Property Investing/ Property Advice: Series 3 of 7; Series 3: Property Strategy: Part 3

I believe you must engage a Buyers Agent with every property purchase, Using a Buyers Agents/Buyers Advocate and Property Advisor is key to more property investment success. These are extracts from my latest book “The Australia Property Investment Handbook 2018-2019″. In all good book stores now. Also Read Property Finance Made Simple and Property Investing Made Simple. Property investment, using buyers agents/ buyers advocates, is so important, and if looking in Melbourne for example, you should look for Melbourne Buyers Agents or Melbourne Property Advisors,

 

 

Series 3, Part 3

Rule: Always do the best you can with what you have, it is almost always better to invest wisely than not invest at all

Rule: Always consider the value of the land as a component of the purchase price and value.

Land size is less important than the value of the land for the size it is. In other words, 200sqm of land within 10km of the CBD of Melbourne is worth much, much, much more than two acres of land in some suburbs 60km from the CBD, and worth more than 600sqm of land in a regional area.

Never fall for the trap of buying a house, when you hear that houses perform better than units without realising that it depends where and what you are comparing.

Residential property falls into four broad types.

 

Type 1: Unwanted, to be avoided.

For purposes of comparison, let’s rule out the less desirable stuff.

  • Serviced apartments.
  • Student accommodation.
  • Buildings of apartments with over 75 apartments in a capital city.
  • Buildings with more than 10-15 apartments in a regional location (non-metropolitan location).
  • Buildings with lifts, as body corporate fees are higher, eating into rental income.
  • Buildings with pools, same as previous point.
  • Properties with limitations written into the owner corporation terms and conditions, limitations and exclusions can negatively impact on you, the rent ability and the future of your investment. Examples can include, no pets, short term lease restrictions on things such as Airbnb can apply, eliminating you from renting it out to short stay tenants. Improvements: You will be limited to what you can do, you do own the living space but not the walls, or car spot, or doors. You cannot add much value, if any, to an apartment. Rogue management: unreasonable or excessive increases in owner’s corporation fees are a risk, and you the owner pays this, not the tenant.
  • Dwellings under 50 sqm living.
  • Apartments in some high-density postcodes, 3000-3009 for example, unless they are especially boutique, and not part of a high rise. Of course, this philosophy of avoidance is not related to apartments for you to live in, it is purely in relation to whether you want your investment to rent easily, sell easily should you ever want to, and grow in value. If you want to self-sabotage, go ahead and invest in Southbank or Docklands in Melbourne.
  • Dwellings on major roads, within 50 metres of high tension power lines.

 

Type 2: Unit, apartment, townhouse, house, villa. Most investors purchase these standard types of properties to buy and hold.

Type 3: Dual occupancy: Some growth and great yield. There are a few boxes that can be ticked here. A) Growth potential, though this will vary, not 6% growth, B) Yield, % yield in relation to price is better in some places than others, the higher the price the lower the yield. C) Price point, D) Manufacture capital growth potential sometimes, by separating the titles (community title).

Type 4: Properties that tick all four boxes of price combined with potential, yield, market growth, and manufacture growth with subdivision is development with some of the types of properties listed under type 2. Not so much a buy and hold strategy in this instance.

As time progresses the purchase price is assumed to go up, so the more spread out the acquisition phase of this plan the more you will probably pay for each property. A property now, in a given suburb, will be more expensive in the same suburb in five years typically. Dilemma; buying more properties in a shorter time to keep price lower versus buying them over a longer period, for comfort and affordability reasons, and paying more for them. Any time a client shortens the acquisition phase and lengthens the h