Episode transcript
Parag Dixit
Hi everyone. Welcome to a brand new podcast in the year 2026 and welcome you all back to our series. We are going to talk about a very important topic today on why people make mistakes in choosing suburbs for investments and what goes wrong. We will take you through what common mistakes people make in terms of what they don't have objectives and what, what they what all they do. We will also talk about how we can avoid those mistakes, about what people do in terms of research, what people can do in terms of finding properties, what people do in terms of not defining their investment goals, what, what? What all stuff happens, and how we can avoid those things, how we can set our goals properly, what can be done in terms of, you know, avoiding the pitfalls. And we will discuss some case studies, and we'll take you through about some examples about what people have done, and maybe give you some voices about what people have experienced when they have done such mistakes. But today, joined with me are my colleagues, Julius and mudit. Hi guys. Welcome. Welcome. How are you? I'm very good. How you been good? How are you holidays?
Julius
Holiday was good. I was in New Zealand around two weeks. We were in South, then we went north, spent some time with family. It was good, yeah, it was
Parag Dixit
good. Must have been good fun. Yeah,
Julius
it is, it is you went after a few years. I went after five years, five years, yes, five years. All right, all right, some with some good memories. And I made my tenants actually your tenants, your your first house. First I was in New Zealand, yeah, must be good. Yeah, it was good. And then they've been there since that time. They're there since, eds, eight years. Eds, same tenants, good, yeah, that's really good. Yeah, I must be half family now they are actually, and then the way they are maintaining the house is much better than me. It was first time for the for your younger one, right to go there? Yes, first time for my Android. Okay, interested, all right, that's, that's which city is it in? It's in Wellington. Oh, my God, you must have got some good views of the mountains and stuff. Yeah, on top of the hill, I have a water views as on one side I have good mountain views, all right. And then we got a small hill at back where we end up putting all the driveways together, yeah. And then I planted few trees over there, so it's a small garden as well, and my tenants are maintaining
Parag Dixit
it nicely. What the hell are you doing in Sydney?
Mudit
Just fun to go back and to see the view. He needs to do some work here. Just fun, yeah, you need to pay the mortgage. Yeah, I have to pay mortgage, right? Yeah. I was away. I was overseas as well. I went to Malaysia, then India, then Singapore. So it was long, four weeks off, thorough enjoyment. And it was lovely time meeting a lot of friends across different places. And I met my sister after six years, and it was a big get together we did in Malaysia. So my cousins and my sister, everybody flew from different places. It was 27 of us there. Oh, my God, you took all the hotels. It was chaos, but it was good fun. Yeah. So Parag, the kids must have been just busy in themselves, and they would not have been even looking at you. Alright, absolutely, and so are we. We didn't have to worry about the kids because they were all just playing together, and good to see that some of them were meeting for the first time, but within within a day, they could develop good camaraderie, and they were able to gel well. So age groups of the youngest one was like 10 months, and their list was my daughter 12 years. So 10 kids in those age groups. So yeah, chaos, yeah.
Parag Dixit
Chaos is a good word. No running around after kiss, nothing. You know, they just deadly on their own.
Mudit
Yes, mix of that, yeah, of course, but yeah. So how about yours?
Parag Dixit
I was nice. It was good. So we some friends and like, we all went together. We went on a road trip to WA and then we went to the southern part. So we were down down in Esperance, and then we started climbing back Albany. And some of those areas, some really beautiful areas. We saw some amazing out of the world beaches, amazing places, you know, where you should go once turquoise blue water, and you can see the sea, you can see down right to the bottom, and you can, you can, there was one place where we went, they could see some the do quite a bit far away. There were dolphins in the sea, and you were still in the same area. And earlier they were there, but you were not there at that time. So earlier they were there around the beach, and people were swimming around them, and so it was a beautiful place. Very nice to be in Fantastic, lovely places. Yes, I've been traveling a lot around, yeah, and I really love it. It's such diverse places. When we we were there in Keynes few months ago, and that's a different side of the sea. And when you're there, down there in Albany. That's direct opposite end. It's different type of a sea. Some amazing we have this really nice one.
Mudit
Yeah, I've been wanting to travel to that part of the country. But yeah, every year we think, and then something else comes up, and we are like, maybe going India or somewhere else. So yeah, we have to plan that as well. Oh yeah,
Parag Dixit
it should be. It should be. I. I love to this time, the kids have been saying, Okay, I'm going to now drive up from from Perth, and we'll take the Kimberley and all that route and maybe drive up to Darwin or something. Oh, wow. A lot of the lists have come up now go to Darwin and go right from Keynes, and keep on going inside Queensland and go to the rainforest and do some stuff, or it's nice. It's fun.
Mudit
I think, yeah, the accessibility of different places and the infrastructure which we have, and some places you get that remote tranquility and beautiful landscape, I think this is beautiful. What else can you ask for? Right?
Parag Dixit
What else can you ask for? What else can you ask for same thing, kids in a different car, adults in a different car. We had our own fun. They had their own fun. You know, cool. Yeah, good, okay, but yeah, good, good, good. Good to talk, good to see you guys again, and good to connect again and talk and talk through what what we've seen, and we understand what's happening in the market and how people are reacting to various stuff, but I've seen that a lot, and we do so many webinars, and we have so many people who we catch up, and there's appointments we do. One of the biggest mistakes we have seen at all point of time is how people choose their suburbs. In this completely go wrong in choosing the suburbs, and they completely go wrong in being able to find out where they should invest. And then obviously, you buying a house, you're buying a property. So it's not so easy to just unwind that position. You can you can do that, and maybe in stocks, or maybe you can leave some consumables aside. But houses, you don't change so often, so that's basically live it for long, long period of time. So, and I've seen that happen quite often, most of that starts evolving around strategy, right? So I think that's the first one which people have got it wrong. And I've seen that's the basis of what people fundamentally make a mistake. They just don't understand. What is my objective? You know, where do I start from? What's my why did I really get into this? Did I did I want to upgrade my house? Or did I want to, you know, pay down my mortgage? Or did I want to go for a holiday? Or did I, what do I want to do? And that's where the first fundamental mistake starts happening, around getting into a into the suburb, where I select and then, obviously, the investment goes wrong in the as a follow up of that, right?
Mudit
Yeah, and then there's huge cost to it. So you're absolutely right. I think it first is about what's your strategy? What do you want out of it? You're looking for a short term investment, long term investment, because first of all, you had the choice of investment, whether it's property or not, that itself becomes a question. But again, depending on what are you looking for? And then if you if you say, okay, property is something that I want to use as a tool to make more wealth, then what is your reason? And that's where my strategy, my circumstances, my goal, could be very, very different from, let's say some one of my friends, let's say or Julius, right? You. So if I have to choose where to buy. I think that comes secondary. But the first question is, what am I wanting to achieve from this investment? It should be based on what suits me, what suits me as my needs. What is my goal? What is my go to market strategy should be for meeting that goal. What are my current financials? What can I afford? What can I not afford? Am I looking chasing capital growth? Am I chasing cash flow? Am I do I have to balance both, and then, based on that, it's a I think the outcome will be like, okay, where should I go now?
