Problems With Property Hot Spots

Suburb hot spotting is a really popular and trending topic. People want to know where are the best suburbs to invest. However, without a clear vision and strategy suburb hotspotting can actually be useless to most people and potentially even detrimental.

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How To Research Suburbs

0:00 – Introductions
0:55 – What are the problems with suburb hot spotting
1:55 – Do suburb hotspots carry extra risks?
2:47 – You must place context around the hot spot
4:28 – You don’t need the hottest suburb to have success in property
5:10 – Hot spot suburbs might not be the best long term investment
6:38 – How to use suburb hot spots
9:24 – Get your strategy first!

Transcription:

Ryan 0:00
australia’s hottest 100 suburbs the 20 best suburbs to invest in this year the 10 hottest suburbs in sydney suburb hot spotting is a really popular and trending topic people love ring magazines with the suburbs in a blog post that highlight the top suburbs people want to see what the best servers are and they want to know what suburbs should i invest in however when you don’t have a clear vision and you don’t have a clear property investment strategy suburb hotspot is generally useless to most people and can even be beyond useless and actually detrimental to your long term property success if you’re just focusing on this so in this episode i want to talk to you about southern hot spotting the pros and cons of it and how you can avoid the mistakes and also use it to your advantage so one of the problems with how the southern hotspotting really there’s no like problems per se you got some issues with other hotspotting that that based on historical data in that these are the suburbs that have boomed the most in the last 12 months or three months or whatever term it is and so those servers have already gone through massive growth cycles by the time that you actually learn about it so while they may have been the hottest suburbs they may not be any more or suburb hotspotting is predictions on what is expected to happen in the future and those predictions sometimes come true and sometimes don’t so you never know if it’s actually going to be the hottest suburb or not until you actually wait 12 months or a few years and to see if it actually outperformed the other suburbs in australia so there’s inherent problems and risks in that aspect but generally speaking i don’t see major problems with sub hotspotting in that they add massive amounts of risk or anything you can find a server that is predicted by all the analysts to do really well over the next few years chances are that’s not going to be one of the worst performing suburbs in australia unless you’re looking at something like a mining town or some really small town that’s getting a massive growth boom because of a mine that’s opened up in the area yeah high level risks there just ignore those other hotspots for sure but if we’re talking about metro markets here that have long term growth potential there generally speaking looking at sub hotspotting those suburbs may do well they may do average they may do below average but if they’ve made to the suburb hotspot the chances of them being absolute complete duds are a lot smaller than if you just pick a random suburb in australia so in some ways they can minimize your risk there but the problem that i see with a lot of people investing the problem that i guess i used to have in the past is that there’s no context placed on the southern hotspotting it’s looking just a capital growth and capital growth alone and generally it’s covered growth within a short time period and so it doesn’t necessarily think about you and doesn’t think about hey what’s your strategy why are you investing in property what is it that you’re actually trying to achieve financially through your investment properties these are the best hot suburbs for you now it’s not like that it’s just it’s just growth it’s just one figure and while on the surface it might seem like okay any growth is good growth if you want to achieve your goals you need to work out okay what properties are actually in alignment with those goals for me what price points and alignment for me what kind of cash flows in alignment what sort of manufactured growth opportunities so if a hotspot suburb for example is full of units but your strategy is to buy houses and build granny flats to get dual income or to buy houses knock them down and build a dual income property we don’t have that opportunity with units so while you may get good capital growth you may be negatively geared and could have a low rental yield which puts you in a negative cash flow position which stops you investing in more properties and growing your portfolio so while it may be the hottest suburb in australia it may not be the hottest suburb for you because it may not line up with your strategy and so this is why it’s so clear to get important on your strategy and what you’re trying to achieve because the thing is you don’t need the hottest suburb in order to have success in australia each year there’ll be one hotter suburb that outperforms every other suburb and sure the people who invest in it they did good they got lucky and they made a lot of money but there’s so many other suburbs all over australia that still went up in value and still made people money either through growth in value or through the cash flow or the tax benefits those people are getting from their properties so while the hunt for the hottest suburb is obviously very exciting there’s so many other suburbs that can still be successful and lead to your long term success and sometimes as well the hottest suburb this year might not actually line up for you as the best long term investment down the line perfect example is a mining town it’s an extreme example but it may be the hottest suburb for the next two or three years and just grow exponentially but then maybe the mind closes or they don’t need to hire as many people and the price range drop the vacancy rates drop and you’re left with this property that is completely empty no one wants to rent it and it’s worth a fraction of what you paid for it

