SSI - Buy discounted

What is the SSI - Buy discounted?

SSI stands for Strategy Suitability Index. The SSI is a set of indexes used to gauge a market's suitability to a specific property investment strategy, for example:

  • Renovate and sell (aka reno flip)
  • Buy and hold
  • High cash flow
  • Buy off the plan
  • Buy at discount
  • Low risk
  • Development

    Each strategy has its own unique requirements in terms of the nature of the market for success. The SSI scores each market based on the statistics that are most important to the type of strategy.

    For example, the SSI - High cash flow is highly dependent on low vacancy rates and high yields. The SSI - Reno flip on the other hand is dependent on a quick sale for success. So a low "days on market" is very important for a reno flip.

    Each statistic is given a different level of importance for each strategy.

    The SSI - Buy discounted is a score out of 100 for the suitability of a market to an investor looking to buy at a heavily discounted price. The higher the score is, the better the chances of finding a suitable property.

    WARNING: High discounting is a sign of a market under duress. These are typically not good markets to invest in. Investors are encouraged to avoid the "buying at discount" strategy. Before you embark on this strategy please carefully read Jeremy Sheppard's article published in Your Investment Property magazine titled, "Buying under market value".

    PLEASE NOTE: The SSI - Buy discounted score combines more statistics than simply the average vendor discount. The idea is to give investors insight into potential markets, not steer them into a trap. Purely following high discounted markets regardless of any other indicators is pursuing a disaster. As a result, many of the higher scoring SSI-discount markets may not have a high average vendor discount.

    How does the SSI - Buy discounted work?

    All SSI scores are derived using a number of statistics. A Buy discounted investment strategy prioritises the following statistics:

    • Discount
      • Obviously a market in which properties are regularly being heavily discounted is a market in which vendors are open to negotiation.
    • DSR+
      • Markets with high discounting are usually in a state of over-supply relative to demand. To combat this negative, it is vital to have other statistics that support a healthy market. The DSR+ is the best overall indicator of this.
    • Market cycle timing
      • Entering a market in a poor state of demand and supply may not be so bad if the market is showing signs of bottoming.
    • Ripple effect potential
      • A high REP score adds weight to the chances of a market about to turn a corner. It may still be a tough time for vendors to sell. But if there is strong ripple effect, some growth may be on the horizon.
    • Percentage sales growth
      • A rise in sales growth could represent the end of a bad period for sellers.
    • Percentage rent growth
      • A rise in the popularity of a market is first felt in rents increasing. Being able to buy at a discount and then see the market improve is a key to this strategy.

    Why is the SSI - Buy discounted important?

    If your investment strategy for your next property is to buy a property below market valuation to lock in instant equity, then an index to gauge suitability for a specific market for that strategy is an absolute must-have.

    However, be sure to read Jeremy Sheppard's article on "Buying under market value".

    You can examine the SSI statistics from the SSI tab in the Suburb Analyser if you have an appropriate membership. Not all members have access to the DSR+ or SSI tabs.

    A list of memberships and what privileges they come with can be seen on the Pricing page. To change your membership, use the Profile page.

    Is the SSI - Buy discounted reliable?

    Yes, the SSI - Buy discounted considers a number of statistics rather than just one. It is unlikely that all statistics or even half of them are subject to anomalies at the same time. One statistic can be out of whack, without affecting the overall score significantly.