Parag Dixit
Yeah, absolutely right, absolutely right. And, and it's such a good one to pick up, because people get it wrong, even if they are both two kind of people, so Udit and Julius, right? So if you both looking at having equity, but the objective of that equity is different. So one of you wants to pay down your mortgage and the other one wants to maybe upgrade their house later on, your approach will be completely different, because cash flow comes in from there, how much you can how much you can invest. So if you want half a million dollars in a few years, then you can you still have an if you some somebody just wants to pay down the mortgage, you know exactly what you're doing, and you go it backwards from there in terms of paying that off. But you want to upgrade, you have to go forward. So you need to be calculating it right if you then you need to see, okay, how much of a cash flow is it sustainable to invest into a huge capital growth property or not? So all that bit comes in, and that's where people go wrong. And then they buy something, and then they start regretting because it becomes tough to manage it, and then it doesn't become a sustainable investment, sustainable portfolio.
Julius
That's right, I've seen lot of investors making random choices. So when I sit with the clients, I've seen them just buying a property as a transaction because one of my friend is buying there, or they are not sure about what's objective is, or what there is no strategy behind it. But just heard from somewhere, okay, my friends are buying there, or media is talking about the suburbs and just go and buy there without knowing the impact. So there are a lot of suburbs where when, when you don't have a proper strategies, or when you don't when it. Don't look at the cash flows versus a capital growth perspective. Everybody wants to have a capital growth, but when you don't look at the cash flow, then there could be a lot of costly mistakes, especially during covid. Lot of people were buying properties in capital cities where, because loan were cheaper, and then on 2% probably you could have very minimal out of pocket expenses. But when the interest rate rose, then we have seen, okay, those property wise interest rates. So rather than making a random choices if the if the purchases are the objective based, or if it is not random, that is something which supposed to be
Parag Dixit
absolutely right here, negatively geared properties is good for tax benefits, but that's not good for cash management right now.
Mudit
In fact, just just last week itself, I was talking to a potential client of mine, and exactly the same scenario, what you're saying, right? So he had a property in black town, one of the suburbs in Sydney, and I just want to discuss what, exactly, how much, how can it go wrong, right? So the loan was worth roughly a million dollars, and the rental income was close to 3030, 3250, roughly $700 a week. Now, when he was getting into it, he didn't realize that what kind of cash flow impact is going to have. So if you include all the costs, which include the council rates, the the monthly repayment, the property maintenance, the property managers cost all of that combined. The outgoing monthly is roughly $6,400 okay, wow. Now the outgoing is $6,400 the rental income is 3250 so just the double. So there's a good $3,100 gap in a monthly cash flow, which is going out right now. Of course, end of the year, you will get some because of negative gearing, you will get some money back, but I'm talking about the cash flow. I mean, profitability and all that is separate. The biggest problem happens with people is that if you're not able to sustain that now, today, last week, when I spoke to this guy, he was under complete distress. He's like, What do I do? Mother? I mean, do you have some strategy where this can just come down? I was like, there's a repayment. The costs are real. All these costs are real. So it can't just come down just like that, right? Four years ago were probably much lower, like you said. Now the interest rate is close to 6% 5.7 5.7% so under tremendous stress. And that's exactly the idea about Of course, there has been good capital growth, but he can't sustain this property now, then the point comes. Okay? Now it is unsustainable. You can't hold it for longer, so probably getting out maybe a better thing, rather than just continuing. And issues with your lifestyle, everything such a stress, right?
Parag Dixit
You're absolutely right. And that negative cash flow is not only impacting your pocket. It also starts impacting a person's, you know, life, you know, the way you live, the what you do. So it creates too much of stress on your mind. And that's that's not, not a great outcome, because eventually you want it to invest, to grow and to achieve some things. And this, this bit when it's not calculated, it goes wrong, and people always forget that it's a 30 year loan. You know, if you're going to keep it for long term, it's not, it's not a few months, it's going to come, keep on going, keep on going, keep on going. And you can't budget for trades to keep on going down. You're seeing that right now, right?
Mudit
Yes, yes. Interest rates in a 30 year period, interest rates will have so many cycles, they will go down. Sometimes they will go up. Sometimes, if you can't budget for that and that variation, and if you are if your heart goes beating faster at every announcement, then better start taking pills for for maintaining your heart rate. Right? So I don't know it's it's stressful for
Parag Dixit
many people. And we've seen not only this, so the cash flow is one bit. I've also seen people choosing wrong structures in the sense that people will do and we've seen that it's good, that it's kind of commit to a stop. But trust people just buying under trust, assuming trust will have its own borrowing, but trust doesn't have it's your incomes, and then you buy them in multiple trusts. But now, now in this scenario, you early people were assuming that rates will keep on going down. So I'll that's fine. I can take a bit of a risk for a few months. Now. It's not happening like that. So rates are going to go up February, March, May or No, whenever, but they will start going up. If they start going up in the year 26 then you are in for a big surprise, because then you're not, not, not planned for that, or you or people would buy. You know, one person has a higher income, the other person has a lower income, you know, they won't give it a thought. And this, it's not a great tax structure. It's not in a good position. People don't set this up for, you know, sometimes non family people buy, they will not buy it up in terms of the right structure, where, if something happens to one person, where does it pass on? So all that bit happens, and then this, these make a wrong choice, and eventually, sometimes, you know people, when they are making choices of suburbs in such circumstances, they will it starts impacting what they are wanting to buy, because they just don't think through it.
Julius
You're correct. I've seen lot of clients who are buying in a trust structure, sometimes for. Only the right structure has to be followed. But there are a lot of examples where we have seen, for each property, they create each trust. So each trust means probably, you know, spend around $2,000 to create that trust. And then there is annual cost, even though, if you're buying a property which is little negative gear, according to my assessment, unless the cash flow is around very close to in between four to 5% or four and a half to 5% in long term, that property will not be sustainable. It depends on the dollar value of the property, even though, if suppose, if it is on personal name, then you can still claim negative gear, and then you can use it for your daily cash flow. So there will be little less a little load on your personal cash flow as well. But when you are getting the trust, that means whatever negative gearing or the income which you want to get, it after the eto stacks, if it is not coming. And then if you have four or five trusts to maintain, then it will be tremendous pressure on the families.
Parag Dixit
And then this is what happens, good that you picked it up, but people will buy because they are getting a structure which may or may not suit their thing. But then they start fitting a suburb into this structure and say, Okay, I let me this. I want to buy under its trust. And then there is this suburb where it is looking more positive gear. Let me buy it there. But then that suburb is not going to grow in capital value, so you're stuck, or that suburb was has a very high cost to it, so your gross rent may look nice, but net trend doesn't look nice, and top it up with other things. So all of these forces because your objective was not a good suburban and meeting your object, making your outcomes which you wanted to achieve, you've chosen a structure based thing, and you've got yourself into trouble. And that's, again, a problem which people have, and that another bit which I've seen, which is so common, is when you're upgrading your property, yeah. So you, you think, Okay, I have a property of my own, and I've been living in here. Let me upgrade. Which is a good, good thing. And you, you want to move on, and you maybe kids are growing, and you want to have more bedrooms, or maybe more bathrooms, so you may want to have a more modern house, or maybe have two stories in the house, or big garage or a backyard, or a front yard, or a different suburb, all that is fantastic, and you want to grow from there. But then what you've done is you've invested you've started out in a suburb where you you bought something because you wanted to be near transport, or you bought something which was, that was what affordable, but then you hold on to it, and those properties don't really grow over years. So we've seen as an example that, for example, areas like Wentworth field, which had so many apartments, and it has too many apartments, so many of first from buyers have started off from there, but they hold on to the properties, and then they become wrong investments, because they don't grow in capital value. They may be good in rents which are coming in. They may be okay for cash flow, but capital growth is just not there. And then start a cost keeps on rising, and then you are you're really not getting anything from that property. In fact, you're losing more money there, exactly.
