Massively Increase Your Chances of Property Success
You can’t investing in the Australian property market, you can only invest in one property in one street in one suburb of one city.
Because you can only buy one property you are often playing the odds of the property market. How can you swing the odds in your favour and increase your chances of success in property investing while minimising your potential downside risk?
0:00 – Introduction
0:43 – The highest performing suburbs were in regional markets
1:36 – Trying to hit a home run vs getting on base
5:28 – Improving our odds by looking at history
11:17 – Connecting the data with your strategy
15:30 – Regional vs Metro markets
17:42 – Taking a long term view
22:35 – Tortoise investor
while we love to track the australian property market and how it’s going or how individual cities are going the reality of the situation is you can’t invest in australia as a property market you can’t invest in sydney or melbourne or brisbane as a property market you can invest in one property in one street in one suburb and when it comes down to it there are some odds and chances that you’re putting on that so you’re trying to predict the future to say okay is this going to be a good investment is it going to grow or is it not and so today i got with me ben everingham buyer’s agent from pumped on property how’s it going ben awesome man how you doing yeah really good and we’re going to be talking about how can you increase your chances of being successful when it comes to property investing so something that we both saw recently was looking at the highest performing suburbs over i can’t remember the time period that it was but the highest performing suburbs recently were all in regional markets yet the data says on average if you invest in metro markets they tend to outperform regional areas so it’s just this really interesting contrast that the absolute best of the best suburbs in australia were all regional but on average metro markets tend to perform better than regional markets so it’s like okay are we should we go for these super high performing regional suburbs or should we go for the metro markets even though they might hit not hit a home run out of the park how do we i guess how do we consume this data how do we munch on it how do we try and understand what does this mean when we can only buy one property or we can only buy a couple so i’m excited to talk about this today for sure man like i think we’re laughing off camera before we started this bid about you know the top 20 markets or whatever all been regional and it’s like if there’s 40 000 regional suburbs in australia and you you’re trying to select one out of 40 000 like that sounds like really hard to me and gambling versus there’s only three metro markets sydney melbourne and brisbane and those markets have outperformed on average the regional markets in australia by 86 in the last 20 years according to core logic so it’s not that i don’t want to smash that winner out of the park but like they say moneyball the goal is to get on base like the goal is to play the averages and to consistently perform and that consistent performance will get you to where you need to be because of that compound effect of above average returns based on history in the future well i guess this is the thing in property and the thing in investing in general is that idea that okay are we trying to hit a home run which is maybe high risk but if we hit it out of the park we’ll be financially free faster but if we don’t hit it out of the park we might actually go backwards financially it might be a complete strikeout which we know we’ve both spoken to many many people who have been maybe sold a lie or purchased bad investments in both regional and metro markets that have set them back financially years if not decades because the emotional toll it has on them and so you’ve got that or is it like okay let’s just try and get onto base and let’s just try and you know do something that’s going to move us forward towards our financial goal and i think this is something that’s really important to think about something that’s really important to talk about as an investor because i guess both you and i the strategy we talk about whether it be two properties to financial freedom that like metro granny flat cash flow play or if it’s just single income properties in metro markets um it’s all kind of that low risk get on base kind of thing that okay we may not win we may not win the property game we not may not pick the best market but our chances of losing are a lot less and our chances of eventually getting to where we want to be financially are probably higher by making this choice you’ve always been pretty good at getting on base from our private conversations as far as i’m concerned but if you look at the warren buffett doco which is a hbo one on youtube which is free he’s got this picture in his office and i’m not sure if you’ve seen it but he says you only like he’s got his circle of cup like what’s what’s the language there like circumference circle of circle circle of influence and so he knows that the best hitters in the world in baseball like only swing in their circle of influence and it’s the same with the way that he’s attracted or gone into business as his strategy which is just identify what you know stay within what you know follow the rules and consistently you’ll outperform the market averages which he’s been able to do for 40 years straight and from my analysis of history over the last five years which has been insane you know whether that’s phil anderson’s work ray dalio’s work fred harrison’s work core logic stuff homely stuff sqm stuff like i feel like michael matusic stuff i’ve really begun to see these patterns that emerge when you’re looking at one thing consistently