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Rental Reality in practice

Discussion in 'Real Estate' started by Qaz, 6th Jul, 2007.

  1. Qaz

    Qaz Active Member

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    I've been to two of Steve's siminars now and I beleive I am pretty familiar with his overall wealth creating strategies. Rental reality is one of those areas in which I understand fairly well on the theoritical basis, I can understand how it works and why it makes sense. What I don't understand however is how to use it in practice.

    Where do people who are seriously looking at getting properties which meet the rental reality find the statistics cheaply to do so?
     
  2. Jacque

    Jacque Team InvestEd

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    Hi Qaz

    Rather than use Steve's example of relying on the last five years averages of rental yields, I rely on the last 10 yrs and simply purchase Residex quarterly reports (about $90 each for each state) to find out if RR works with a particular property. Residex list the last 10yr averages for every suburb/town. You can also purchase the individual last five years worth of rental return stats individually at around $50 a postcode, if you really want to be a pedant :D
    Keep in mind, however, that although as humans we like the simplicity of formula application when it comes to property investing, it's not the ONLY factor in determining what maketh a good investment - especially when it comes to property. Ensuring that other fundamentals are also covered is essential in selecting an IP that is going to reward you with cg over the long term. See the article I wrote on about Due Diligence on this site for some more information.
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I was browsing through some old threads and found the following info from Steve Navra:

     
  4. Jacque

    Jacque Team InvestEd

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    This data is NOT provided in a report on their website. Residex do provide the 10 year yield for a postcode, but that is of NO use (Rental Reality is based on the 5 year yield AVERAGE)

    You need to request from Residex the last 10 years yields. (All 10 individual years yields) and then average the last 5 years. They do provide 10 years of yield data at approx $62-00 per postcode. (Well worth the $$$$$)
    (Steve Navra)

    Residex actually provide the 10 year average rental yield for each suburb now, which is much more practical and useful than a postcode, which can often encompass 2-4 suburbs.

    I fail to see why one would order the last 10 years worth of yields when it's only the last five that Steve considers significant. Why not just order the last five years and average them out?

    I still believe, however, that the last 10 yrs AVERAGE yield (which Residex certainly do supply in their quarterly reports :) ) is sufficient on which to apply the RR formula. Along with the other fundamentals, it's yet another tool in the box that can be used to ascertain the worth of a particular investment property.
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Yeah, good point about ordering 10 years when you only need 5 :eek:

    I think Steve's point might be something along the lines of 10 years being longer than the typical housing cycle, and so the averages are skewed and not as indicative of where we currently are. I'm just guessing here - I've not looked at the data, and so can't really comment about how accurate it would be.

    I'd defer to your expertise in this area anyway Jacque :D