Julius
And markets always working in a cycle. So does it mean that every market will have a good cycle, yeah, given point in time. So I've seen a lot of examples, especially in Melbourne, when in 2016 to around 20, Melbourne had little bit of good cycle. And then property prices risen. A lot of people were upgraded properties within the Melbourne especially one of the friend bought a property in the nearest suburb. He had a property in tarnette. He bought it for around 570 during that time, if would have been sell that property and buy it somewhere else where, if would have followed the market cycle timing, then he would have made around three $400,000 equity on this property. He hold that property internet with around less than 4% yield. And currently that property is not worth more than 650 so your appreciation on that property is close to nothing, yeah, after losing lot of money. So, and that's a costly mistake. So rather than just upgrading suburbs and then holding those properties which is, which is either not on the right suburb, where the supply is extremely higher, if, suppose, if the suburb is pretty good, but if the rental yields are not higher, or that entire market is not into the good cycle, then then liquidating those properties and investing those funds to somewhere else will be the good choice,
Parag Dixit
absolutely right. So you entered into a suburb with an objective, yeah, okay, I am a first home buyer. I'm going there because that's what I can afford, and that's fine. As soon as you've upgraded, that objective is met. So there, the emotional attachment to the property is not wise, because that property may not suit as an investment, so it may suit some other first term buyer, and that's great so, but it doesn't suit me as an investment, and I need to just move on from there exactly. And that brings the important point about research, and that's what people miss out. They don't really put their thoughts behind it, in terms of when I'm wanting to do a research, when I'm wanting to do to understand why I should invest into a particular suburb, why I should whether I'm buying to stay, whether I'm buying to invest, whether I'm buying to let out. I need to know why am I doing that? Otherwise, there are 16,000 suburbs across. Across Australia. Why do you pick one against the other? It has to match our objectives in place. And typically people would do that. So they will. They will not research. They will, at best, they what they think as research is reading a few media articles, and a lot of them are sponsored articles which are hiding the truth behind it. And then you go, go into that hype, and you get impression by it, and you think, okay, oh, this looks nice. And there is this person who's written about it, and let's do go and buy that. But that's there is, there is no transparency penfrancy around that bit of write up. And you get, you get stuck with it.
Mudit
No, that is, that is very, very common. And you are right. And, and another thing which, which is very common, is that, okay, my friend bought there. Let me just go and buy another property there, right? So now the assumption is that friend, I would have done the research, right? So, yeah, but, but why did your friend buy there? Is that shallow research? Is that not shallow research? That is 1.9 second, like we said, that maybe that suburb and the choice of that property suited the friend's objective, right? What he was looking for? Yeah, there could be multiple differences. What is the objective? What is his current financials? How is the circumstance? What is the what is his execution plan in terms of sustainability of that property? Yeah, then his risk appetite could be his. Or her risk appetite could be very different from yours, right? So just getting influenced by where some of my friends are buying. So that is just very anecdotal, right? So you said, okay, this person, this person, but then that way is across entire country. There are people buying all across just because you knew two people who got in certain areas, doesn't mean that the research about that and the right as per you, for suiting your needs is being done.
Julius
There other issues are basically buying to your neighboring suburb, because you can travel there, you can drive there, you can go with the property, and then you can buy it. Or a lot of infrastructure announcement across Australia, where you just follow whether, without analyzing whether, what is actual impact of those infrastructure announcement to that region. For an example, Melbourne had plans for the big games canceled. There was a place called Mobile where the biggest paper mill has to be was announced by government. Good movement of the property prices was canceled. Lot of solar farms, energy projects were announced. When you look at the remote regional areas, then wherever there is the habitable area where a lot of people are living, versus those mines, or the projects are actually around two to 300 kilometers away from where those suburbs establishments are. So is there any actual impact of this project from the entire region? So lot of people are not aware about those and just listening about the hearing about those projects and getting into that area, that's very shallow research, then little analysis about demand and supply. Everybody knows that demand and supply and all this stuff, but okay, when you look at demand and supply, whether you are at the right market timing, that is very important, whether the demography is improving or it just a little spike, very important. People are not looking at the affordabilities. People are not looking at the infrastructure growth. So for an example, if you if you look at the affordability example, there is a suburb called Cabramatta in Sydney, where we were researching about about few Sydney suburbs, about how way the affordability is lying, and all the stuff. So average median prices are around 1.3 7 million in that suburb, versus average household income is one less than 1400 a week. Probably now it's into as per the 2021 census, so according to the so if you consider on 5% growth, then it would be around $700 per week buying affordability, like when you calculate the affordability is either how many years do you need to repay the mortgage according to the current interest rate in your income, or times of salary in entire Australia? If it is more than eight times of your salary, then it's difficult. Or they're sitting at around 17 times of your annual income, means there would be a property appreciation. But those who are buying in purely towards investment in entire area, when you're looking at that area, and if there is a good buying affordability, where owner occupier has those incomes, because rental yields around 2% Yeah, that means there is no Rental Affordability. So the investors will not come in owner occupied can't afford the property. That means in long standing basis, you will not make money and on this property, but you're burning lot of money on the negative gearing. So when you're getting into this type of suburbs, there'll be a huge mistakes.
Parag Dixit
Absolutely right? No, in fact, you're so right about it that suburb selection, and to understand that that suburb is targeting owner occupiers, or that suburb is targeting investors, or that suburbs intrinsic places which which is where it belongs, is important, and whether you have, if there's a demand for owner occupiers or investors, you have to see that. And then whether you can afford it or not, you can see that. And that's that brings you made a very good point just a while back about how people will just be buying their backyard because I think I can go there, but I never go there. There. You know, there's a tenant staying there. I can't go in. What will I do driving past that house? So I never do that, but I just buy because of the same thing. I have not done any analysis. I have done any checks there. I have not understood what, why is what happening? So I go there, and I basically have done no assessment of that suburb, whether that suburb really fits what an investor would look at or not. I'm just buying because it's there in my backyard. I can stay in any suburb for my own for a long term basis, but I cannot be staying there. I cannot be investing there if I'm having a investor mindset. And that is where the risk assessment really comes in. The risk assessment of doesn't mean saying just seeing whether it's a risky suburb or not. Basically, risk assessment is understanding the property, the rental yields, the future, the what, what am I going to get out of that? When can I exit from a property? What? What external forces are driving that property? Area is there? Is there something which is out of my control which is going to impact the prices on that property, that risk assessment I need to do, and that's where we talk about super regional areas, where people sometimes go and buy because they find it's cheap, or they find they think that there's a phenomenal rental return coming in from there, but What they miss is that if it's super regional area, then to even do a simple maintenance is a huge cost. The tenants which are going to come there are far and few, because not too many will stay there. So if, if suppose your house gets vacant, the vacancy time would be maybe longer where you we don't get rents out there, or rents will not grow at that speed, right?
