Walk Score

We use plenty of portals, (mostly paid subscriptions) when conducting our property research and due diligence. One free portal is particularly handy when focusing on amenity, and that is walk score. While there are many more important elements that we must take into consideration also, the ‘walkability’ of an address, in tandem with streetscape and zoning is a valuable measure.

“Walk Score measures the walkability of any address using a patented system. For each address, Walk Score analyses hundreds of walking routes to nearby amenities. Points are awarded based on the distance to amenities in each category. Amenities within a 5 minute walk are given maximum points. A decay function is used to give points to more distant amenities, with no points given after a 30 minute walk.

Walk Score also measures pedestrian friendliness by analysing population density and road metrics such as block length and intersection density.” Data is sourced through google maps and other sites/inputs.

When selecting a capital growth property, we aim for a walk score above 70.

When selecting an investment property for capital growth potential, walk score is one of many important measures. An outperformance asset will require both owner occupier demand and tenant demand in order to meet it’s objectives. Owner-occupiers who purchase similar properties in the area will contribute to increasing property values, as they continually push up prices year after year. If the location and dwelling type is selected well, an investor can look forward to consistent asset value growth as the surrounding properties remain in high demand. Likewise, if the target tenant demographic is well-catered for, the investor’s property will continue to rent well and offer attractive returns and minimal vacancy periods.

Walk score plays an important part, but it certainly isn’t the only measure. In fact, in solo it can lead an investor astray.

Take these two properties, for example.

The first is my office in the heart of Yarraville. When I first purchased it, the property was leased and the tenant had it set up as her home. It wasn’t a difficult conversion to manage, however the owner before me would have likely purchased with a commercial loan in place, as the property is Commercially Zoned. Many lenders won’t accept a residential pre-approval for a Commercially Zoned property.

The impact for a buyer who purchases at auction, (or otherwise unconditionally) without being aware of a commercial zone can be dire. They will likely face a commercial loan, enforcing a 35%-40% deposit and a fifteen year amortised loan term, and if they can’t manage/qualify for this, they could lose their deposit altogether and face damages from the vendor’s side.

However, the walk score is fabulous.

The walk score makes perfect sense. The train station is less than 100m from my door, there is an abundance of cafes surrounding (and below) my office, two supermarkets are just down the street, the two schools are within 300m each, a cinema is in the same little village, parks are an easy walk to, the taxi rank is by the station and the restaurants and pubs to choose from are bountiful. Access to the city is easy and parking is reasonable.

Take this recent sale as a second case in point. It may be familiar for those who have watched the recent Location, Location, Location show. This property was recommended to a contestant, presumably because of the price. It is a pretty Edwardian three bedroom house, and in any quiet street in the same area it would presumably cost around $1.45M. On a busy road that carries trucks, however the price is significantly lower. It recently sold for $904,000.

This is attributed to the challenges associated with living on a truck route. Pollution, noise, the inability to park out the front on the street, and the dangers associated with crossing a busy road all play into purchaser, (and tenant) decision-making when selecting a home.

The walk score is very good, but the investment-grade is questionable.

In isolation, this score is not a good measure of an investment-grade property. But in combination with other measures, it’s very insightful.