Research and analysis part 2 - the five layers

Research and analysis part 2 - the five layers

In our previous article we outlined the virtues of taking a holistic approach to finding your next investment property. This time around, we’ll dig a little deeper into the individual layers of our five-step funnel to give you a better idea of exactly what types of data and research you should be using at each level along the way.

To briefly recap, our funnel moves from macro to micro and takes you through the following layers in order: states, local government areas, suburbs, streets, and properties.

Let’s take it from the top!

1. Start with states

With six states and two territories to choose from, the first thing we’re trying to isolate is where a particular option is on the property clock. Is it ripe for further growth or on the cusp of a slowdown phase? 

Bear in mind that we’re dealing with areas covering thousands of individual markets here, so a general state-wide assessment is not always going to pick up on the many subtleties within. To take a current example, regional New South Wales is firmly in the growth and acquisition stage of the property cycle, while Sydney is comparatively in a slowdown phase – savvy investors will always be looking to get as specific as possible.

That caveat aside, looking at macro-economic and cultural factors does still carry significant value. Areas such as net population growth and gentrification trends can certainly show you which way the wind is blowing. You’ll still want to be careful not to fall too much in love with the data this high up the funnel, however. Things start to get a lot more concrete when you move on to the next level.

2. Hone your focus with local government areas

 The typical size of local government areas lends itself particularly well to the type of analysis we’re talking about. With an average of around thirty suburbs per LGA, you’re looking at a solid sample size that really hits the sweetspot: not small enough to fall victim to variance, and not so large that generalisations and multiple mixed markets muddy the waters.

Sample size is the key here. Local government area analysis allows us to group together suburbs which are being driven in the same market direction by shared changes in areas such as transport, environment and their wider infrastructures. It also enables us to efficiently compare LGAs both locally and across the country.

Based on the sample size of residents and dwellings within, we’re able to perform property clock analysis in this layer with a high degree of confidence. We’re also able to start diving into metrics with high-level health checks on areas such as yields, days on market and sales volume at various parts of the cycle.

All told, this is the level where it really starts becoming obvious whether you’re staying consistent with your overall strategy and the outcomes you’re trying to achieve.

3. Get specific with suburbs

Moving on to the suburb level, this is where we really switch gears from property clock analysis to individual metrics-based analysis. The level of data available per suburb is generally not enough to put them into a black-and-white time period on property clock. A metrics-based approach, by contrast, lets us compare suburbs like-for-like and assess them against our wider goals with considerable accuracy. 

4. Sift by streets

The harsh reality when you get down to this level is that not all streets are created equal. You’re looking for streets that have great amenities in terms of shops, schools, and transport, but that are also firmly clear of no-go areas. Street level analysis lets you quickly sift through suburbs and find the sweet spots which are truly primed to deliver the outcomes you need for your strategy.

5. Plump for a property

Finally we’re down to the property itself. Is the demand actually there locally and does the property measure up? There’s no point in buying a white elephant on a perfect street – in-depth assessment and appraisal are critical.

 

Next time around, we’ll tee up a series of future strategy deep dives with a brief reminder of the importance of consistency through all stages of the funnel, so be sure to keep following along!

Subscribe to our newsletter

Weekly updates Weekly headlines, delivered to your inbox

Join the conversation!

Suggested Stories:

Investor in focus: Guy Williams, part one

Investor in focus: Guy Williams, part one

Investor in focus: Guy Williams, part two

Investor in focus: Guy Williams, part two

From renos to sub-divisions: how property developers avoid a legal headache

From renos to sub-divisions: how property developers avoid a legal headache

Renovation revaluation strategy

Renovation revaluation strategy

Building a large portfolio through structured lending

Building a large portfolio through structured lending

July Growth Masterclass and Big Reveal

July Growth Masterclass and Big Reveal