Mudit
And in fact, it being super regional means there are inherent risks in that area. That is there enough job diversification is the sustainability of that town itself? What is the guarantee of how long will it sustain? We have heard so many stories about the different towns, mining towns, or based on one specific, small project, and then after few years, just because the project is not viable anymore, financially not viable, project is kind of ramping down or closing, and the town becomes a ghost town. So that assessment, that risk analysis, is very critical, just because the cash flow is high, and most of these towns, at a certain point of time, they generally have very high rental yield, that is what is attractive. But we can't go from the extreme of that cash flow is very important to saying, okay, cash flow is the only important thing, and just miss out on everything else.
Parag Dixit
Absolutely right. No, in fact, it's interesting that you said that when I was roaming around Western Australia, and then after, after aspirants, and when you were coming back towards Albany, there was a small town, hope town, a small place called Hope town. And we stayed there, nice place, beautiful place, but they had a pub, and we were there in the evening, and then we were talking to the owner there. So he was like, it's tough to sustain, and sometimes we don't see too many people coming in in the evening, though it was full at that time. But he said, as soon as winters will come in, there's not they're not going to be too many people out here, because there's nothing here. And when then we went in the morning to another cafe, and we were talking to that guy. He was happy, pretty happy. Everything is going pretty nice. But his, all his talks were about, you know, I still see because it was a mining town, so there used to be mining had, which used to happen about, say, 15 years ago, okay? And then the the miners pulled out, and then there's nothing happening there. So till now, he was carrying the hope that, oh, last, you know, last month there was a helicopter which came with some people, and there's some, looks like some important people are coming. And I think there's going to be mining will start again. So he's still living in that bit that, okay, something will happen. Something will change, and there'll be influx of people which come there. But then Dutch would hope, hopeful for, I'm very hopefully what he's saying is right, but doesn't work like that.
Julius
You know, population growth is especially a good phenomena, because we have been investing in around 500k suburb a lot, and even though we had a webinars as well. So when I was researching more about those locations, and then how what kind of population is it? Because we have more than 15,000 suburbs. If you look at the SA twos, then they are more than 2600 and then I was mapping the population with because when we are buying in this type of location, population plays a major role, right? If the population is more than nine to 10,000 less risky population. During that time, I found a suburb where sometimes data is misleading, by the way, so data scores was pretty good in lots of platform, but in the entire suburb, the population was 42 people. So purely based on the data with because when we look at the suburbs which are super regional, or the regional kind of thing, then you need to have a deep research as well.
Parag Dixit
Yes, true. True. That's true. That's true. And that's what that's saying, that so many houses are vacant in such places because earlier people were living. Now there's no living. There are ghost towns. And that's where the contingency plan comes in, if you're going into Super Regional, if you're going into such places, what is it? And whenever we talk about a place growing, it will only grow with people, and it will only grow with economics coming in there, if there is no economic upturn coming in. In that area. Or there is no sustainable employment, or people to find jobs and to be able to earn out of it. Or there is no population growth which is happening there. It's unlikely to grow. And then that's where you find out, okay, if I'm if there is a place which I'm going to invest in, if it doesn't have anything except for fishing, then maybe, you know you'll have, you'll visa.
Mudit
I'm just thinking about what the what's the irony the hope town you're talking about was it? Was it named after the mines went away and they're like, it is hope town? I don't know So, but, yeah, hope cannot be a strategy, right? So not this. Hope is, you can pray for it, but it doesn't happen. It doesn't happen. So you can't sustain your life and your your financials, and based on that, okay, one day it may happen. It is, of course, being positive is important. But at the same time, when you're talking about as an investor, when you have options. So if I have I if I have 15,000 suburbs you choose from. I should do that research and figure out that, okay, whether this suburb one is, of course it, it has good capital growth, good, good, good cash flow and all that's balancing the same times. What is the risk I'm taking there, and am I okay to take that kind of risk? If it goes down, there should be a plan for okay, what's the backup? Is there something I can do, or I can't afford to lose that money, then I shouldn't take
Parag Dixit
that risk? There's a huge impact of not doing these things. Huge impact of not understanding these factors and all these mistakes we've been talking of the impact is massive. You know, you miss out on growth. You miss out on opportunity. You could have done so much with the money which you had for investment, and now it's stuck into a property which is not growing, and you were just sitting there, you know, sitting with a dead investment, or a half dead investment, and you are looking at your friends and family, you who've grown some money, and you feel that, okay, I've lost out. I've lost out on the and there's a and then then there's an opportunity cost, right? And opportunity cost hits you very badly, right?
Mudit
Yes, yes. I mean the example that you were talking about Wentworth will write so somebody who's bought an apartment, let's say for 550k or 600k there. A few years ago today, the apartment value would have risen up by 70k 80k maybe in four years. Five years time now, same time if, if you could have bought, you would have bought an apartment, let's say in Albury or in some other town, same value, maybe 450 k5, 100k today the value would have been up by 200k so of course, if somebody is buying that, you need to live in, that's a different story. But if you bought that as an investor, so 200k worth of your equity capital growth not happening. That's a lot of money you lose on equity. You lose out on your money stuck there. You couldn't invest somewhere else. So that's where the right suburb plays such a such an important role, and otherwise, like you're saying, the impact is, one is the financial stress, of course, that you go through, but you lose your night sleep. You just you should stress your lifestyle. You wanted to do something. You wanted to maybe spend on education for your kids, go for vacation, meet family, whatever, but you have to compromise on so many things just because of one wrong choice and because you were not doing the research properly. You were not mapping whether that's the right thing for you or
Parag Dixit
not, and you put that example very rightly earlier, when you're talking of the black town example of your clients, and now you have to go for maybe a distress sale or something when you don't want to sell. You would have loved to hold it for a few more years. That also is a distress sale. Distress is just not about not today. Yeah, that's that's just, I don't want to sell, but I have to sell because I can't hold on to it. And that itself is a, is not a great feeling. You know? It leaves a bad taste in your mouth. You have a bad memory for life, right?
Mudit
Absolutely you carry. And a lot of people carry that, that baggage, that kind of guilt, and that I could have provided better for my family had I made the right choice. And losing some money is one part of it. But carrying that burden on you, on you, for long time, that's actually more killing
Parag Dixit
absolutely right? And, and I think, and at this point, finally, I think we should really also talk about, what can we do, right? We sure that we've seen the impacts, but what can we really do to avoid these things, avoid these mistakes, and avoid these stresses and all these impacts? That's important, right?
