Always better to buy above the median

it was in this book......


I'll try to find it at home and provide some more details.

 

Adding to my earlier comments, I think it really depends on the overall deal. On some deals, I have also paid over median price for properties when I think about it, but that is because I saw the adding value in them via development and it would be impossible to buy those deals under median price in most cases. So it I think it really depends on the overall deal, and not just saying I'm going to always aim to pay over or under or whatever.

 

No, it has about 7% less than the median based on my best calculation of what it should be worth. With two days elbow grease and a paint, there should be 15% equity off the bat as long as there are no hidden surprises.

 

If all properties in a suburb are rated 1 to 10 with 1 being the worst and 10 the best, median priced properties fall in a range between a 3 and 5.

The idea is to buy properties in this range as most people can afford to buy them and rent them.
They are easier to buy and sell and the yield is better.

 

What about buying a property that you realize has a real value of 7-9 but pay 4-6 price

 

I would be checking my definition of median, you're looking at below average. Median is the price which falls in the middle of a series of sales ranged in numerical order.

 

Per my understanding McGrath owns precisely zero investment properties.He is a PPOR + weekender type operator as are many high net wealth types. His wealth is in REA / MEA and other listed and unlisted investments. Not property. For what its worth...

 

Is that the one you're taking to with a chainsaw?

 

I'd suggest Hugh's ballpark estimate is pretty fair.

Lets look at it another way.

The median full time income in Aus is about $55k. The average is about $80k.

Do you consider a $55k income a 5/10 income? What do you consider a $35k full time income /10? It's pretty much impossible to work full time and earn under $35k so surely $35k would be a 1/10. If the median is a 5/10 income, that's 5 increments between $35k and $55k.

So the what's a $100k income /10? $250k? $500k? $1mil? $10mil? $100mil?

 

@Steven Ryan - it depends on what you include in your definition for the stats.

If you exclude the unemployed (but actively seeking work), self-funded retirees, pensioners, maternity leave, workers compensation cases, other benefits, seasonal workers, self employed (eg farming community) - then you will have a different result.

If you use statistical analysis and subject it to say 10% confidence limit, both the statistical highs and lows will be removed and the results much more reliable.

 

Ahhh another "what is retirement" question. Good luck guys I wish you well on your quest for enlightenment... Take some beers with you

 

"Median full time income"

6202.0 - Labour Force, Australia, Sep 2013

 

No, I should have included quotation marks, it was straight from the lady herself Jan Somers.

Over a statistical range of properties in a typical urban area the prices will range from cheap properties rated a 1 to expensive properties rated a 9 or 10. There will usually be considerably more properties in the lower quartiles hence the suggestion of buying properties in the 3-5 range for buy and hold.

The median is referring to the middle, a 3-5 property most likely will fit in this range. If I was still at home I would post the graph.

Since this was what the previous poster was referring to Jan's book I had it handy.

 

In that case she's being selective - disregard the higher priced properties but include the dregs, this is not representative of the median or a bell curved distribution.

To be fair, you must selectively remove sales at both ends, not just the top. Eg a suburb with 10 sales of Waterfront properties but 25 on a 6 lane highway sandwiched the cemetery, treatment works and abottoir and 40 regular sales. If you disregard those in the 9+ category the median will be skewed significantly leading to a non representative sample and incorrect conclusion.

 

If you had as much passive income as he has coming in I wouldn't either I reckon....

 

Never bought a Million dollar IP , Re PPOR's , we've only bought one ( current PPOR ) , but we've sold three ...

Cliff

 

I read McGrath as talking with regards to ppor's

Buying pre mil and selling post mil! that simplifies investing

 

Never buy em, only sell em.

 

How long is a piece of string, so many variables come into play.

What I have also noticed for example period homes in desirable locations/areas that are fully renovated can actually work out cheaper than unrenovated period homes, simply because it is harder to find these properties that are untouched, and there is much higher demand for these.

MTR

 

Well that clears that up.
I'd add to @Leo2413 's comment, buy at 3-4, sell at 5-6.