for 60 hours a week like we have been yeah and so there are some rules that you can you know you’re not going to beat the house not everyone’s going to buy that byron bay 30 years ago and go in 30 years time zac efron and the dude and i think one i saw was like suffolk park which is just out of byron bay was one of the highest performing suburbs there was another one like just out of cessnock um or out of raymond terrace like just random you would not pick these on a map and say yeah that’s going to be the suburb in 10 years time no but what we do know from history is that if you buy houses which is the first rule then you’re going to do on average 96 better based on the last 25 years of corelogic data houses have done 96 better than units on average in australia yeah so that’s like four percent better per annum just by buying at home on average yeah i just want to okay frame this before we go into the data is this id is kind of like stacking your averages and stacking your chances to increase your chances of success so ben’s talked right now about houses versus units and while some units perform really well on average houses across the nation have performed better than units so by looking at houses over units you’re kind of increasing your chances of getting a better return you’re not guaranteeing it but you’re increasing it and then if you look at the other data which we’ll talk about now it’s kind of like each each data where you’re choosing the better chances over the i guess less good chances um you’re increasing your chance of success and decreasing your risk on average that’s so important man because if you had bought a unit in melbourne or sydney 10 years ago within 5 ks of the city that would have obviously outperformed a house in brisbane or perth 10k from the city but if you hadn’t bought a house in sydney or melbourne that would have outperformed in the last 10 years a unit in sydney or melbourne on average in the same suburbs so again these are averages and we’re not trying to beat them we’re just trying to as you said stack them the second rule for me is when core logic looked at the last 20 years the seven top metro markets which are the capital cities of australia have outperformed the average regional market by 86 in the last 20 years so again houses stacked on with metro markets and then when you overlay the australian bureau of statistics data they’re saying that 75 of australia’s population income and job growth is going to go to sydney melbourne and southeast queensland in the next 10 to 20 years again like you can start to see where the money’s moving where the incomes are moving where people want to live the lifestyle and you can sort of see that continuing to play out in a way yeah and then you add on top of that i think it’s michael matusik’s data about how close you are to the cbd of that city as well plays a role with inner city outperforming kind of middle city outperforming the outer ring of a city yeah so you know he found that from looking at sydney melbourne brisbane perth etc that if you buy within 20k of the city you generally in each of those cities perform by at least half to one percent better per annum than buying further away but huge asterisks there again that’s an average some suburbs can be 20 cases in the city but have incredible demographics and you know you know beaches they can be a lot nicer than suburbs 5ks from the city so again the average game though because i think it’s really important to talk about this because we’re talking about averages and i guess increasing our chances for success in property so all of these things like houses over units that doesn’t mean just buy any house and you’re going to do better than any unit buying metro market versus regional doesn’t mean you’re going to do any better but it’s like okay we create this framework for ourselves based on these statistics that we know about and then we overlay on top of that all of our suburb research all of our market research all of our historical like market timing and where we think uh city uh suburban region is at in their market timing of the property cycle so we overlay all of these things on top of that to try and find the good suburbs within that region that we’ve chosen and then try and find okay the good streets and the good houses within that suburb so every single step along the way we’re just trying to decrease our risk and increase our chances of success and by stacking all these chances on top of each other that’s where we can get to a point where we’re reasonably confident that this property is going to perform well whether it performs as the best property in australia look probably not because we’re not swinging for a home run we’re just trying to make base but the chance of it being a complete dud and losing us money hand over fist and the area going to massive vacancy rates and not being able to rent it out you know that kind of catastrophic property investment that also becomes very low or at least we feel like it is i love that man like there’s some other things that you just mentioned there so if you had a bought north sydney or eastern melbourne you know 20 years ago obviously that particular part of the city because of the high concentration of wealth and um you know in sydney beaches has resulted in an over performance so when you’re looking at a city it’s not just brisbane’s good enough it’s well east brisbane north brisbane and southeast brisbane represent the best long-term value based on the highest concentration of wealth and then it’s like same with the suburb it’s not a suburb the suburb is filled with cheap pockets expensive pockets main roads that you don’t want to buy and beautiful quiet streets surrounded by mums and dads that live there like same with land size like we don’t buy anything under 600 