Understanding vacancy rates is crucial if you’re looking to invest in an area. This video talks more about how to approach this topic and what to look out for.
VIDEO TRANSCRIPT
Hi, today I just want to talk about vacancy rates and give you just a few little tips that I use when I’m looking at vacancy rates when I’m sort of trying to ascertain how an area might stack up from an investment point of view. So, look I use vacancy rates quite a lot. I rely on the information chiefly from SQM Research to get started, I’ve shot another video on SQM that you’ll be able to find. It’s a great tool, its recently been revamped, and it gives you a really sort of, great, sort of, top down post code level of view of an area and gives you an idea about the stock on the market from a rental point of view, and sort of, the prevailing vacancy rate, and it gives you the trend and everything, it’s super easy to use. But, one thing to consider is that, when you’re looking at vacancy rates, when you’re looking at a post code level, it might include sort of, a number of suburbs, right? So that’s the first thing to be weary of, that it’s unlikely that you’re sort of considering all those suburbs, you might be but certainly in the case of some of the places I’m looking at, I’ll be looking at one maybe two suburbs of that particular post code. So when I, sort of initially look from that post code level, I need to understand that you know, that’s, it’s the bigger area that I’m looking at and it’s also for all the property types, all right? So if something’s sort of saying 1.5%, that might be a good indication that it’s a fairly tight market. But then, I need to understand what the sort of vacancy rate looks like for again, the suburb that I’m looking at and also the property type. Right, so, it’s unlikely that in a particular suburb, that I’m going to be interested in, in all the different property types right. So for example, I might just be interested in sort of three bedrooms or four bedroom free standing homes. So if that’s the case, I need to understand a little bit more about what the tenant demand looks like for those particular types of properties. So what I do is after I’ve sort of seen you know, used SQM or, you know some other tools to sort of, to look at that sort of high level, sort of postcode level view, then what I actually do is, I just jump onto domain and realestate.com.au and sort of pretend I’m a tenant, right. So, I was sort of going there and then if I’m looking at three bedroom houses, then within the filter I sort of, I just look at the suburb I’m interested in, I just filter down to look at those, and you just sort of search and you’ll see how many there is at that time and that will give you an idea what the sort of, a more true, you know, at the moment the vacancy rate looks like for that particular type of stock if that’s what you’re looking at investing in right? Which is a lot more sort of useful then that sort of, that higher level sort of post code view that you normally see. Then, what I like to do is, if I’m sort of looking at researching an area, I don’t sort of look at a thing and then buy the next day, it will take a number of months to really understand things so I actually set up an alert, in the same way that I set up alerts for sales, I set up alerts for rental, right? So again, if it’s sort of three bedrooms, I might just set up that alert, I’ll get it emailed to me daily, and that gives me a live snapshot of what’s coming onto the market. Okay? I’ve got some other software that allows me to find out how long a particular tenancy or a rental I should say, has been on the market, so that gives an idea about what’s moving, what’s not moving, right? And again that’s all sort of, a lot more granular information and a lot more usable than just looking at that sort of high level number. Then, really as you get a little bit more into it, you need to sort of speak to, well I do at least, I speak to the rental managers in the area, so I sort of find out who’s doing most of the rentals and I’ll speak to the, you know, top couple of agents and anybody else in the area who looks to be a specialist and I’ll speak to them freely and just tell them what I’m looking to do, the types of property I’m looking to invest in and you’ll be quite pleasantly surprised I think at, at what they’re willing to share with you, right. Because in the end they’re looking to develop their business as well and there’s a good chance that if you do end up purchasing, you know, you might consider them as a property manager. So, they’ll be able to sort of, again take that sort of, that bit, those bits of data that you’ve got and add just a bit more information to that, right, so if you find out that, look you know, four bedroom homes with two bathrooms and the garage are really popular in this particular type of area, they’ll give you a bit more information, maybe about the types of streets that you really need hone in on, or the ones to avoid, or whatever. So, that’s just that little bit more information that you need, that’s going to help you longer term to get a property that hopefully, sort of out performs the average. So again, vacancy rates are great, it’s great to sort of use those tools like SQM, at the higher level, understand the sort of trend in the area, because even if you’re buying in one suburb, then you need to be aware obviously of what you see of what’s happening around the sort of immediate vicinity, but what I like to do is go you know, beyond those things that really sort of hone in on, on property types and you know, just sort of investigate it as if I was a tenent to find out what’s on the market, and it’s, you know I found it’s a good way, a bit more time consuming but its a better way of doing it, rather then just sort of looking at it, a figure that says 1.5% or 2.5% or something and taking that as read, so yeah hope that helps.
