the ratio is an interesting point, I guess it has some points in it.

 

[MTR]

Its an interesting point, but if it was accurate then how did they miss the boom areas???? I am no guru but I picked at least 4 areas in Perth/Syd over the last 2 years, why??? cos you talk to locals and you watch the listings, you check the stock, its not rocket science. You find out what is driving a particular market, and then you identify the right product to buy, very important.

Sure I could use their formular but I think I may be then listening to noise and miss the boat.

 

[LeoT]

Its an interesting point, but if it was accurate then how did they miss the boom areas???? I am no guru but I picked at least 4 areas in Perth/Syd over the last 2 years, why??? cos you talk to locals and you watch the listings, you check the stock, its not rocket science. You find out what is driving a particular market, and then you identify the right product to buy, very important.

.

Eric, MTR has it SPOT ON.

I am no guru either (not that I think there is such a thing in property investing really) but doing the things MTR has mentioned, I was able to pick quite a few areas that proved to have amazing growth over the years. My friends do the same.

Two no brainers IMHO.

1. Never buy in a boom market a property that you KNOW is going to be inflated in price
2. If you can, try to always follow (in this order)

a) the boom-to-come state,
b) the predicted boom suburbs, (this is done from thorough DD)
c) in demand dwellings, regardless of where you live. (again deduced by DD)

Leo

p.s Bonus tip, Holiday homes? run faaaaaar away.

 

[travelbug]

Hi Eric.
I went on the weekend too.

I liked the idea that they don't just focus on one strategy.

With the formula it sounds great in theory but as others said, there's more to it than one stat.

Also it doesn't consider the ones under contract (can be half?).

And the sales for the past year are past sales and you are comparing it to present listings. The listings are for now (not the year). Someone questioned that but was told "that's just the way it works".

I guess it gives you a starting point. They say if the ratio is 1-2, 1-1 or 2-1 it's good so consider buying a suburb report for more info.

 

[ericproperty]

Hi LeoT:

"Two no brainers IMHO.

1. Never buy in a boom market a property that you KNOW is going to be inflated in price
2. If you can, try to always follow (in this order)

a) the boom-to-come state,
b) the predicted boom suburbs, (this is done from thorough DD)
c) in demand dwellings, regardless of where you live. (again deduced by DD)"

spot on, completely agree. the steps a,b & c do not come easy, they take lots of experience.


Hi Travelbug

if I knew you were there, I would definitely have a good chat with you, which will worth more than the workshop. I rearly go to any form of workshop or seminars.

when I think about this wrokshop, I would say it was more for fun than learn.