Property Investing/ Property Advice: Series 5 of 7; Series 5: Property Research: Part 2

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. We also service NSW and QLD, so look for Sydney Buyers agents and Brisbane Buyers agents, and QPIA advisors

Investment strategists, property investment, buyers agents, Melbourne buyers advocates, Melbourne Buyers Agents, Melbourne Property Advisors,

 

 

Check the position that state is in, in regards to the property cycle – property cycle refers to the period of time over which the price of a property changes by being influenced from demographic, economic and supply and demand changes in the area; each area may have its own cycle and be at different stages than any other area – and whether it is at the bottom, middle, or top of the cycle. It is always a good time to buy, but not everywhere, at any given time.

The peak would be 12 o’clock on a clock (end of the boom), 6 o’clock would be trough (bottom of the market). Between 12 o’clock and 3 o’clock is a correction, 3-5 must avoid, 5-9 is opportunity. It is difficult to know when the top or bottom is going to be 6 o’clock to consider jumping in. Between 11 and 12 o’clock you might want to exercise caution.

Looking at supply and demand in conjunction with population migration is one of the most important points. An example of an area to avoid is Docklands in Melbourne, with the oversupply issues and extremely high vacancy rates. If, however, you look at population migration in isolation you may be led to believe it is a perfect area, hence why it is so important to review population with supply.

If people were not attracted to the area, the area would unlikely increase in value. The fundamental figures start with supply and demand, like any commodity. If there is no demand, then it has little true value.

The more important element of the location is its infrastructure. Some infrastructure is merely ‘being discussed’ by council, and other authorities, as to ‘whether it will be planned’. Then it may end up ‘being planned’, and move forward to being a ‘committed plan’. Once the infrastructure has actually commenced, you can be certain that it is in full swing and it will have a tangible end result. The best solution here is to select a location where there are several existing industries. Be careful if you’re acting on something that is only being discussed. It needs to be approved.

You must avoid one-industry towns, because if government contracts cease or spending there ceases and the population is very small, the town will probably die, capital values will drop and vacancy rates will rocket up.

The economy of an area and surrounds, including the amenities there already (and in the pipeline), are important to know. Properties in suburbs with train stations tend to grow more than suburbs without stations in metropolitan locations. Hospitals, schools, other transport, and shops are important too.

The demographics, particularly for guiding you in making a more informed decision about the ‘what’ you should buy in the area, are very important for your budget, growth, rental, and any works needed on the property, and whether those renovations will improve the value. It also tells you the number of renters in an area. In some areas, units and townhouses are more popular and will have appeal to a greater percentage of the population. In other areas, duplexes or houses are better. The number of renters versus owners will impact on the upkeep and future desirability of pockets within a suburb.

Vacancy rates (and not just the current rates, but how they are trending) will help you see if the area is becoming more popular, or losing people. A simple snapshot will not demonstrate this, as it only captures a moment in time. When you look at shares you would normally look at trends, so do the same with property.

This methodology applies to the following points: Capital growth history, yields, days on the market, discounting and auction clearance rates, median house prices, population, supply and demand, vacancy rates, stock on market, income and employment growth is also very important.

Many people think that when a property has been on the market for two months nobody wants it (many people do not invest wisely though). I see opportunity. Maybe the vendor has been out of touch with reality of what the property is really worth. The agent normally has signed a three month contract to sell it, both the vendor and agent may be more pliable and agreeable to a lower price. Look at the best streets; try to stay within a couple of blocks of these streets.

Comparable sales and timing of these is very handy and vital to your negotiations. You can compare what similar properties sold for within the previous six months, within three months is better (this is what valuers and financial institutions use) and use this as ammunition; it also provides you confidence in what the property may be worth. Sales within 1km is best, others in the same suburb may still be okay if a little further away. Comparing land size within 10% or less variance, and compare the same number of bedrooms and bathrooms – there is software that will do all this for you.

If new: Just focusing on fittings and fixtures included in the property, quality, uniqueness is good but be aware of what other properties in the estate include.

Oversupply, master-planned communities, and excess land can all hinder growth. Prime examples could be suburbs in growth corridors; there could be better opportunities to be had further in towards the CBD/town centre. In some of these large estates, schools, hospitals, shopping centres, and a train station may improve your property. Trains and access to transport are big factors in the investment being viable.

There is software out there, which allows you to drill down in a suburb and overlay your own preferences to find an ideal location within a suburb. Figures suggest choosing the street wisely can deliver much more capital growth than the rest of the suburb, rather than just haphazardly buying in a suburb, and it is a low percentage of a suburb where ideal streets lie. You may wish to understand which streets have less public housing and streets where people earn more than other streets. Rent and yield is higher on some streets, and you can avoid streets with too many units or apartments, and understand which streets have too high a percentage of tenants versus owner occupiers.

Of course, a good buyer’s agent will have access to several software programs that on aggregate may cost a significant amount per year to subscribe to. Leveraging off a buyer’s agent and their access to data and knowledge in combining all the data, can save you thousands in annual subscriptions for the same outcome, not to mention hundreds of thousands in buying the right versus wrong property. Even then, doing it on your own is fraught with danger, without leveraging off the experience and knowledge of the buyer’s agent.