Chapter 1: The one property investment mistake that trips up 99% of property investors

FREE ESSENTIAL GUIDE

The essential Guide to Property Market Research

The Sceptical Property Investors Guide to Finding Investment Property Locations Set to Boom Soon

Before we get into the nitty gritty of finding your own boom location, it's important to understand why so many investors get it wrong so you don't make the same property investment mistake.  After all, you wouldn’t be reading this Guide if you did not believe that investing in property can be lucrative, not so?

Simply put, this Guide will ensure you....

Don't make the same property investment mistake most investors do


Regardless of your preferred property investment strategy - be that buy-hold, renovate, develop, high yield - if you don't know WHERE is best to invest then any creative strategy could be eroded by poor organic capital growth (an increase in property values over time), or lack thereof.

Before I knew what I was doing, I bought an investment property at a significant discount to bank valuation through a property development venture I was involved in. Even with a 20% upfront discount on the retail price, after a number of years of very little market related (organic) capital growth in my chosen area, the value of the discount was quickly eroded.

Years later I did the same thing ... bought a property at a discount but ALSO enjoyed fantastic subsequent organic capital growth simply because I learnt how to calculate the ratio of demand to supply for every location country-wide and so had bought into a suburb which was starting to rise in value, with no effort on my part. This little property gem is almost like my personal ATM today and is loaded up with equity provided purely by market forces ... no renovation needed to manufacture the growth (I didn't need to renovate as it was brand new too). And all because I chose to buy in an area that then benefitted from organic capital growth.

With over 15,000 Australian suburbs to choose from … split further into two property categories: Units and Houses … there are almost 30,000 micro property markets in Australia; each with their own unique supply and demand forces affecting capital growth and, therefore, your potential returns.

Sadly, almost 1.5 million property investors in Australia get stuck on just one investment property as they become the victims of one common property investment mistake. One property is hardly a 'portfolio' promising the easy life, which property 'spruikers' are keen to promote along with their personal bias of where and when to invest.


It's rare these 'spruikers' ever sell more than one property to their clients so they are mostly not interested in how your investment pans out in the medium to long term.

It's always up to YOU to decide where to invest. And you have 15,000 micro-markets to choose from!

Think about this ... over 60% of property investors are negatively geared, with their properties costing them over $10,000 per annum while they hold on hoping for some uncertain future capital growth.

This is an ATO (Australian Tax Office) FACT published a few years ago but it holds true today. Less than 1% of property investors achieve financial independence through property. The rest fall prey to the number 1 property investment mistake of buying in the wrong location and simply fund a billion dollar industry out of their take home pay.

Not ideal.


So how do the 1% of property investors get it right and avoid the main property investment mistake, while the majority fail?

Estate agents, property developers, mortgage brokers, the lenders and bank: all get paid first before the poor property investor who hopes that some future capital growth in their chosen suburbs will compensate them for the risk and cashflow sacrifice each month.

ATO 2016-17 TAX YEAR STATS

60%
RENT LOSS

2/3 of property investors record an annual loss against rental income

71%
ONE PROPERTY

71% of property investors only
own one property

1%
SIX PROPERTY

1% only can live off their property investment income

Why do most suburbs deliver poor results for property investors?

The answer is surprisingly simple.

  • The vast majority of property buyers and sellers do not know how to calculate the gap in supply and demand for property
  • There are over 15,000 suburbs (and a House and Unit market in each) making manual research almost impossible
  • There is no standardised method for comparing all these suburbs to highlight the very best

99% of locations will drain your bank account and put a stop to your wealth creation. The ATO stats don't lie.

Think about this....

My property market research tool, Boomscore, that I built back in 2010 (or thereabouts - time sure flies) compares over 15,000 Australian suburbs against 8 different indicators of supply and demand using a standard method of calculation known as an algorithm. Now, the ratio between supply and demand is crucial as it is an indicator of the likelihood of imminent organic capital growth. See where I am going here?


