An Australian property expert who owns six homes worth a combined $6 million has shared his top tips on how to make money from the market.
John Pidgeon was only 22 years old when he bought his first property in Horsham, Victoria, in 1999, but he was 35 before he actually lived in it – before that he bought to rent it out.
“Houses are something that everyone needs, so I thought about the supply and demand and capital growth that happened with property when I started,” he told Daily Mail Australia.
He took time to carefully build his portfolio and said: “It wasn’t really a race to the top. It was more of a long-term plan to buy my dream home in a great location.”
After ten years, Mr Pidgeon and his wife had four properties and have continued to expand ever since, along with having three children.
John Pidgeon was just 22 years old when he bought his first property in Horsham, Victoria, in 1999, but he was 35 before he started living in one of his own properties – before that he bought to rent them out. The photo shows a house for sale
Mr Pidgeon (pictured) is the author of the new book Sort Your Property Out & Build Your Future and a podcaster on real estate issues
The family lives in NSW and owns property there, as well as South Australia, Queensland and Victoria.
After working as a real estate coach and investor for 25 years, Mr. Pidgeon has explained the factors behind finding the right place to invest, which he divides into macro (large-scale) and micro (small-scale) factors.
He also explains the pros and cons of different property types and how to find a hotspot and avoid pitfalls.
Macro factors
1. Population and growth
There are more than 15,000 towns and villages across Australia. How do you find the one location to invest in from such a large number of potential locations? Answer: you’re not.
Focus on the top 50 or so markets nationwide, by population, which can significantly narrow your search. But more importantly, narrow down the choices once you’ve determined your price, desired return and type of property.
2. Real estate cycle
Knowing when to make your next property purchase comes down to when you are ready, both from a credit and strategy perspective, and when ‘The Property Clock’ is set to the best time to invest, in line with your strategy.
3. Supply and demand
Supply and demand can be affected by government land releases, gentrification, employment, infrastructure and services, the attractiveness of the general area or investment from investors.
Other factors may include how many first-time homeowners are looking to upsize, downsize, or enter the homeownership market.
High demand usually puts upward pressure on prices, while low demand usually puts downward pressure on prices.
4. Unemployment
Take the national average for unemployment and compare it to the unemployment rate in the market you are considering.
High unemployment is usually accompanied by low population growth, which poses a challenge for your real estate investments.
5. Economic strength
Look at the sectors currently active in the markets of interest to you and see how diversified and strong they are.
Also consider what new industries are being developed in the market, creating businesses and employment for the future.
6. Government expenditure
Will new transport routes, parks, public spaces, services or other infrastructure be developed?
How many years from now are these developments expected? Talk to municipalities to get an idea of what will happen in the future.
7. Credit terms
Are interest rates high or low? Which banks or lenders are interested in the area you are considering? Have lending rules been relaxed to encourage more investors and homebuyers to get involved?
There is no shortage of people offering tips on how to get started in the real estate market, but the best advice comes from those who have proven their recommendations work by doing it successfully themselves.
Micro factors
1. Vacancy rates
View the vacancy data online and assess the trends. What has happened in the market historically?
If the rate is higher than 4 percent, be on the lookout for supply issues, but also look at where this trend has developed from: is it going up or down?
2. Affordability
Everyone’s definition of “too much money” for a home is subjective. Get to know the affordability of the area to understand where the market is.
3. Demographics
What constitutes the local population? What cultural backgrounds, life stages, ages and lifestyles do you see? What is the socio-economic composition of the area and suburb you want to invest in?
These trends shape the lifestyles, behaviors and interests of potential residents, and the types of properties they are looking for.
4. Sales data
Think about the sales in the area over the last twelve months, and in particular the sales of properties like the one you’re considering.
5. Stigma in the suburbs
How do local residents experience this suburb? Speculation deters many people from buying or investing, but is the stigma justified?
6. Walkability and general access
Walkability is an accessibility benefit. It promotes health and wellbeing, accessibility, convenience, time and cost savings and social interactions, and generally has a positive impact on property prices.
Houses under construction in Oran Park in Sydney’s far south-west are pictured
7. Income levels
When incomes are higher, residents can upgrade, renovate or improve their homes, increasing the value of the surrounding suburb or city.
8. Child-friendly
Are there playgrounds, schools, after-school activities, services and facilities? Are the suburbs attractive to families because they are safe and suitable for children? This affects property prices and also affects who will or will not move to the area.
9. Which side of the tracks?
If there is good growth in the area, the unwanted sides of an important roadway or railway line will not be left behind. All sides are positively affected and often benefit from growth, even if it is delayed.
10. Type of real estate that is in high demand
There may be a shortage of one type of property, which could lead to better performance due to demand.
Get a good understanding of who is moving to the area and what type of properties have performed in the past, and look for trends.
John Pidgeon’s new book Sort Your Property and Build Your Future is out now.
Sort Your Property Out & Build Your Future by John Pidgeon (Wiley $32.95) is available now from all leading retailers