Julius
Yeah, so determining the long term objectives are very important, like when you're looking at a property, the research is a key parameter. Until this will have an objective, or the strategy, which will align with your financial goals, because your income, your financial goals, how much you can sustain, and whatever you can sustain according to that, if strategy has been made, which will which you can sustain, it for longer time, then we should start buying a properties which will align with that objective. Because everybody's income is different. Everybody's circumstances are different. It doesn't mean that we can build 10 to $15 million property portfolio strategies for everyone. So whatever is your financial situations are, if you can build a proper structure around it, and then we can if, then we. Choose the right asset with the help of the data research, doing deep research about where to invest, what should be, the cash flow, right financial structures, then that will help you to go further. And then when you build a portfolio, portfolio just can't behave you on one property type, like capital growth strategies, you should have mixed up both. You should have good properties which will have a good capital growth, you should have a good property which will have enough cash flow, also you can balance it. Yeah, balance then you can grow. If you can't hold, you have to sell.
Parag Dixit
Yeah, that's true, and that's true. So cash flow, capital growth, that's the choice. And how do you balance it? Because you will never have half, half. You know, very rarely will you find a property which has everything in it.
Mudit
Everybody will be buying that property here, correct? Yeah, sir, you can't have
Parag Dixit
everything in a property, so you have to choose which side do you lean on? Is capital growth more important or cash flow more important? And then you choose out your properties, your suburbs, and you invest according to that. Otherwise you will be otherwise you'll be lost, and you will have a wrong aim and a wrong eventually, a wrong suburb and wrong property for yourself, which just doesn't set it up. Yes, you need to set up your goals in time. You need to set up your timelines in place as well.
Mudit
Right, correct. How long do you want to be invested in? Of course. I mean, it is very difficult to put strict timelines when you're starting itself, but there should be some idea that, okay, I'm looking at investment maybe three to five years, or is it a 20 year horizon? Because the choice of suburb, choice of property, everything will change based on this, the change in the objective itself. So setting the objective very critical, setting timelines, also having that risk assessment, what kind of risk can you take? How much you're willing to take, how much, how much you're willing to let go off, just in case, if there's something goes wrong, right? So these are important things to set up first. First is this, so that and everything would follow after that. Oh, yeah.
Parag Dixit
So we've seen that. So we know, we know people. Have so many people, I know they were just investing in Victoria in the last year because they thought rates are going to go down, though it's tough to hold on to it, but because rates are going to go down, it's going to become better, I can hold on to it for six to eight months in one year or something. Now that's pure speculation, no data, fundamentals in place, and you're buying because somebody was buying there, or you read about it and then you went and bought that. You understand it's $2,000 negative for me in this year. But you You say, Okay, I've got 50 grand, so I can hold on for a couple of years, and by that time, it will, it will be, it will keep on going. But you've not done your risk assessment. You don't seen what the external market can do. And today's geopolitics and today's internal Australian economic forces are now putting pushing us towards a rate hike. Now it's completely different. Now you're running around here and there, trying to find a way. How will you manage and I'm getting, you know, get so many calls, can I fix it? Can I do this? Can I do that? Can you, can you do this? Can you help me do that? But it's, it's different. The risk assessment was done only assuming everything is going to be brighter, yeah. And it's, that's never works.
Julius
Yeah, that never works. And even though there is, there should be a risk assessment on the type, choosing a type of properties as well. Yeah, because there are different type of properties, I've seen lot of investors are choosing a property which have always have a granny potential. You can have a multiple sets of properties in your portfolio. You can have good properties with good cash flow. You can claim a little bit of depreciation, plus a good less maintenance property, and few properties should have a granny potential. If you're buying only properties which require lot of maintenance, and in future, you're going to put lot of grannies. That is not the workable strategy as well. So unless you define the goal, and then if you do the risk assessment about how much you can hold for that property and whether that property is the right property for you, then you want to make up mistakes.
Parag Dixit
That's true, and we need to be very we need to really be sure financially, because financial assessment is very important. I should know what is my income, what is my liabilities, what is my future liabilities are going to look like? I may have some investment, some expenses on my parents, some expenses on my kids, something which is, which is going to come in a few years. I need to know that I cannot just hold them. I just forget about them all that thing I need to see. I need to understand what I want to do with my overall situation, overall circumstances, and then say, Okay, this kind of an investment will suit me. This is the suburb where I will want to go into. This is the kind of suburbs where I want to invest. These are the kind of properties where I want to invest house in a granny or a house or an apartment, or a larger house, or a smaller house or a regional house, and where I'm going to do it's all going to be on my financial assessment, absolutely.
Mudit
And then you have to also budget for the ongoing things, right? So one is, so all the cost you need to one is, what is my financial credit? Then what does a property investment entail? What kind of costs are there? Upfront costs, ongoing costs, cost at the time of selling? Yeah, so all that needs to be planned. I mean, just to give an example, right? So because many people, they have bought one property, let's say to let. In where they are in that state, so they're not aware of upfront cost difference itself. Different states have very, very different stamp duty and transfer duty costs. Yeah. If you talk about, let's say property of 700k transfer duty, stamp duty combined in New South Wales will be somewhere close to 3.7% Yeah. But if you do this same, same value property in South Australia, it will go close to 5.8% 2% different straight away, because the transfer duty and stamp duty are very high. So these costs need to be thought about before you're choosing anything, because they have a direct impact on the ROI of your investment, same way you're talking about ongoing costs, right? So you have to factor in council, you have to factor in property management cost. You have to factor in the interest rate and the interest of course, you need to do that sensitivity analysis around if the interest rates change, not assuming that they will go down forever, right? It's a 30 year loan, so you have to do that. That okay, if the rates go up by one or 2% can I sustain it or not? Of course. I mean, we don't have a crystal ball. We can't say that when the rates and how much will they go buy but some assessment, summer assessment, that is critical to it, yeah, and then taking care of some unknown cost, I mean, property maintenance, for example. Now, of course, you would do research today. You will be trained on building and pest inspection, do all of that inspection today. But when you're buying a property, you can't assume that there will be no maintenance, or that if maintenance comes then I won't know what to do. There could be small things can happen there, and then maybe a few $1,000 there was, there was aircon installed there, but the aircon can conk off, yeah, it's a straight 5000 $10,000 expense. You have to factor in something for that. Oh, yeah,
Parag Dixit
you have to. And people get caught out in so many of these. So many times do I get a call from a client who wants to buy a property in South Australia, and when we send it across to them that these are your cost and this is your stamp duty and this is your transfer duty, they just can't believe their eyes, because they had not budgeted for such kind of cost. They did not even think that there will be something like this. Some people don't even know that different states have different Yes, yeah. They don't know different states have different kind of a transfer duty. And it's massive in South Australia, massive in Queensland, quite a bit high in Victoria. So these things change with with a lot of stuff, and it's one and very right. One thing is known costs, one time cost. The other thing, the biggest thing, is the unknown cost. And they can hit you anytime. Yes, then vacancies can hit you at some point of time. If tenants have come in, a new tenant comes in, they always pick holes in your stuff and say, I want this repaired, and I want that repaired, and that want that cleared. So that's, again, a cost which is going to come in and you can't say, No. There are tenancy laws in which you have to abide by. You do inspections which are to be regular inspections. There's so much stuff which you have to do around the house that you can't assume that you will not have expenses which are going to be there and as soon as you have expenses. And if you and you don't understand the nuances between different states, different areas, different councils, you know insurance costs, right? Yes, insurance in the Townsville has been always higher, because you get cyclones there, and insurance in maybe some other areas are always lower. So people have been really caught out by oath. So much of an insurance. But that's it. That's the way it
Mudit
