The Importance of Better Price Point, Better Location, Better Returns

G’day, Ben Kingsley here. In this How-To video I wanted to spend a bit of time in talking about the importance of better price point, better location, better return on investment.

So let’s switch over now to Google Earth — and here we are. We can see the two marketplaces that I want to show you. I’ve set the date stamp back to 2000 and I can see Melton.

I’m in this little area over here now — and we can also see Sunshine. So they’re the two markets that I’m focusing in on today.

I want to draw your attention to a couple of the areas in the video. We can see this area here is currently farmland, and we can see exactly where the borders of Melton go and you can see where the expansion of mountain starts to take shape.

So let’s move our date stamp to 2010. Now we can start to see a fair bit of expansion through Melton, and also further expansion in Sunshine areas as well. We’ll move that date stamp out a little bit further — so as close as we can get. This is a 2016 — and you can see the expansion of Melton and also quite a lot of expansion through Sunshine. Sunshine is now pretty much fully-utilised; but there’s obviously still a lot of vacant land in Melton, and it’s a long way from the CBD. So, land value is still far cheaper out in this location (Melton.)

 

Let’s switch over to the research platform — and what we can see is an interesting story…

 

Quick Tip: If you’d like to find out more about our research methods click here.

So, we’re back in January 2000 and I’ve got those two suburbs up. I can see what my median house price is in Melton at the start of this journey. We can see here that the median house price in January was $90,000. For Sunshine the median house price was a hot $130,000 in that same time period.

Now, let’s just expand this out and focus in on what could be a life-changing difference when it comes to the return you’re getting on your money.

If we just look at Melton in isolation, as we can see here, we can say, “Hey, the 338% return on our money, a compounding growth rate of 8.48%, and $300,000 up in value from the $90,000 back in January of 2000… well, maybe I’m okay with that!”

But what if I was able to get into the better market — the better market where I would have absolutely doubled that return?

If we look at Sunshine, you can see the median price is $770,000 — with a growth of $640,000 or 492%, with a compounding return of 10.34% percent.

This is an EXTRA $335,000 in your kitty.

You’ve made $305,000 here (Melton) and you’ve made a nice little earner of $640,000 there (Sunshine) — not forgetting that the better the price point, the better the rent you’re also going to get if you hold on to the property indefinitely

So, that’s a highlight. But what’s important about this? For me, obviously is it all comes down to cash flow. Because the reality is, if you didn’t do your homework, or if you didn’t get a plan or get some advice around what you could afford — you may have opted to be conservative. You may have opted only to go for the $90,000 purchase price, which has put you into a marketplace that was not as good as the better marketplace, the better location.

Back in January 2000, you could have paid $130,000 because you’d done your cash flow analysis, you had some advice, you’d effectively planned to become what you plan to become — and you’d gone off and built this journey (Sunshine’s numbers) as opposed to just this journey here (Melton’s numbers).

We can see that even when the downturn comes in at certain points through Sunshine’s journey — some of you might be thinking, “Well, has that been a good result?” — the long term story has been a growth one. Because the reality is, underlying land value starts from the center (CBD) and pushes out. (Read more: Ripple Effect Potential).

So in my view, it’s doing an exceptional result.

This is what’s at risk. This is why getting the right advice — getting the right price point based on your cash flows — can have a significant wealth effect for you. It could change your life. This is why I always say, “Seek professional advice to get that planning done!”

You can maximise your understanding of your potential, and then go out and realise this potential.

Thanks for watching.