square meters if a client can afford it because there’s a higher than average chance of the bigger land size which is where the long-term value is outperforming we know that buying close to the coast is a benefit as well there’s definitely information there to support that and so you know these combination of things begin to create a framework or a process for investing and then we know that larger higher quality houses have historically outperformed cheaper houses in the same suburb in the same market quite a high quality streets have done the same thing it’s just you know it’s simple and then you get to the really granular stuff higher average household incomes lower percentages of renters in a suburb on average quality infrastructure and access to employment in a suburb as well and then a vacancy rate as you said below or before below two percent like gives you the highest chance of surviving as an investor through good times and bad in a suburb that’s completely landlocked and you know nobody can build anything new there yeah and so you’re overlaying all your statistics and all of your research so you’ve got that sort of framework that you create these rules for yourself so okay i’m not going to invest in a suburb with vacancy rates say over two percent that kind of really narrows down your focus of where to look at once you’ve overlaid everything that we just talked about and then you connect that with the strategy that you have and the way that you plan to make money in property so whether that be single income properties whether that be renovation whether it be dual income properties like we talk about or development or subdivision or whatever you overlay your strategy and you kind of connect those two and what that will do is i eliminate the majority of properties for sale in australia most of them just won’t fit both of those criteria and so you’ve got a really narrow data set to look at to say okay what can i actually invest in and then also you look at how am i going to make money and property and you’re increasing your chances of buying a property that will help you to make money in the way you want to because something could be an amazing development opportunity that the right person with the right skill set could make a great investment from and make a lot of money from but if you don’t have the right skill set or the enough enough money to do the development or the connections or things like that that same investment which could have been good to someone else might actually lose you money so you’ve also got to think about your strategy what suits you and finding properties that best suit your strategy and your way that you plan to make money such a you know perfect example man like i was speaking to a client recently about three and a half four years ago we bought him an 800 square meter piece of land on the beach which already had two titles on it meaning it didn’t have to be subdivided it was already subdivided there was just a house in the middle four years later we knock it over we built a house and a granny flat in the house and a granny flat on both he’s now getting you know over a six percent rent return great tax benefits made a bunch of money on the way in because he was strategic when he bought it and he’s got you know because of a wholesale pricing through our relationships got himself about a 70 grand saving on the build then you know i talked to another lady who booked a strategy session with us she wanted to do the same thing a few years ago i told her that that opportunity had passed she still went out to the marketplace on her own bought the place for 700k went and paid an extra 120 grand then she stood up for the build she she rings me and she’s like i’m super excited like all novice or first time investors or second time investors do they look at their comparable sales based on the highest number not the worst number in the area you know two years later i get a call from her i said how’d it go she’s like i’m still holding both of them she only built single income houses on them rather than dual income she’s in this project for 1.3 million bucks for 800 bucks a week in rent you know and she’s she’s in it for 200 grand more than she should have paid at least if not 250 that means that she’s stuck from doing anything else for the next 10 to 15 years and it’s just like you know like that’s the difference i suppose between understanding and following the rules and doing the right things at the right time versus just hoping that just because something’s worked previously it’s going to work again yeah and it’s also you’ve got all of these rules and all of these i guess well they’re not rules they’re guidelines that we follow but it’s like you can do everything right pick the right area and things like that but if you get a couple of them wrong like overpaying for a property over paying for a build not working on getting a property that supports your cash flow needs it can just cause the whole thing to topple over and to change so getting that strategy right so that you don’t make those mistakes is really important and ben and the team over pumped on property do for free strategy sessions so if you need help working out okay how can i implement this sort of stuff what sort of strategy will actually work for me then you can get on the phone with them talk about where you’re at where you want to be and what strategy might work for you so go to on-property dot com dot eu forward slash strategy to learn more about that over there and then just you can take that strategy you can run with it yourself or if you want to and it’s good fit you can hire the team over pumped on property to help you find and purchase those investment properties as well so again go to on-property dot com to you forward slash strategy to work that out but