is, right? Another one is land tax. Yeah. So every state the land tax varies. And you you can't just if you bought one property and you're assuming, okay, the land tax will be same. Then, of course, again, you can be hit one day, Council, rates, insurance, all these factors. So you need to budget. You need to do a bit more. Go extra level of detail, trying to see, okay, how it is different because the choice of your suburb choice, it depends on what state you're buying in. Because of all these factors as
Julius
well, lot of people are making mistakes in assessing the yields. People are going behind gross yields, yeah, but when you're comparing the yields, then always look at the dollar value, which is a net yield. Because, for example, if you look at the Council itself, your gross yield will be around five and a half percent. Your net will be around three, 3.2 insurance is around 4k and your council rates are straight $4,000 Oh, wow. Plus, plus you often have, when they have embargo, when they have cyclones, the rates are keep going. Plus the insurances are getting more expensive and expensive. I've seen few properties. You are assessing few properties. And I'd seen a property insurances up to 9000 also. Oh, really, a lot of people not assessing the insurance rates till they settling the property, and one week before settlement, they're looking for insurance. And their surprises, you have to settle the property. Now what to do? So unless you do that all pre homework about, yes, how much would be my insurances? A lot of building inspections are sometimes dodgy, like they only say, Okay, you need to do this, painting, this, this, that? But thorough building inspection is also very important. Sometimes they say, Okay, we had been to a situation. We have seen a property where it doesn't have a gutter. According to the council compliance, gutters are not required, but it's a heavy rain zone where they always have a lot of rain. But when the inspector inspected the property, we found, okay, there is a lot of mold within. The walls, molds within the windows. Roof was rusted, and then lot of water was falling. You didn't have a greater system, so it was going behind you, below your slab. So this type of assessment has to be done properly, because when you're only buying a property, sometimes people are buying a property the original Queensland, where cost of construction is extremely higher. So selection of property should be should buy a good house where the land is so cheap there that basically your land doesn't have any worth because there is a lot of land available. So rather than buying properties on high set homes or bigger land with very old property where you require lot of maintenances, buy a property assessment of the property. Should be buy a property which a pretty new wish build around 1012. Is built. The small landscape should be fine. So always land appreciating doesn't mean mean that it's everywhere. So you need to know that, okay, in that area, what is, what is the rational
Parag Dixit
behind it? Yeah, what's the, what's the rational behind it? And which one is the right location. That right location is important, because if you don't know the right location, that's where you can go wrong, you know. And you need to do a lot of research to find that right location, the right property, the right area where you want to buy. And my writer and your right area is wrong, but, but it's different, but it's important that I know where I am going to buy and I need to and we very clear parameters, and I think very, very common parameters which keep on coming up with for everyone and any kind of a study which you do, the first thing, which they will always say is to understand demand and supply. And demand supply will always give away what kind of costs are hiding behind. So if you know that there is going to be a good demand that area, if you can read through, if you can analyze, is going to be a good demand that area, you're very likely to get the suburb selection right. If you're going to have a huge supply in that area, you're going you're very likely to have a suburb selection going wrong in that question affordability, we've spoken about that right. So, so important that affordability bit easily is one parameter that even if you as a layman, just focus on one bit. Whether that affordability of that property, is it going to continue for investors and for renters, then it's a good area, because there, if you can, if you can afford, in the future, people can afford, it's going to keep on rising. It's going to keep on rising till it becomes non affordable. But till that time, you will enjoy the growth in that suburb, and that location becomes very good if it's rentally affordable. Then then you know that you'll always have tenants. You will never have vacancies, and you'll always have people coming in and taking, taking taking place and getting the houses. So that's that's a good one.
Mudit
No, absolutely. And I think, like you're rightly saying that supply demand is so critical. So I think on the demand side, just predicting a bit about how the future will be, how the demand will be So, understanding migration patterns, understanding how employment opportunities are increasing or diversifying and are not just dependent on one sector or something, understanding that how infrastructure is going to change how government is planning to invest, or private sector is planning to invest, how it is that going to impact in terms of driving more demand towards that city, that location? These are very, very critical to understand from a demand point of view and on the supply side, like you said. So one is, what is the current supply of housing in that area, and what are the vacancy rates? Those are kind of how, what's the percentage of people who are renting there or who are occupied? These are important to understand. But I think the other day, we were discussing about which is layering, apart from this data that we getting in in very consumable format through different sources. The other thing is that what potential is there in terms of supply, like how much land is available, which can come in, right? So you have to layer that on top of these easily digestible data, and put that on so feet, on the ground, helps you understand that, okay, this is the potential. There's so much land available, and this can come in, and this can increase the potential supply immediately, and that may have put a downward pressure on the price of the houses, right? So, I mean, and I understand this is not easy, it is. It's a lot of research we are talking about. But when you're investing a half a million dollars, or a million dollars, or whatever amount it requires that kind of research, absolutely right?
Parag Dixit
Yeah, with so many, so many data points which are critical socio economic changes, were like what you rightly said, what's happening there, what what people are doing, what kind of employments people have? Very important. These financial bits are very important to understand, because that's what's going to drive the affluency level, yeah, particular suburb, and that's what is going to tell us what kind of people will stay there and what kind of people want to stay there,
Julius
right, correct. Type of population is very important. Then, when you say population growth, whether the retirees are moving there or young families. It's very important, if the young families, they're coming there for a reason, then we'll look at hold period, like how many years they hold property. The whole period is higher. Means, basically the characteristics of that entire area is superior, that people would like to hold properties there and live there. Also. When you look at the socio economic outlay, if the incomes are good, affordabilities are better, and the entire area is diversifying in terms of the employment as well as the socioeconomy, then we could see a good amount of population is moving there which has good income. And when you look at the income projections for next four to five years for that entire area, then it will have impact on the affordability also. So when we interlink all those parameters where demand and supply will end up you in, okay, yes, what is happening there currently, it's a point in time snapshot, but when you look at a long term growth, property will have two cycles, short and long. Short term will be yes, current demand and supply has lot of gap. People are buying there, but there'll be time it is going to be hit by the affordability. So when you're looking at the long term parameters, like affordability, employment, generation, socio economic outlay, then your property will have a long term growth which is sustainable, yeah. So both the type of assessment are very, very important,
Parag Dixit
100% right? The assessment of what kind of properties we are going to go for is very important. And that is, that's what's the most important bit about how do what we need to understand, if we are going to go wrong, if we have not chosen the right property, then there is going to be an impact. And there is that impact is, we've spoken earlier in the in the second segment, impact of not choosing the right property is huge, you know, and there are common, simple mistakes which people do when they look at properties. This is a macro data which we've been talking about, how do we get into a suburb? But once we've got into a suburb, and we understood, okay, this suburb is right, choosing the right property again, becomes another important bit, because we can make mistakes within the right suburb as well, even if we got the right suburb that what property we've taken in. And there are some simple, simple mistakes. Which people do. Easements is one of them? Such a common one? Yeah, you bought it in a in a good suburb. You understood the suburb. But then the house you bought has, as a large say, drainage easement has a has, you know, something running through your house. You know you'll have a high tension wire running just behind your house, and you don't pick it up, and you've not done research enough to understand that your resale value is going to get impacted. Your loan values are going to get impacted. Banks don't assess it very well. Future clients don't purchase a store, yes, very well. So it starts impacting you on what you purchase there.
