Pick The Next Property Hotspot using the Ripple Effect

Video Transcription: 

Hey, guys. So one of my favourite subjects in property is the ripple effect. This is one of the key things that will help you identify where the next hot spot is. Look, I'm a big believer that wherever the media and the newspapers and all that gurus are talking about buying and investing, isn't where you should be. You should get ahead of the ripple effect, or the curve.

Normally what people associate with the ripple effect is house prices rising. So, house prices rise in one area, people can't afford it, so they move out to the next area or next closest area, and vice versa, so it ripples out. It's not actually correct. Now, it is correct basically, what it is actually rippling out? You throw a pebble in a pond, what happens? The ripples go equidistance out, so it's like a circle around the centre. That's not how it works here.

And this is one of the key understandings. If you want to understand where the next hot spot is, then the thing you've got to look at is not equidistance from where they went up, you want to look along fundamental lines. And what do I mean by that? Shops, schools, transport links, major employers, major investors. You will get bored of hearing me say this over and over again, but if you understand this, then you can pick the next hot spot yourself. You don't need a guru, an expert or whatever. You can do it yourself. And that's, you know, one of the key things of becoming a good investor, a numbers investor that I call. It's being able to read the market and see what's going on and then look where the fundamentals are changing, and move to that area because that really helps you ahead of the curve. When you get ahead of the curve, you get prices that are actually quite low, you buy well, and then what you do is just sit around and wait and watch your investment grow.

And for me, it's a long-term buy and hold. That's one of my favourite things because I'm too busy to be stuffing around trying to maximize every last dollar. I prefer just to sit around on my butt, live life, look after my four kids and my wife and travel and spend time with friends and all those other things. Not sit there and monitor my properties and how much they go up, and, "Oh look, I can take out another 10 grand." I don't. That's not me.

So, ripple effect. So, what do we mean by going out on the fundamental lines? Look for train lines, this area which has the train line here, that's gone up 15% and then go to the next train station and look how much house prices are. You know what? They haven't gone up, or they've gone up 3% the previous year. That's one indicator, that's not the reason you should go and do it. You got to look at all the fundamentals. So, look for investment and then explore that. The existing area that's gone up 15% and then look at the area, and that's gone up, perhaps 3%, and then look at what investment is going in that area. If different roads are getting built into that area, making it quicker to get there, if there are more parks, if there are schools, whatever it is, okay, fundamentals, then maybe that's an area to look at.

And so, if you look at that, pretty quickly you can see, "You know what? This is a bloody diamond in the rough. And I think this is the next area that could appreciate that 15%." After researching, this takes time and effort, then you can keep going, you basically look in your next area and you invest there. You find a property. Fantastic. That's really what you want to be doing.

So, look guys, the key to all of this if we're honest, is that we want to be picking those areas ahead of time, before the news, before the media. Now that could be a bit scary, because you're sitting there going, "You know what? The newspaper's saying this area is growing and it's a hot spot." But you're saying, or the data are saying invest somewhere else. It's scary. But you know what? What you do is you practice, you practice and maybe you do a few areas, and you think, "You know what? I've done my research. I think that area's going to go." And then monitor it for six months, and see what happens.
And then all of a sudden, if house prices start getting reported...they're going up, you go, "I picked that one. I may not have invested, but I picked that one." Do it again, and do it again. And eventually, you'll get the confidence to go, "You know what? Actually, I could do this. You know what? I'm going to go start researching this area, and this is the strategy I'm going to apply, and I'm basically going to invest there."

And you know what? You'll very quickly become a numbers investor, a confident investor. And, you know what? When you get to that level, it is amazing what you can do and it's amazing the money you can make and it's amazing the lifestyle you can create from property by doing that.

All right guys have a great day. Live with passion and remember, subscribe and comment.

Brett Alegre-Wood
November 19, 2018

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