SSI - Reno flip

What is the SSI - Reno flip?

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 - Reno flip is a score out of 100 for the suitability of a market to an investor looking to maximise profit from a buy-renovate-sell strategy. The higher the score is, the better the chances of finding a suitable property.

    How does the SSI - Reno flip work?

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

    • Price spread
      • If all properties in a suburb sell for between $420k and $450k then you're unlikely to get more than a $30k increase in value for the reno. But if prices ranged from $350k to $550k it may be possible to renovate a $350k property for $100k and make it looks like a $550k property. So a wide price spread is vital.
      • A quick sale time reduces the amount of interest paid on a mortgage waiting to sell the final product.
    • Auction clearance rate
      • A well renovated property may be at the upper end of the market. An auction can also guarantee a sale date, reducing the period of time on the market. Both cases suit a market with a high auction clearance rate.
    • Proportion of renters
      • Owner occupiers take better care of their properties and often add extras such as decks, pools, additional storage, extensions, 2nd story, pretty landscaping, etc. A market full of renters however will consist of bare bone properties. The risk of over-capitalising is higher in high renter proportion markets.
    • Percentage of sales by auction
      • A market with a significant proportion of sales by auction represents a market in which demand is strong with respect to supply and buyers are accustomed to auction and agents believe this to be the best method of sale for their clients.
    • Percentage of listings with open inspections
      • Similar to the percentage of sales by auction, the OFI% is a good indicator of demand outweighing supply.
    • Neighbour price balancing
      • If prices in neighbouring markets exceed the prices in the target market, then the risk of over-capitalisation is reduced and the chance of a balancing in prices is possible.

    Why is the SSI - Reno flip important?

    If your investment strategy for your next property is to buy a property to renovate and sell, then an index to gauge suitability for a specific market for that strategy is an absolute must-have.

    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 - Reno flip reliable?

    Yes, the SSI - Reno flip 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.