Checklist for finding investment property?

Hey guys,

Recently bought my first property and is now looking to buy another soon and have been looking around for some rule of thumb pointers or checklists to assess the potential of a property and have not been able to find much.

Does anyone have any rule of thumb or criteria's they can share? Some of of the points I have read include finding a property with high Demand Supply Ratio, increase in rental yield and low vacancy rate but how accurate are they to assess the success of a property?

Greatly appreciate any advice to this novice investor

Thanks.

JLin

 

1. Choose state based on where currently they are situated in the cycle.
2. Start analysing suburbs based on your budget.
3. Narrow fown on suburb based on deciding factors (school, infra, yield, vacancy, type of dwellings and demand for dwellings)
4. Narrow down on streets and check flooding information.
5. Start looking for BMV deals (more the demand, lesser will be the negotiation).
6. Post the details on PChat

Depends on your price range and the state you are looking at. Some of the yielding areas are currently in Adelaide and Brisbane (logan area and vicinity or deception bay or kippa to moreton bay). Coming year, may be in Perth, Melbourne outskirts (geelong vicinity, frankston, etc)
These can be high yielding areas and ave seen some or good growth in past two years.

Quite some threads on deception bay, logan, adelaide and kippa ring, strathpine, petrie, brisbane other areas, geelong, norlane, corio, etc.

Regards

 

Hi Ashish,

Thanks for the great information. Im based in WA and am only focused in houses in that state.

I've read a few articles that you should always buy houses 20-30% below the median price and that the price of your land should be worth 70% of the property value.

Anyone heard about that before? Any other rule of thumb anyone can share? Am very keen to learn.

 

There's a reasonable basis for this, the property will rise in value on the back of others in the area. It can also be argued that these properties might also be the rubbish that others don't want and will never perform as well as properties above the median.

Land tends to be the resource in a property that provides scarcity and thus drives the increases in value. Most people don't pay the rent for the land though, they want to live in a nice house. In some areas properties with a lower land value percentage might have a better rental yield, thus promoting affordability.

The point is that there's no single rule. Don't follow a recommendation just because it's quoted in a few places. Understand why it's being quoted and how that applies to the general location and the individual property. There will always be exceptions and good reasons to do some things differently.

 

Something you may want to think about even if you can buy under market value, Perth market is actually falling what you believe is a bargain today could actually be the opposite tomorrow.

MTR

 

If you're only looking at the Perth market it may make sense to sit on the sidelines for a while

SQM Research - Weekly Asking Property Prices

Take a look at the chart. Not taking anything else into consideration personally I would not look at Perth until at least the "12mth % change" figure goes into positive

 

I found Margaret Lomas' Checklist helpful to go through when undertaking due diligence to purchase a new property - check out the questions on the link below:

The 20 questions to ask before you buy an investment property: Margaret Lomas

 

Thanks guys for the great info! Greatly appreciated.

I am currently building my own spreadsheet to start tracking a few suburbs I have in mind. Can anyone advise what specific data I should be tracking - no. house sold per, house available, no. of house for rent, rental yield?

Also, should I be tracking it monthly? Any website that may help with finding useful information apart from realestate.com.au or reiwa.com.au?

Any information would we awesome!

Thanks!

JLin

 

Great article posted by @DiligentPM

@JLin88 - Check out this thread which has similar discussion: "Strategy" - how does it look like?

 

Sounds like that's a lot of detail and analysis. Step back and look at the following as a starting point:

• Is there government and commercial spending in the area
• what are the rental yields there? Is it acceptable as this will determine whether the portfolio is negative, neutral or positive cashflow
• where is the suburb / city / state in the property cycle. Does buying there present good opportunity to get into the market prior to or during an upswing

 

What kind of properties are you looking for? Do you have a strategy?

If you have an end goal (for eg, 'x' properties within the next 10 years) you'll need to have a look at your borrowing power to make sure this is going to be achievable with a buy and hold strategy. If it's not, you may have to look for properties that can be subdivided. Instantly, this impacts your checklist and the areas/types of properties you need to look for. Most of it won't change, but it will mean a few extra criteria.

Do a bit of planning ahead with your broker - you don't want to buy a couple to hold, only to find you need to sell to keep expanding.