An Australian real estate expert who owns six homes worth a combined $6 million has shared his top tips on how to make a mint off the market.
John Pidgeon was just 22 when he bought his first property in Horsham, Victoria, in 1999, but he was 35 before he actually lived in one – before that he bought to rent them out.
“Houses are something that everybody needs, so I was thinking about supply and demand and the capital growth that happened with property when I started,” he told Daily Mail Australia.
He took his time to carefully build his portfolio and said that ‘it wasn’t really a race to the top. It was more of a long-term plan to buy my dream house in a fantastic location’.
After 10 years, Mr Pidgeon and his wife had four properties and have continued to add since then, along with having three children.
John Pidgeon was just 22 when he bought his first property in Horsham, Victoria, in 1999, but he was 35 before he lived in one of his own properties – before that he bought to let them out. A house for sale is in the picture
Mr Pidgeon (pictured) is the author of the new book Sort Your Property Out & Build Your Future and a podcaster on property matters
The family lives in NSW and owns properties there, as well as South Australia, Queensland and Victoria.
Having now spent 25 years as a property coach and investor, Mr Pidgeon has explained the factors behind finding the right place to invest, which he breaks down 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 over 15,000 towns and cities across Australia. How are you supposed to find the one place to invest in from such a large pool of potential locations? Answer: you are not.
Focus on the top 50 markets nationwide by population, which will help narrow your search significantly. But more importantly, narrow it down once you’ve identified your price point, desired yield and type of property.
2. Property cycle
Knowing when to make your next property purchase depends on when you are ready, both from a lending and strategy perspective, as well as 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 release, gentrification, employment, infrastructure and services, general appeal or investment from investors.
Other factors may include how many homeowners are looking to upsize, downsize, or enter the homeowner market for the first time.
High demand usually creates upward pressure on prices, whereas low demand usually creates downward pressure on prices.
4. Unemployment
Consider the national average for unemployment and compare it to the unemployment rate in the market you are considering.
High unemployment is typically associated with low population growth, which poses a challenge for your real estate investment.
5. Financial strength
Look at the industries currently operating in your markets of interest and see how diversified and strong they are.
Also consider what new industries are developing in the market, establishment of companies and employment for the future.
6. Public expenditure
Should new transport routes, park areas, public spaces, services or other infrastructure be developed?
How many years away is this development expected? Talk to the municipal councils to get a feel for what needs to be developed in the future.
7. Lending conditions
Is the interest rate high or low? Which banks or lenders have an appetite for 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 successfully doing it themselves
Micro factors
1. Vacancies
Look at job vacancies data online and assess trends. What has historically happened in the market?
If the rate is higher than 4 percent, be wary of supply issues, but also look at where that trend has evolved from—is it going up or down?
2. Affordability
Everyone’s definition of “too much money” for a property is subjective. Get to know the affordability of the surrounding area to understand where the market is.
3. Demographics
What shapes the local population? What cultural backgrounds, life stages, ages and lifestyles do you see? What is the socio-economic composition of the area and the suburb you want to invest in?
These trends determine the lifestyle, behavior and interests of potential residents and the kind of properties they are looking for.
4. Sales data
Consider what sales have occurred in the area in the past 12 months, and in particular sales of properties such as those you are considering.
5. Suburban stigma
How do the locals perceive this suburb? Speculation holds many people back from buying or investing, but is the stigma justified?
6. Walkability and general access
Walkability is an accessibility advantage. It promotes health and well-being, ease of access, convenience, time saving, cost saving, social interactions and generally has a positive impact on real estate prices.
Houses under construction in Oran Park in Sydney’s outer south-west are pictured
7. Income Levels
If incomes are higher, it allows residents to upgrade their homes, renovate or improve their properties, increasing the value of the surrounding suburb or city.
8. Family friendly
Are there playgrounds, schools, leisure 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 into the area.
9. Which side of the tracks?
If there is good growth in the area, the undesirable sides of a major road or train line are not left behind – all sides are positively affected and often benefit from the growth, even if it is slightly delayed.
10. Type of requested property
There may be an undersupply of one type of property, which may 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 Out & Build Your Future is out now.
John Pidgeon’s Sort Out Your Estate and Build Your Future (Wiley $32.95) is available now from all leading retailers