yeah i don’t know like regional markets can be really good we’re definitely not anti-regional markets we just look at the data and say okay for our personal investing we know that metro markets are going to be desirable in the future we don’t know but we’re like we’ve got we’re pretty confident right like we’re saying that it could be an apocalypse yeah i don’t think so man like everything has already happened in the world and i was talking to a client yesterday about world war ii and they were saying that like they were talking to their father at that time and he’s like he was just shocked like absolutely shocked at how quickly people forgot about such an extreme event like i know there’s a lot of people out here right now thinking that the world as we know it is over forever yeah but when the world lost 120 million people over a 10-year period and you know destroyed half of its major capital cities and the value of everything plummeted and people didn’t have jobs and 40 of people were unemployed like that is that is so gnarly and we still get on with it as human beings like i just want people to recognize like how good the future is going to be and how like yes there could be an apocalypse like you know that’s sort of like what the current virus is right now like no one can go outside without being chased by some crazy person it’s kind of like but we will get through this like the fundamentals that have worked for hundreds of years in australia and 350 years in america and europe will be the same fundamentals like australian government is saying 60 million people in 55 years sydney is going to be 10 million people melbourne’s going to be 10 brisbane is going to be five that is a very high concentration of wealth with the rest of the world speculating on our property as well and that’s why i’m so excited when people say is australia overvalued markets in australia don’t make sense to me right now suburbs in australia don’t but there’s places like we bought a house this week in brisbane 20k from the city for 307 000 like you know what i mean it’s like there’s so many opportunities around when people know what to look for and where to look yeah exactly and i think yeah taking that long-term view because i was okay i’m parked at the beach right in my van i work in my van if i leave the door open people just come and talk to you because they want to check out your van build how it’s going anyway this guy comes up to the van and he’s looking at doing out his toyota hiace he’s got a property in sydney he’s thinking about selling his property because he thinks because of the coronavirus the market might go down so he’s thinking of selling it to get out of the market and just doing up his van and living in his van but he had such a short-term view of the market and you know how long will sydney go down for i think he was only thinking about the next 12 months two years max and then i’m saying to him like well where’s the market going to be in 10 years 20 30 years time i think that’s a really important thing to think about if you’re buying a property now that’s going to serve you into retirement which may be 10 years 20 years 30 years 50 years is that property going to be cheaper in 50 years time than it is today like you ask anyone that question they’re like no but we get so fixated on the now and what’s going to happen in the short term and i think when it comes to like these chances and what we’re talking about for me and ben we both definitely take the framework of okay we’re thinking 15 30 50 years down the track how’s this property going to be performing versus a regional market and then when you start to overlay that sort of like time frame how much more sense does a metro market make to a regional town which regional towns can prosper but they can also completely disappear within the span of 10 or 20 years because they got bypassed or you know things changed and so yeah overlaying i guess that long-term sort of thing as well is a big thing for us because it might take us 15 years to pay off our property that might sound like a long time but if we’re going to be owning it for the next 35 years after that like i want to be in a metro area where i know there’s always going to be people there more and more people are coming into australia more and more people are going to live there it’s just stable and it’s just going to pay for my life over the next 50 years i love that bro like one thing that i think about and i think people have a recency bias it’s a really strong problem with investing and obviously the guy that knocked on your door was just the example of that what happens year to year like i say that 50 years worth of growth looks like that but if you live at year to year there’s minus 30 years there’s plus 30 years and there’s flat decades and it’s like sydney melbourne and brisbane in the last 50 years according to the abs and core logic have done an average of 9.5 per annum per year each if we just go hell conservative and we go well let’s what’s half of that you know 4.6 per year it means every 15 years that dollar you spend in sydney on that million-dollar home becomes 2 million in the 15 years after that if we get that nice little 4.5 4.8 return for 15 years on average two moon becomes 4 million in 30 years time like it’s just insane the potential with leverage over time and you know i know my grandma when i spoke to her who bought on d1 the northern beaches this beautiful big block at the top of the hill she she thought she was overpaying spending two thousand dollars and my grandpa thought he would have to work for 40 years based on his income at that time to pay off that property for two grand she just sold it as land for 1.6 mil 50 years later you know what i mean it’s like to think that you know with them printing money like they are