QLD checklist to property purchase?

Hi guys,

What are some of the things to look out for when purchasing an investment property?

e.g.
Property should:
- have a yield of at least 5%
- be a detached dwelling
- There are no major units/property developments nearby
- have high vacancy rates
- be insurable
- have easier access to public transport
- Nearby quality schools
- suburb should have a higher proportion of owner-occupied and families

I am a newbie and the above is just based on some basic research.
It's probably too much and might lead to overthinking. so any suggestions or feedback is welcome

Thanks heaps

 

No termites.

 

So if the seller gives you a rental guarantee at 5% yield for a year……

 

but if it's in a suburb where vacancy rate is say at 0.3%, provided the property has also had a good rental history... why would you want a guarantee?

 

Because not every suburb has 5% yield. Would you have used the same criteria in sydney for example for the last 10 years? Most metro sydney properties wouldnt have 5% yield and you would have missed a tripling of prices.

 

definitely not looking at Sydney or Melbourne, I am looking at regional QLD for now

That should also be on the check list too, i.e - > property is not in Sydney or Melbourne

 

You can be assured that the price will have increased to cover the 5%, it won't come for free.

 

As a brief overview, I personally use a top-down approach when searching, let me explain. When I am looking for an area to purchase in I start at a national level and work my way down to a state, a broader area in the state, LGA, and then a suburb. This can be more than one area at a time and I will use a number of metrics that focus on supply vs demand, where that market is within its cycle and the budget I have to work with. Sounds like you have already done this by focusing on regional QLD.

I then use a bottom-up approach when I find a property in my selected suburb. I assess the property itself (condition, land size, yield, value-add potential) to see if it meets my criteria. Once I confirm this all stacks up I then gauge its overall location in relation to infrastructure and the desirability of that street within the chosen suburb.

A combination of the metrics you have listed is used within this approach. Hope this helps.

 

A common reason Branden's top down approach is used by many is state land tax. Buying in a new state may access a fresh tax free threshold. However this may need to be weighed up against growth potential as some areas are notorious for poor growth, lack of demand in quiet markets etc. The past several years have led to many thinking property is always in demand as new investors may not have seen the reality of falling values or stagnation. . In reality when things contract some property can be unsaleable without hefty price reductions and sellers can face losses where if its self sustaining you can always afford to be patient and wait. In poor markets sellers lose but owners dont as they have a mere paper loss in value. In this market I would be carefully considering a affordable property to hold even if rates rise

IMO a buyers agent services could become even more valueable than previously.

 

I am not as specific... Here's my unsophisticated list.

- Not in a flood zone
- No termites
- different..i.e buy a 4br when everything else is 3br etc....it needs to have some point of difference. Doesn't have to be much but it needs something.
- able to add value. A new Reno? Extra bedroom....is there a possibility that I can add value to this (easily).
- financials....does the deal add up with interest rates at 6 percent?
- what if rent drops by 20 percent? Can you still handle it?
- am I prepared to hold onto this for at least 10 years.

 

You dont know that. Just because you dont buy in Sydney doesnt mean you miss out, it could just as easily or more so be argued that you did. If you get less than 5% yield you probably have missed out on accessing funds and opportunity. Not all Sydney properties have trippled in price. There are properties in places other than Sydney that have trippled in price. Some with 7% net yeilds have 5 Xed in less then 10 years. Most places have doubled and are now giving a 10% yield which has allowed leverage, further income, assett acquisition. and growth. Just heard stats this morning that Melbourne and Sydney have had long term median CG of only 5%, Farmland has given a median 8% CG as well as high rental growth.

 

You want low vacancy rates, not high vacancy.

 

This is our generally prelim checklist before shortlisting a property for further due diligence (valuation, inspection, B&P etc).

Once again, in general, this is a property level checklist. It does not encapsulate:

> State vs State
>LGA Predicted Performance
>Suburb Buying Window analysis
>Street Sweetspot
>Property fit to strategy

But here we go (sorry about the font):

 

When targeting major metro markets, typically properties 10-30km from the CBD, we would be aiming for the following to begin with:
- House
- 500m2+
- Minimum 3 bed 1 bath
- Flat block
- Not in a flood zone
- Quiet street
- No housing commission directly next door or above 10% on the street
- Close to amenity - shops/schools/parks etc
- Low vacancy rate
- Low % of renters
- No unusual overlays
- Not close to cemeteries/major power lines/main roads etc
- Final building approval

Once the above checks are done, we would narrow it down further, specific to our client's goals. For example, a few people above have mentioned no termites, however, if the property is at a big discount and the issue can be easily rectified, there may still be an opportunity.
The condition of the home is fully dependent on what you want as a buyer. Some are happy to complete a renovation, others want a complete set and forget. Good luck!

 

Why ‘high’ vacancy?

 

typo