In 2020 only 12 locations out of 15, 231 suburbs countrywide would have been regarded as areas likely to see huge price increases based on the simple fact that demand way exceeded supply in these areas. 


How long would it take the average property investor to find and collate over 1 million data points (yes, that is what is needed) and then create a formula to highlight those areas where demand exceeds supply?

Find the best BOOM locations and avoid common property investment mistakesThere were only 12 hotspot locations identified in Boomscore in 2020

How quickly could you find and analyse over 1 million property data points across various public sources?

The bulk of suburbs were 'balanced' - meaning the number of properties available for sale pretty much matched the number of buyers. So price growth in those areas would have been...well...average.

Unfortunately, the vast majority of suburbs either experience no price growth or, indeed, go backwards in price when factoring in the costs of owning the property and inflation. Which is why so many property investors feel they need to develop or renovate to stand a chance of making any money.

But it doesn't have to be that way. As a property investor or property professional, it's your duty to find those suburbs that are relatively more likely to produce 'effort free' (so market driven) capital growth ... and avoid the money pits (of which there are many).

Avoid being another victim of the most common property investment mistake ... and learn how to master finding suburbs with the best capital growth potential. It really is as simple as that.

Who doesn't get frustrated listening to the media, the experts and everyone else who has a personal opinion on where and when to invest?

Instead, the universal law of Supply and Demand states that if demand for property outweighs supply, then prices will increase. Conversely, if supply exceeds demand then prices will fall.

Instead of relying on commission based 'experts' or personal bias, you can check a suburb's Boomscore which highlights those areas where demand exceeds supply (and vice-versa).

 

Pareto's Principle - 20% of suburbs deliver 80% of capital growth

The Pareto Principle - named after esteemed economist Vilfredo Pareto - states that 80% of consequences come from 20% of causes, saying there is an unequal relationship between inputs and outputs. This 80/20 principle can also be applied to the property market, in that 20% of Australia’s suburbs provide 80% of the capital growth. The trick is knowing how to find these location gems.


What Pareto does not tell us is which ONE suburb will produce the very best returns. Even a Billionaire would struggle to own property in 20% of every suburb in Australia.

Pareto: 80% of capital growth in the property market comes from 20% of suburbs

80% of outcomes (or outputs) result from 20% of all causes (or inputs) or 80% of all capital growth is found in 20% of the suburbs countrywide

Read on in this 'Essential Guide to Property Market Research' to find out how property prices (aka Capital Growth) are influenced by supply and demand … how to calculate the gap in supply and demand for any given location ... and how to cherry-pick the very best growth locations to suit your investment strategy. We want to help you avoid the most common property investment mistake and knock those dreadful ATO stats on the head!

We’ll also share a tool (powered by property market data and ‘machine learning’ technology) which seasoned investors have been using with success for over a decade to pick high performing suburbs with scientific accuracy. You guessed it - it's called Boomscore.


Just a quick taster to keep you excited - Boomscore does exactly what it says 'on the tin' - it scores 15,000 suburbs, both Unit and House markets (so 30,000 micro-markets), based on the ratio of demand to supply using over 1,000,000 property data points and then rank orders them for you, based on your strategy, to highlight the best capital growth locations for YOU.

Yes, it's very powerful as you will see soon. So powerful, yet so easy, that even a 6 year old used it and beat the property market expert forecasters.

Okay, so we've set the scene... identified the problem... highlighted the challenges and the most common property investment mistake... now it's time to get into the detail... the practical 'how-to' stuff. Thanks for persisting and staying with me this far.

No more murky theory. It’ll be crystal clear. Promise.

Michael Fuller, Creator of Boomscore

Blog Post by Michael Fuller

Disclaimer: Nothing on this page, our website, or any of our content or courses is a promise or guarantee of results. All the material within Boomscore.com.au is provided for information purposes only and we are not implying you'll duplicate any results. Your results will vary and depend on many factors. All property investment entails risk and no action should be taken solely based on the information in Boomscore.com.au. The publisher is not entering into any kind of practitioner/client relationship with its readers. The publisher is not responsible for errors or omissions.

>