is that long term success that you want is that what you want for your property portfolio sure you can ride the wave and hopefully sell at the top it’s always hard to pick those timings but is that going to lead to long term success for you and that’s a more extreme example but the same example can happen in other areas maybe there’s a hotspot in melbourne that’s going to grow well over the next 15 years but in melbourne currently you know allowed to build granny flats and rent them out legally to tenants and so if your goal is cash flow and your income and high rental yield properties you may get the capital growth from that property but you don’t get the rental yield to support your lifestyle and achieve financial freedom and so then you’re tied to your job in order to hold that property let’s say you lose your job for whatever reason you can’t afford to hold anymore so you’re forced to sell it and so you never even get that long term success so there’s so many things that can play out so when you’re looking at southern hotspots yes they’re good to look at but you need to look at them in a context of what are your goals what are your strategy what sort of market do you want to invest in what sort of properties do you want to invest in and then you can look at these hotspots and you can say okay nine out of 10 of these hotspots are either in the wrong state or the wrong market that i don’t want to invest in there’s maybe one or two of them that are interesting that line up with the market that i want the type of property i want to buy the price range that i’m in i’m not going to research that suburb in more detail i’m also going to research the surrounding suburbs of that southern to see okay what opportunities exist here and then hotspots can be a stepping stone for you to actually understand the market better and to find a great market for you to invest in so hotspots should not be taken as gospel not be taken as canon and exactly what’s going to happen or what’s going to be the hottest or what’s going to be the best for you but they’re to be taken as one data point among many within this upper layer of context of your own vision and your own strategy so you just layering your own vision on it almost like putting on your own goggles so you get your vision you get your strategy of okay these are types of properties types of markets i want to invest in let’s lay them over my eyes and then every property i look at i’m looking at through these goggles of my strategy and the first thing i’m looking at is does this suburb line up with my goals and my strategy and if the answer is yes then you’re like okay i’ll keep that to look at that later and do more research on it but more often than not you’re going to look through these goggles and the answer is going to be no no no no no no no no no no and then property investing and choosing your market choosing your suburb choosing the hotspot becomes this easy process of elimination because you’re looking through the vision you’re looking through your strategy discarding everything that doesn’t fit in that and then you’ve just got a couple left and all you have to do is look at those couple and then you can analyze them again through your vision and you can see which one lines up with your goals the best and the types of properties and suburbs you want to invest in best and you can discard the worst ones and so you kind of end up in this process of elimination where it’s not necessarily that you’re choosing the suburb it’s more like the suburb chooses you because you’ve eliminated everything else and this suburb has stood out to you as the winner and so somehow hops on and can be great and still really interesting to read i still read the articles i love it i love looking at it but it’s not the be all end all and you take it in the context of your own strategy and if you don’t yet have the strategy and you sucked into the southern hotspotting and you just want to know what’s other to invest in get your strategy first i’ve done videos on this i’ll link up one down below of how to create a strategy or you can actually get on the phone to someone and talk about his around that here’s where i want to be what’s the strategy that could line me up with my goals and where i want to end up and what are my next steps in the process if you want to get on the phone to someone talking about that get clear on your strategy get clear on your next step so you can find the hottest suburb for you not the hottest suburbs hotter summers for you, then go to onproperty. com. au Ford says suburb? No, that’s my cause. go to onproperty. com. au forward slash strategy. And you can learn more about that book in a time that suits you and get clear on your strategy. And yeah, I guess I do have a course on suburb research. If you want to learn how to research suburbs yourself, go to onproperty. com. au forward slash suburb. And you can learn about the data points that I look at when researching a suburb, how to collect that data, how to analyze it, how to compare suburbs to each other. It’s a paid course, but it’s also very useful. go to onproperty. com. au for suburb to check that out.

They mean to talk about that and it just kind of came out. I wish you the absolute best of luck in your property investment journey. I wish you the best luck in finding a suburb that suits you and suits your goals so you can achieve financial freedom or whatever your property investment goals are as quickly as possible. I wish you the best of luck out there. And until next time, stay positive