07 Aug Do hotspots really exist? – Jane Slack-Smith
Without doubt, one of the most commonly asked questions I get is “How do I get ahead of the market, and how do I find out where these hotspots are? Do they really exist?” Jane Slack-Smith tells us about a hotspotting workshop that is about to tour the country.
Kevin: Without a doubt, one of the most commonly asked questions I get is “How do I get ahead of the market, and how do I find out where these hotspots are? Do they really exist?” Let’s talk to Jane Slack-Smith about that. Jane, of course, is running a Hotspotting Workshop in Brisbane, knows all of this, and is actually doing them in other parts of the country, too, that we’ll find out about in just a moment.
Jane, thank you very much for your time.
Jane: Pleasure, Kevin.
Kevin: Now you’re delving into hotspots. What’s taking you into that area, Jane?
Jane: Actually, it’s no different what I’ve always proclaimed. For me, actually finding the best renovation property comes down to location first. I’ve always concentrated front-end on the data-driven analysis of locating the right suburbs, streets, and properties within that suburb to then determine whether there’s pricing disparity to do a renovation. Location is still very much key to me, and finding that hotspot, as you said, is absolutely what everyone’s after.
Kevin: I have to ask you about what a lot of people say to me, too, and that was a second part of my question – “Do they really exist?” – because many people say “By the time we find out about this hotspot, it’s no longer a hotspot.” How do you get ahead of that curve?
Jane: I get to asked to write articles all the time for magazines, and it surprises me when I do all this analysis and try to find these locations, they don’t get published for three months, and then it becomes quite, as you say, frustrating because the data is old.
What I teach people is how to create the data-driven analysis themselves to be able to identify that hotspot or the next arriving market and have the data behind it that validates it. We’re looking at just simple things like the ripple effect where areas that have had good growth over the last 10 years: what are the next suburbs past that that maybe get the growth in the future because of affordability issues? Or what about areas that have the infrastructure spend going into then, the gentrification going on?
When we start seeing that kind of information, I guess, it’s almost a proven success formula for a suburb that says “Based on past data, this is what has been a success of properties and suburbs that have gone up in this area in the past and we’re applying that now.”
Rather than waiting to read about it in the paper or in the magazines when the data is three to six months old, we’re actually talking about finding those areas yourself.
Kevin: How much of it is really understanding the data? How much can be data-driven, and how much of it is gut feel?
Jane: Oh, Kevin, I leave my guts out of it. I was an engineer by trade, so everything to me is data-driven. At the end of the day, walking the streets and getting a feel for the area and understanding what the area is like and validating the demographic information you have is important.
I get my students to work through the dot map exercise to understand emerging suburbs and then using reports. In our one-day workshop, we spend thousands of dollars on reports from every property expert and collate those into the list of our emerging suburbs, and then we put them into our Suburb Selector software.
I think I can say with lots of confidence that we’re the only ones with the 2016 census data in there at the moment, and we’re applying what’s happening in that suburb at the moment and looking at the percentage of renters to make sure that we have a low-risk investment because there is the rental demand there. We’re looking at vacancy rates. We’re making sure the number of sales, that there is a turnover so that we’re not wasting our time in the suburb.
For me, the data-driven analysis allows you then to get to the suburb, and in the workshops, we end up with three suburbs. We choose one, we get down to the street level that you can find what streets the renters want to be in, and then we look at the typical property.
I’ve seen in the census data there’s been a change over the last four to five years of the typical property, and some of these suburbs have moved more to the townhouse semi, so we’re actually making sure that we’re reducing our risk as an investor again by actually getting the typical property for the area.
And then when we get into that final analysis on the suburbs, I get students to get the last year’s worth of sale data and actually put down that data on a map of the suburb and find out where the townhouses or semis or units getting the higher prices. What side of the street is actually demanding a higher price?
That kind of analysis, you can leave the kind of gut feel at home when you get down to that level, and then hitting the streets and doing the inspections and validating is really the last point of call. So, 90% of the work can be done from numbers alone.
Kevin: What’s occurred to me listening to you now is the data is out there – it’s been out there for quite some time – but it’s actually knowing what questions to ask about the data. I was just listening to you say then which side of the street is going to appreciate greater and why. They’re the kinds of questions, I guess, you can learn at things like your Hotspotting Workshop.
Jane: Absolutely. And it comes down to things like there might be a suburb that has 20% public housing in it – not such a bad situation, but just know where that is. Often, obviously, people in public housing are renting, so if you’re looking into finding the area or the territory that you want to find properties within, it may exclude where the public housing is.
It’s actually looking at the data and getting down to as an investor… And we’re in a changing market at the moment, and I am an absolute believer that there’s so much opportunity while people are worried and stepping back, and the people who buy now and buy well will be the people in three to five years everyone’s saying, “Oh, you were just lucky.” I’m happy to be lucky, but I know the data is behind it and I know that’s what my students have.
But the analysis that goes into it, and as you say, the questions to frame the analysis around… Let’s just actually get down to the right property that people want, that’s in demand, that will continue to have the growth, and apply that trident strategy that we do.
Buy under the market, which has been hard in recent years because the market has moved so quickly, but now market intelligence allows you to know an area and take opportunity. Market reluctance is allowing me to take the opportunity while people are pulling back.
Renovate and add value to push up the rent, so you have a better cash flow position while you’re waiting for that long-term growth to come because you’re in an area where people long-term want to live.
For me, it’s about getting the right analysis, asking the right questions, coming down to having the right property to purchase to put in your portfolio.
Kevin: I told you about the workshop that’s coming up. I’ll give you more details on that in a moment. Just before I do that, Jane, what can people expect to get from this workshop?
Jane: Essentially, we jump boots in. Everyone collaborates. We do a dot map together for that city – so Brisbane will have a dot map – we’ll go through all the software and paid reports that we cover the cost for, and we’ll come up with three suburbs and we’ll go into a lot of detail on one suburb. We’ll jump on a bus, we’ll go and do an inspection and show how to inspect with our four-checklist process.
Better still, we’re having students – and it’s only limited to 12 people to a workshop who are actually taking this data – some of them decide that it’s a bit hard for them, and they’re handing that data and the criteria of the suburbs and the streets and the suburb over to a buyer’s agent, and they’re buying properties within two to three weeks – targeted properties that go into their portfolio – and they’re following us around the country and attending every one and purchasing property.
It’s a great testament, I think, to the workshops themselves that people are actually coming out with the properties very quickly afterwards.
Kevin: Wow. A lot to get through. Jane, I want to thank you for being with us. Let me tell you about the workshop. Go to the website. We’ve set up a special website for you to go and get all the information you want. It’s called HotspotsWorkshop.com.au.
The Hotspotting Workshop is going to be on in Brisbane at this stage. It’ll go to other areas around the country a little bit later this year, but in Brisbane on the 26th of August at the Royal on the Park in the city. That website again is HotspotsWorkshop.com.au.
My guest has been Jane Slack-Smith. Jane, thank you so much for your time.
Jane: Absolute pleasure.