bringing on hyperinflation cheap credit that we’re not going to go through this period within a couple years and end up in a better position longer term than we are today is just a really dangerous way of banking yeah and also the idea that as time progresses incomes go up because of inflation so you may be able to pay it off faster as well as rents go up over time a lot of people don’t take into account the fact that you’ve got cash flow coming in it’s a productive asset property and so you’ve got cash flow coming in which can be used to pay off the mortgage or pay the interest on that property so you’ve got that coming in as well as the growth in the property but yeah i hope that this has kind of helped people i guess get a new lens on how to look at what sort of strategy am i going to implement what sort of areas do i want to invest in and why me and ben are so like pro metro markets and why we talk about that so much when we’ve worked out a strategy where you can get metro markets with cash flow it just kind of feels like okay we can have our cake and eat it too but i hope this gives you a framework of some of the reasons behind that decision and why we feel like for us personally that increases our chances of success we may not get the best suburb in australia but it’s going to step us towards our financial goals and what we want to achieve and that’s what’s important to us whether it takes us an extra five years or whatever it’s like you know we’ll get there eventually because we’ve chosen that so is there anything else you want to add to that ben i just wanted to like say one more story if that’s cool which is a story i’ve talked to you about off camera before now we had a client called dave who’s from sydney dave is like the perfect example of the tortoise investor in the last 25 years he’s bought four properties in sydney one of them being his own home and then one property in brisbane so when i came to dave he’d already been investing for 23 years he’d never earned more than a hundred and three thousand dollars a year in his life he’d raised three children and his wife had never had a second income 25 years ago he bought one house in sydney for like 300k it’s now worth 1.2 mil about 15 years ago he bought a second or 20 years ago sorry he bought a second property for 400 grand 15 years ago he bought a third property for 500. all three properties are now worth 1.1 to 1.3 mil then when they changed the granny flat position in new south wales 10 years ago he built granny flats on all of them so all of the properties now rent for over 1300 bucks a week and because he just paid principal and interest nothing else but principal and interest off all the properties when he came to me he owned the three houses with 50 grand a year of debt and 150 grand a year of income this guy is still working he’s 53 years of age i said what is the secret and he said i didn’t buy the best suburb i didn’t buy the best streets i didn’t build the best granny flats i just held the properties through the good and the bad and consistently worked on paying off the debt and that was three and a half years ago man at that time after seeing him i went i’m doing this completely wrong thinking about it such short term and trying to make 20 grand on the way in and 50 through a renault i sold six of my houses that didn’t make sense and now i’ve replaced them with four houses and four granny flats and it’s like there is a path that people have been doing for longer than you and i have almost been alive that has worked it’s like why do we need to reinvent the wheel it’s like buying brisbane and getting dual income up here is like doing it 25 years ago in sydney it is so cheap and people don’t realize that once we go through 10 years of growth up here and the average house isn’t 300 anymore it’s 500 the numbers just don’t look as good like if you’ve got one house that’s worth 200 grand more to buy for the same rent how long does it take you to pay 200 grand off using your own personal income right now and that’s maybe three years for some people maybe it’s 10 for others of financial freedom and choices they’ve got to trade and i love this stuff man i love so passionate about what we do i love that story because that story perfectly emphasizes what we’re trying to talk about which is you don’t need to hit it out of the park you don’t need to hit a home run you don’t need to pick the best suburb in australia in order to be successful in property and to achieve your financial goals and what you’re setting out to achieve you don’t need the best of the best you don’t need the best results but if you’re buying good suburbs that have good growth over time that have good rental income and you know good stability and vacancy rates and things like that which i think is our focus is we want stuff that is good that’s going to consistently be good versus trying to hit it out of the park so yeah for a lot of people out there i think this will be a wake-up call to say okay i don’t i don’t need to hit a home run i don’t need to stress about that i just need to do it good i just need to do it well and it can be so easy to do it well and we have we both have so many videos on our channels about how to do that how to research markets how to research suburbs all of that sort of stuff or you know if you do want personalized help then book a free strategy session with ben or one of the members over pumped on property and say okay here’s where i’m at here’s where i want to be how can i take steps to get there so go to on-property dot com do you forward strategy you can learn more about that and book in a time that suits you over there and get on your journey start taking those next steps you know increase your chances for success we wish you the absolute best out there and until next time stay positive