Ripple Effect Investing. What is The Ripple Effect?

Transcription

1 Ripple Effect Investing What is The Ripple Effect?

2 When demand changes, Property Prices change in one location, Before it changes in others Ripple Effect Investing is Understanding Growth Reading the Market Riding the Wave

3 John Lindeman Investor 40 Years Property Investing & Research 20+ Property Transactions John Lindeman Researcher Widely Respected Leading Analyst Manager Research ABS Leading Data Providers

4 John Lindeman Author Australian Property Investor Columnist Author Mastering the Australian Housing Market (Published Wright Books in 2011) Context The Ripple Effect In Summary A relationship between suburbs How to Take Advantage of it Buy in, Stay in, Get out, and repeat For Add Value Deals More Profit, Less Risk Today

5 Predicting the future Cycle theory Hot spotting Recent performance Demand dynamics Ripple effect Cycle theory

6 Cycle theory Cycle theory

7 Hot spotting Infrastructure Development Demographics Economic change Recent performance

8 Demand dynamics Population growth and change Availability, cost, need for finance Supply listings, new dwellings Demand type and tenure The Ripple Effect

9 The Ripple Effect All housing markets have a price relationship A house, a street, suburb, city Price changes in one affect others The Ripple Effect To Understand It you need to: Know the Pool Know the Stone And Who s going to Throw it!

10 The Ripple Effect To Read It you need To Collect Data Sort Data Look for Patterns The Ripple Effect To Ride The Wave you need to Know how the Patterns work When to Get In How Long to Stay In for When to Get Out

11 The Pool

12 The Pool Australia is too big Need to Drill Down State s CBD s Town s Suburb s The Stone

13 Which Stone will start it? Population Growth & Change Availability of Finance Supply and Demand of Dwellings Price and Location 3.0% Australia s Population Growth Rate 2.5% 2.0% 1.5% 1.0% 0.5% World War I World War II 0.0%

14 Availability Of Finance Finance is Key Success Factor Interest Rates Lending Criteria Supply and Demand of Dwellings Supply and Demand Population Changes

15 $1,000,000 $100,000 $10,000 Capital city prices and rents from 1901 to 2011 Post War Population Boom Great Depression Post War Population Boom $1,000 House Prices Rent index Sources: ABS House Price Indexes, Stapledon Index, NLA Trove and Mitchell Library archives Supply and Demand of Dwellings Supply and Demand Population Changes War and Recession Aging Population Immigration Current Construction Shortages

16 Price and Location Changes to the Area Significant Infrastructure Changes Road and Rail Introduction of Industrial estates Shopping Precincts Zoning Changes Gentrification Who ll throw it?

17 Property Market Hand-Outs Renovator Markets

18 Collecting the Data What Data Do You Need? Level of Accuracy sought? It depends on Change Very High % Everything you can!

19 Very High % Awareness of Economic Conditions Population Trends and Demographics Income Statistics Planned Infrastructure Changes Housing Statistics Sales Price and Rental History What Data Do You Need? Level of Accuracy sought? Very High % Everything you can! 80% ish Changes in Economics, Demographics, Infrastructure, Finance, Price History 50% ish Price History

20 Where Do You Find It? Awareness of Economic Conditions Newspapers, Radio, Economic Summaries from Banks. Population Trends and Demographics ABS Some Property Monitors: RPData, APM Where Do You Find It? Income Statistics Council Website, ABS Planned Infrastructure Changes State Councils, Local Councils

21 Where Do You Find It? Housing Statistics: Construction Council Website, ABS, HIA Sales Price and Rental History Property Magazines Real Estate Search Engines REI your State Collecting Data Price History

22 Drilling Down

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25 Drilling Down Further Melbourne

26 6 Monthly Median House Prices For 89 Suburbs of Melbourne From 1989 to 2011 Those Median Prices in a Graph! Toorak

27 Year on Year Growth Rates Messy Clear Trend Messy Clear Trend Sorting Data Pockets of Land

28 Melbourne Freeway Roads Beach Lakes and Parks Pocket: Albert Park, Middle Park, Port Melbourne

29 North East Melbourne Suburbs Eaglemont Alphington Thornbury Heidleberg West

30 Sales Prices Timing Eaglemont to Alphington 2 years. Alphington to Thornbury 1 year. Thornbury to Heidleberg West 2 years.

31 And Then

32 Sales Prices Timing Eaglemont to Alphington 2 years?. Alphington to Thornbury 3 years. Thornbury to Heidleberg West 1 year.

33 In Our Example Where would you buy next? When? How long would you hold it? How much might you make? Sales Prices Anomaly

34 Prediction

35 Observations 1 2 Buy In

36 Sell Out The Plan

37 Alphington Change: $200K Thornbury Change: $150K Heidelberg West Change: $120K The Plan Alphington Change: $200K Thornbury Change: $150K Heidelberg West Change: $120K Combined - $320K 5 Years Minimal Effort

38 Is it Time to Buy? No! Is it Time to Buy? First - Verify Other Statistic Economic Changes Infrastructure Changes Demographic Changes Verify Data on the Ground

39 Is it Time to Buy? Verify Conclusions from Other Sources Property Power Report Property Power Report For Our Suburbs

40 1 2 1 Yr 3 Yrs

41 1 2 Conclusions If you go for 50%... sometimes you ll get it wrong! Verification of Predictions is Critical Economic Changes Infrastructure Changes Demographic Changes Verify Data on the Ground Qualified Second Opinion

42 Ripple Effect Investing What we did Summary Ripple Effect Investing Identify Pockets of Land Identify the Suburb within those pockets Collect Sales History for those suburbs Analyse the Sales Data

43 Summary Ripple Effect Investing Identify Trends Collect Other Info Confirm Predictions Infrastructure changes Demographics Zoning Changes Summary Ripple Effect Investing Buy When Prices are Low And Rents are High, Buy When Prices are about to rise Ride the Wave of Growth Sell when Prices settle. Re-invest into next wave of Growth.

44 Your Turn Your Turn A Map, The Stats, The Graphs Map Identify the Pocket Stats Identify the order Graph Identify the Trend

45 Your Turn A Map, The Stats, The Graphs Predict Identify the Next Suburb Identify When to Get In / Out. Identify How Much Made?

46 Your Turn

47 Buy In? Stay In? Get Out?

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49 Ripple Effect Investing Value of Forecasting It s an Investing Strategy unto itself. Risk Management for Riskier Deals Perfect to Increase Profits for Add Value Strategies.

50 John Lindeman Property Power Report The Definitive Second Opinion John Lindeman Property Power Report Predicts the next Growth Suburb Determines Future Rental Values

51 Forecasting Well Can Take the Guesswork Out Shortlist Areas Manage Your Risk Avoid Dud Areas Forecasting Well Can Add Market Driven Growth To Add Value Projects Time the Market For Selling Maximise Your Returns

52 And The Property Power Report Is FREE For 2012 Grads Ripple Effect Investing Thank You John