Mudit
Yeah, being on the maybe next to, right next to a train line or on a main road, there's so many things so So and these are easy to pick up. You you open google maps there itself, you can see some of these things. You don't need to go to a long, deep research for this. But some of these things can be very, very easily mitigated or eliminated, right? And otherwise, like you said, so again, you buy right next to train line, then your loan can become an issue. There will be lenders will say, Okay, we don't want to cover this thing. And the you have to look at that. If you're an investor, there will be an exit point. It's not that you're going to hold it forever. So if there is an issue like this on the location itself, the chances of how, how will you sell it? The any for future buyer who's a bit more research oriented compared to you, if you've not done that, then they the if it's in market for six months, eight months, the liquidity of the property goes down suddenly. Oh yeah, that's a
Parag Dixit
big impact on you. I don't want to hear train noise in my backyard all the time, right? So, and I'm always going to have a main road structural issues to us sometimes, you know, I've seen, I remember vaguely, a few years back ago, one of my client had a property in orange, and just behind there, and that was an apartment just behind their apartment block, there used to be a train line, which used to go and it was a it was a good strain train line, so there used to be always noise and the huge vibration. A few years down the line, they realized that there is a small crack, which is going down from the top to the bottom of the apartment, and that was scary, scary as hell. Those guys, I don't know how they managed to sell it, but they sold it. They sold it at a loss, obviously, because somebody purchased it. And that's when they realize how it's how important that one is that structural issue of that property. This is just an example of a train line here, but it can be for various reasons. If you've not understood structural issues in an apartment, if you've not got a building and pest inspection either done, or the guy was not the right guy, or they they didn't go through it so thoroughly, or they gave a report, and you didn't really put emphasis on it. Eventually that's going to come and bite you in the in the future, right? Yeah, especially
Julius
towards the when you assess the property, is whether it is right property for you. And try to avoid the properties which are high set, because generally we try to avoid high set properties because of the fact that when you need to do the restumping of the property, the entire floor has to be replaced. That's number one when you're assessing the easements right, especially for the old properties on the title, when everything was digitalized, that on the title lot of times. Easements were not registered. So sometimes the property status is clear, but still there is easement on the property. How do you find it out? So there is every state has a different diagram, so that's why you need to thorough due diligence through your solicitor also. So what they do is basically they order a document called dig before dial, or they order a survey plans over there from the council. You will see on that entire land, what is there? Is there an easement, civil lines, even though it is not registered on the title, but still it is documented over there, and then you can take a fair call. So that assessment is also very important. Rather than just doing a physical assessment by yourself, the legal due diligence through
Parag Dixit
your solicitor, this is also very important. Is important, is important. That's true. And I think we move on. I think besides all of these things which, which are apparent to us when we look at it, it's also important to have an exit plan. You said very true about a few little while ago about that an exit plan has to be there for every investor, because you eventually you're going to exit out of the investment. How you're going to exit out, when you're going to exit out, that's as per your goals, but you're going to exit out when you're going to exit out, what kind of a suburb I am in? If I have invested in a suburb which is moving towards owner occupier, I'll have more emotional buyers which will come in, and I may likely get a higher price. But if you I'm investing in a deep, heavily invested, rich suburbs, I may not get the price which I want. How? What will I do when I exit out of a property that's important and I need to think it through. I can't just leave it to luck at that point of time. Otherwise, the suburb selection will be right if I have done this research, will be wrong if I or maybe not appropriate if I have not done this research. And we need to, we need to build a lot of flexibility around what I want to make as an exit strategy, till I have my end in mind, till I know where I'm going to go, till I'm nowhere. What do I want to achieve? I my exit strategy will be strong and will be meaty, and will actually give me benefit, rather than giving me stress at when I'm purchasing a property, when I'm trying to get into that and very easiest way to keep flexibility is to understand and to keep on measuring at my milestones. You know, I can keep some milestones up for me, but every one year. Every two years, I'll just reassess, maybe talk to my professional, you know, accountant or a mortgage broker or buyer agent, whoever I trust, and assess with them, where we are going, how the market is going for there, whether it's still going strong, whether it's kind of plateaued out and there are more opportunities somewhere else, or, you know, there is something which is coming up in that area, which means that I can hold on for another five years. Though I had thought I'll exit now, but I can extend my stay in that ownership of that property. All that bit of dynamism is important because it
Mudit
can't be cast in stone. I mean, I decided once that okay, I'll live, I'll exit after 20 years, and then I stopped doing anything on that property and thinking about it for next 20 years. Though it doesn't, you're right. It doesn't work like that. It is. It has to be dynamic key, because there's so many things that can change my circumstances, macro, Chromie, factors, how the market is behaving. Everything is so much subject to change. So re evaluating, keep on doing that. That is required throughout those journey, throughout the process, very, very critical.
Julius
Yeah, and it's strategy based. Also, there are a lot of properties which lot of investors buy. They actually know that. Okay, that's it's a riskier market. But yes, currently they are good mining boom, so I'll be buying there. But then you need to know when to exit. So if you're very greedy, and then if you're not able to exit on time, then you will be in limbo. So that's why the exit plan on those property has to be defined. Second thing is, the budgets are not sufficient, but you try to get into the property. Kind of properties where, okay, you know that market will be cyclic. There is a good cycle for that market. Then, rather than waiting for forever, whenever you say, like, okay, the market is grown by around 40, 50% try to exit from that. Sometime people exit early, yeah. So the lot of ws boom started in 2020 21 it's keep on going. A lot of people exited wa in 2023 Yeah, in mid of in mid of 2020 there. 2024 by then, from mid of 2024 till now, it is gone by around 20 30% more. Yeah. So that exit has to be precise, not exactly. You need to know when to but it has to be calculated. And then you need to keep track of the market as well. If the market is plateaued for another for five months, and then if that suburb has lot of investors and not lot of sales activities happening, then that would be a good benchmark for the exit strategy.
Mudit
But it is. You're right, but I know that as an investor, timing the market perfectly. I mean, we all want to do it, whether it's stocks or property, but it's so difficult, and we have to assume that the absolute bottom is when we buy, absolute top is when we when we sell, it's going to be it's not possible. But, yeah, you're right. So keeping track. Back of these indicators here at USS whether it's a good time or not right.
