Can You Expand On How You Pinpoint Locations
Can I expand a bit on how possible locations are identified?
I’ll take a deep breath, this could be a rabbit hole where this is probably a lot of my background as well, matt.
So my profession was actually as a software engineer and I’ve spent a lot of time, you know, Ripehouse has been operating now for over 10 years, so a lot of the earlier days it was a software platform.
Okay. And and research and due diligence has always been a big part of what we did.
So we have started giving public recommendations for suburbs in 2015.
We’ve had extremely strong over performance around the suburb average growth across the country in that time. Alright.
We generally pride ourselves with the research in getting into areas first.
We don’t follow storylines. Okay.
Um so Matt sort of also as a second part of that question asked how many suburbs would be presented for initial consideration.
So I’ll just, I’ll park that there and I’ll come back to that in a moment if that’s okay. So we’ve got really good at finding these locations.
Okay. Um they do change and evolve over time when we do find the location, we’re not in there for very long, 6 to 12 months, an absolute maximum we’re finding the optimum buying conditions to be very comfortable of the projected or imminent growth of the location, but it needs to also provide us the opportunity so we can actually acquire properties there an area to give you an example at the moment that you know, is looking very strong from a growth perspective, we’ve got the olympics coming up, you know the data on the ground and the demographic data.
The macro data is very strong um, is brisbane.
Okay great. Lots of investors are talking about it but buying on the ground, there’s a lot of heat in the market.
You know, you are part of the growth story because you are potentially paying overs for a property.
It’s very hard to assess value. It’s very hard to identify property and to acquire it and not be involved in offer over office scenarios.
So when we identify our location, we’ve got to be very comfortable of its growth fundamentals and it’s projected growth.
But then we’ve actually got to be able to acquire property.
It’s got to be in the by the buying window. So I’ve given some maybe some background information there Matt.
How do we actively find them? Where we have our buying rules. We have Eric who’s a data scientists masters in actuarial studies and uh you know, we’re very experienced and well resourced in our data I guess.
And the algorithms behind the scenes have been evolving for quite some time.
Um look really simply at a high level. The main things that we look at is previous performance. It is days of supply, it is vacancy rates.
It is yields. All right, these are the big demand supply signals that would point us towards a market that is set for good, strong, imminent growth.
We’re then looking more broadly at the overall opportunity, employment terrain, diversity of that employment, you know the backbone, you know, I guess or the depth of that employment, new projects coming up in the area, lifestyle factors and then supply that might be coming into the area that could burst any bubble or potential for growth.
So we’re looking at those those larger macro items and then we’re drilling down into the on market metrics.
As I mentioned, you know the days of supply yields vacancy rates, um sales volumes. Um soul price changes to determine.
Are we in the buying window? So we’ve refined those algorithms, were refined those buying rules over time.
We’ve got really good at it right in the last 12 months, the average property purchase for clients has grown 24%.
Right, that’s compared to 18% nationally. We generally do overperform against the national average by a similar amount. 5-8% per annum. Alright. Um think of it in terms of we have our buying rules when a suburb moves inside those buying rules between the goal posts, that becomes a buy for us.
We are constantly reassessing each suburb very regularly. And suburbs are moving in and out of those goalposts on a daily basis essentially when we then identify a location, it’s just moved inside those goalposts. That’s when we will activate our on the ground due diligence. Um there’s not many places now in australia that we haven’t either purchased in before.
I’m myself or with other clients or we know very intimately where we’ve considered in the past. So I’m generally very well connected and have a lot of on the ground due diligence already in the books about those locations. But we will then confirm our research via that on the ground due diligence and then it becomes an approved location at any one time that there’s around 110
Locations or suburbs at the moment that are approved. And this suburbs coming in and out of that as I mentioned every week when we’re going through. So probably the second part of it. Hopefully that answers your question there matt. And there’s a lot of information that’s providing our research that does sort of maybe give you some indications of exactly what we look for.
And you can definitely pick the brain of erick who you know around any particular questions, why do you do this or um you know, do you pay attention to this? So you can really sort of um you know, go into as much detail as you like there. But the location is approved right? We’ve done our due diligence um of those 110 or so suburbs that are currently approved.
There might only be eight or 10 of them matt that are actually going to tick the boxes for. You generally you might say to us look nothing in queensland because I already owned properties there and land taxes an issue or I don’t want to have anything in w. A. Because I grew up there and I just don’t like the areas.
That’s okay. We definitely take preferences from you. Um to begin with, we will go away and try and find those locations set to deliver what you’re trying to achieve. We’re bringing that research generally around 6-8 different suburbs. You know, three or four different local government areas to consider.
Um that’s a process where you can say, look, I’m not gonna buy there. Have you got any other areas like this? So it definitely can be a back and forth. The more areas, the better, the more areas we get to choose from, right, the more properties we can consider and usually the faster and the high quality of properties that we actually locate because we have more options right?
We’re very good at going through many properties. So you don’t want to, you know, we’re not going to get bogged down by too many options. We just methodically work through that to find you and do that due diligence. Hopefully that answers your question.