The Sweet Spot Between Higher Yield and Strong Growth
inding the investment sweet spot between higher yields and capital growth became a personal crusade for Jacob Field when he hit a wall in his early days of portfolio building. Shut out of the property market for two years, Jacob and his partner Anna used the time to thoroughly research the state of play within wider New South Wales. The investment parameters they developed during that period - understanding the value proposition of what makes people live in an area and why, along with how much they’re prepared to pay to buy or rent there - became the basis for Jacob’s disruptive technology platform, Ripehouse. Now a key player in artificial intelligence asset selection, wealth builders utilising this innovative investment tool are reporting an average of 18.7% growth over a 12 month period.
""With Ripehouse you’re able to source property more strategically, purchasing like the top 1% of wealth builders who can keep going with their portfolios regardless of the environment.""
API: When did you first start investing and what do you love about property?
JF: I started investing very early, before my 21st birthday actually. We didn’t necessarily have a lot of money growing up so I was quite ambitious to save and build wealth for myself from an early age. I turned towards real estate after reading More wealth from residential property by Jan Somers. It appealed to me that I could use other people’s money in property to increase my asset base and step forward more quickly. I was a good saver and quickly bought two properties in Hobart which did really well off the bat. In the one year period from 2004-05 property went up 45% there which was a great start. After that I was obviously in love with property!
API: In your early days of investing did you come across any challenges or hit a wall?
JF: When I migrated to Sydney from Hobart with my soon-to-be-wife Anna we were both very keen to continue to invest. We’d moved there for employment and wanted to leverage that into continuing to build our portfolio. I had a network of friends in the property game and on their recommendation we looked at Mt Druitt in western Sydney. We found something that looked great on paper and was priced really well for the street but when we went out to an Open Home we realised the locals had knocked the back fence down. They’d made the property into a thoroughfare between a housing estate and the train station, with really quite intense foot traffic and it was obvious that it wouldn’t be at all suitable. I was a bit rattled after that experience when it came to knowing how to find the right investment for our needs.
API: What realisations helped you overcome these difficulties?
JF: I’ve got an analytical and technical background so we went back to basics gathering data and crunching numbers. It took us a good two years of researching - not just looking at data, but we literally went to a different suburb every weekend. We found that going and having breakfast in a suburb on a Saturday was a great way of understanding who lived there and why. We did that across the whole of New South Wales - into a lot of regionals, there were no shortcuts taken. We avoided analysis paralysis and gained confidence by developing our own framework for assessing and comparing these suburbs, along with the individual properties within.
API: Describe your aha moment when you knew property was still the best path forward for you.
JF: When I could quantify value that was the real aha moment - understanding why people paid what they did to buy or rent in a particular area, it was possible to step outside the comfort zone of our local area. Comparing apples with apples like this was when it really clicked for us. We were then able to position ourselves just before really strong growth in the Newcastle area, where we bought a large developable block. Subsequently we’ve continued to purchase in multiple states. Once we got the process right we were able to rinse and repeat, over and over again.
natural evolution of the framework Jacob developed for selecting potential investment properties, Ripehouse started out as an advanced research tool to help better understand locations throughout Australia. It worked as a mapping guide looking at where shops, schools, public transport and public housing were located, assessing how they impacted on value and contributed to growth. Key to strategic property selection Ripehouse has also come to the fore under APRA’s tighter lending criteria, with real gains over the short-term enabling investors to keep borrowing and adding to their portfolios.
API: What led to you founding Ripehouse in 2011?
JF: I had a strong technical background professionally and founded Ripehouse on the premise of trying to understand these locations whether they were in Darwin or Sydney or Perth or Hobart. I shared it with my network and got a lot of positive feedback about the initial framework. I realised how powerful it would be to share the technology to the wider market, helping investors to find the optimum State and Local Government Areas for their individual needs - set to deliver results from day one. I saw that through Ripehouse, investors could find suburbs and streets within them that were leading the growth forward, understand the dead spots within a suburb and then the individual properties that people were demanding.
API: How does Ripehouse work?
JF: We try to be quite innovative with what we do, providing commentary, research reports and analysis tools. We try and understand the value proposition and where the best areas to generate the best returns in the country right now for what you’re trying to do as an investor. It’s all about providing these tools and research to investors to help them develop the confidence to do push outside their comfort zones, not look next door but across the country to where those absolute top returns will be generated. We want to position ourselves just before a boom before everyone knows about an area, which is where you get that really strong growth. Ripehouse is really good at helping you do that, meaning you can negotiate really hard on a property and buy typically 7% under market. Combined with average growth of 18.7%, the number that keeps coming back to us is 25% improvement in value of that asset in a 12 month period. Investors are then able to take that 25% and move that into another asset around the country. APRA has brought a sledgehammer to a lot of investors’ plans - with Ripehouse you’re able to source property more strategically, purchasing like the top 1% of wealth builders who can keep going with their portfolios regardless of the environment.
API: What type of investors does Ripehouse work best for?
JF: Generally our investors fall into three main categories, the first of which is investors trying to build net worth and develop that asset base. The next phase people may be going into is a lifestyle investor, so they’re looking at winding down work - not necessarily older, they still may be in their 30s, but wanting to move into part-time work. They’ve got an asset base now, have a family, and want to reap the fruits of their portfolio. Their assets may not necessarily change but they might move into larger, developable blocks where they can get a bit more creative while retaining a focus on growth and yield. A retirement investor then is where things start to definitely change, where you might have a lot of equity on the table and can go into two directions: people might sell down assets and really hold those long-term stayers to secure their retirement, or they might sell down assets into yield, chasing cash flow. The default strategy for most people coming into Ripehouse is that net worth, lifestyle category, where people are looking for the best of both worlds with high growth, high yield property and they’re willing to invest across the country.