Parag Dixit
It's, you know, if we've spoken about so many of these things, what's what's more important is, once I've understood and I've understood this bit, for me to start implementing I should really, really take care of a few things. I should really take care of the pitfalls which are going to come in while I want to implement what I've learned through what I've understood. Okay, I should not do this. I should not do this. I should not do that. But if I would want to take out or take away a few pitfalls which I really need to avoid, I think the one of the with some of them are pretty apparent to us. You know, we when we are looking at a suburb, when we are trying to find a suburb in very clear one is just to understand how much of a land supply is coming in there. If you're finding that there is some 5000 or 7000 or 10,000 houses which are going to come around in that area, then, then we better be sure when we are buying there at a high price, right?
Julius
We are land supply can make a break, because if there is a developable land and if you see lot of approvals in a council, even though current demand and supply is lot of gap, but if Council says extremely higher land supply, and then lot of houses in pipeline, and if that area is extremely populated by the renters, then that's The very risky area, because you're getting into higher renter proportion, area where land supply is and there is lot of investors infestation, that means your vacancy is going to be high. Because of that high vacancy, you will have a lot of choices, so your rental will not rise. If rentals are not rising, that means, basically, you don't have good renting affordability, very poor economic conditions. So that demand and supply gap is very important.
Parag Dixit
The affordability you know you get, you understand affordability out of these areas. If your affordability is bad, renting affordability is bad, your you know, your buyer's affordability is bad, you're again entering into slippery slope, and that's getting into a point where you're not really going to invest into a great suburb or in a great location, and you don't want that, you know, you don't want to go there in such a high places. And it's not a, no, it's not the objective. The objective is just not to buy something. Objective is where I want to really get something out of it. I should not buy something which is too remote, you know, I just don't even get transportation there. So if I'm not going to get transportation there, or to the place where I can work, or if there's a problem in transportation, then obviously I'm not going to get a good price out of it. I'm not going to get good renters, because renters don't want to stay too far away. They can still get something which is nearby, correct? And if their economies are going to work for them with something nearby, they'll not come to you. So you're not going to enjoy stuff there. How industries are playing out there. That thing is important for us.
Mudit
Yeah, and how socioeconomy is changing. Is it is it changing? Is it constant? Is it improving? If it is improving, then, of course, your affordability or demand, everything goes up, the how the job opportunities are being created, that changes things. So these are very, very important. I mean, somebody doesn't need to look at 500 parameters to decide if you look at five or seven of these things itself, that will give you a very, very good insight and help you shortlist very easily that which are the suburbs, where should you be targeting?
Julius
Either a lot of suburbs are heavily dependent on a single employment, or there are a lot of industrial overlays, they would impact on your prices as well, also when you look at a suburb, if socioeconomies and from last three years that that time, you have to go pretty early, when it is getting into the boom cycle. But if last three years growth is more than 50, 60% and then socio economic index, as per the CIFA index, CBS, if it is in between one to three, then I believe should not touch that type of suburbs as well, because that will give an indication that the suburb has done already. So it will not go further, sometimes higher, segmentation of the pricing of that entire suburb. So for an example, only three 4% of the properties are selling at $800,000 and most of the properties are selling at $600,000 then you have a massive window to grow from 600 to 800 because there is a lot of comp because there is a lot of competition. But if you are buying a properties at 800 to 850 which is a higher segment of that suburb, then the then the chances of having capital growth is very minimal, because you do not have more competition, because affordability of the incomes in that area is not so high that they can afford million dollar because you exit for that property probably would be one to 1.1 million. So extra $300,000 on 800,000 from 800,000 is very difficult, rather than you getting into the $500,000 so sometimes, when we compare the price growth per ratios and renters ratios are very important. Yeah, apple to apple comparison. If I look at two suburbs, one is in Brisbane, in Ipswich Council like art at this stage, 54% renters. Pro occupy is only 46% buying affordability in years is more than 45 years. Socio economic index is one at this stage, the median prices are touching very close to 750, to $800,000 the entire growth is driven by an investor. Dollars. That means, yes, that suburb had done lot, but this is not the right suburb in that price guide, because if you look at the similar suburb called heavily in Perth, owner occupies ratios around 80% Yeah, investors are 20% the incomes are very close to $2,500 a week. Socioeconomic is around seven out of 10. So then the investor should not be location specific. A lot of people just want to get into the Brisbane and then for $800,000 you get into the Likert, rather than you spend that $800,000 in heavily, because that has capacity to go up to 1.5 million.
Parag Dixit
Yeah, yeah, that's true, and that's true, and that's that, that bit of an understanding is important, that eventually I'm an investor and I need to invest where my money is going to grow the fastest. And that's so important to understand why, what, and all these things which we've spoken right now, and that that culminates pretty well, you know, into what, what we should do and how, why we should choose the right suburbs and avoid such mistakes altogether. I think it's a, it's a, it's, it's a good, good chat, guys. I think we it's a good bit, if we can summarize what we we would, we would have, we would have spoken to now, yeah, and it's, it's a it's been, it's so important, so eye opening when we understand what, what kind of issues people do. I think one of the key, key takeaways for me is to set clear, clear investment goals for myself. So if I, if I don't know what I'm doing this well, and I don't know what I'm trying to achieve out of this, I'm going to be into trouble for sure, right? And that's important. My investment goals have to be set very clear and very, very we need to my I need to understand my financial position. I need to know where I want to, where I am, where I want to go, and how I'm going to go there. And if I understand these two financial parameters, I'm in on the right track, right?
Mudit
Because then you know that, okay, this is where you're going. This is the path you're taking. So then it becomes more about implementation that, okay, I need to do a bit of what is the right research? What are the right parameters to look at, in what in what relation to each other? Do these parameters work? So doing that research, whether you do it yourself, or you outsources whatever suits you, but doing that research becomes very critical, and then setting up that the due diligence for that property that becomes very important, because that's where you understand, okay, what is right? What do you want? What are the pitfalls? What can go wrong? So that that that becomes very, very critical when you start implementing the strategy, yeah, choosing the right strategy objective and picking up a right property in the right suburb, paying right amount for that property, and defining a clear objective with the exit strategy. Due Diligence here, the due diligence
Parag Dixit
is very critical, right? Very, very quickly, we need to know what's inside that property, what's going to happen there, and then the risk management and the ongoing risk management and understanding the risk which I'm getting into that property very important. If we are these are not too tough. You know, these are simple one in our eyes, but if we are able to take care of them, I think we will not get into this mistakes of getting into the wrong server or buying something where I don't want to buy, and we definitely, hopefully, will be able to invest something where we really want to what we really want to get out of that suburb? What do we want to do out of that investment and make it a successful journey for ourselves? Right?
Mudit
No, absolutely, and not being mean to people of hope town. But, yeah, we don't want to invest in a Hope City or a hope town? We want to strategy. We want to rather invest in a strategy city, strategy town.
Parag Dixit
Absolutely right, yeah, 100% we need to know where we want to go to Yes. All right, guys, no. Thank you so much. Thank you very much for a great chat. Thank you Julius for coming in today. Thanks mudet Here.
Mudit
Thanks Parag. Thank you for having us and awesome, awesome. Speaking to you again.
Parag Dixit
All right, let's, let's talk. Next time again. Thank you guys, bye, bye.