QLD Help with “analysis paralysis” please

Well I have been bitten by the “analysis paralysis" bug......


I am ready to go for my first investment property and have been reading this forum daily for the last couple of months. I have changed my mind more times than my underwear and have read every piece of statistical data I can get my hands on

Basically I am looking for an IP around the $330k mark. Chasing capital over the next 5-7 years gains but trying to keep it cash flow neutral.

I have narrowed down the state to QLD.... that was the easy part! Being from Sydney and my first IP I am trying to avoid too much renovations.

For the last month I have been looking at buying a house along the Gailes - Ipswich corridor. 4/2/2 in Redbank Plains for $320k on a 400-600sqm block. Similar to this 26 Chetwynd Street, Redbank Plains QLD 4301 - House For Sale - 2012636707

But after talking to a few PC members its evident that there is a lot of land in the area still to be developed which may delay any capital gains for some time.

I have now been following some advice from @sash and looking at townhouse/units closer to the Brisbane CBD for around $330k. I found it interesting that even though you have to pay strata costs the holding costs come out almost the same.

Here is an example of one that was posted somewhere else on the forum 2/93 Albert Street, Camp Hill QLD 4152 - Apartment For Sale - 2012702695

I am aware that there is an oversupply of units in the Brisbane area. However I would be sticking to smaller unit/townhouse blocks. 7-10 per block. HTW reports says that units in the Brisbane area on the decline but I am not sure if that would include these kinds of properties 5-7km from the CBD.

Basically I am just looking for any advice on my thought process and the direction that I should be heading.

Thanks in advance!

 

Yeah fair enough. Ideal end goal would be maxmium capital gains in a 5-7 year period on a $330k property. Without going down the path of immediate renovations/dual occ.

 

But ask yourself: why do you want that initial capital growth as quickly as possible (i.e. within 5 years)?

I'm guessing it is because you want to springboard off of this equity as deposit for IP #2 (let me know if this is incorrect?).

If this is your goal - to start building a portfolio of several properties as fast as possible - that is an admirable goal but not only that; having this goal should help you actually wade through the analysis paralysis a bit more easily.

Seek out the ideal CG you'd like to get out of this property in say the 5 year term. Put a number on it. E.g. $40k? $50k? $60k? Etc.

With this number in mind you can then do suburb based historical data searches. Sure, 'past performance is no reliable indicator or guarantee of future performance' blah blah blah.

But look at the numbers and then back this up with a search of the forward-driving opportunity for the suburb. Are there new roads / shops / hospitals / transport nodes going in to the suburb? Does it trend from the past few years that the population is increasing? And how much stock is currently being built (cranes on the suburbs skyline)? How many Development apps are sitting with that councils website right now, for that suburb (and surrounding ones too). Whilst you may not know how many units are in each tower sitting proposed with council, at a cursory glance does it appear this supply will under / meet / over supply the demand from the population trend data you already sourced (that i mentioned earlier)?

Then there are my personal favourite (what i call 'suburb wildcards') that are above and beyond all of this data and hard evidence. These include a cursory assessment in your own opinion of the following wild cards:

- is there topographical dynamics in your favor? (By this i mean national parks, sea, or hilly restricts that either restrict the use of land amd/or make it unattractive for the giant apartment tower developers to swoop in and develop?)
- Is it Chinese-favoured? You'll know this in several ways. First, are any REA listings bilingual? Are any properties with a number 8 in them advertised associated with words like 'luck'? Two many reasons why Chinese favour suburbs: 1) good school catchment zones (check school ranking stats on ksou to get a vibe - Chinese buyers obsess over this and can cause CG to lift). 2) to a lesser degree Chinese also favor outlook (Feng Shui based revenue of light, hills, and other features I dont fully understand
- I hate this word but is it gentrifying? I mean the real kind. Not just 'build it and they'll come cafes with fake astro turf and garden gnomes' but actual on-the
- Are the lot sizes bigger? Google maps and street view help highlight this, but one of my favourite favourite newish wiz bang tools in property is actually Google Earth's new update. 3D modelling in google earth was once restricted to topography only (mountains, hills etc.) But for a select few cities around the world (In Australia sadly Sydney, Darwin, Hobart are not mapped but Mel, Bri, GC, Perth, Adel, Can all are!), they have 3D modelled at the house-level. This includes the backyards, trees, fencing heights etc. This is powerfully to virtual-tour a suburb more aggressively before you fly up for on-the-ground inspections. All three google tooks together are powerful for Brisbane property assessment.
- Heritage. Another wildcard that shouldnt be ignored. In Brisbane generally this isnt as relevant, I know. But lots of heritage is great because it can dampen development capability which restricts supply. When demand is still high, that is a great problem for an investor to have
- Just on on-the-ground due diligence. People-watching (creepy, much?!) Is a must. Ime. Spend a few hours in that suburb and do what i do. I sit and observe people from a park bench (i mostly am in suburbs at this level on saturdays, which helps) to get a true view of the socio-economic reality of an area. Things to look out for: are sugured-up kids being belted by parents smoking ciggies and screaming expletives at them? Or are people with children better behaved? Many homeless folk? Are people walking pairs-of-same-breed dogs? (This is a big one, PM me for why!). Many fitness minded people? Go to local shops. Talk to shopkeeps. Go to the local police station in your walks and talk to police. Be open and say you are an investor, 'what kinds of crimes are most common in this area?'

Of course the above is a lot of data but like i said, once you're down to the suburb level in your search, it actually gets a lot easier. Be truthful in your convinctions and believe in your own skills. If you've gotten it down to suburb-level you must have waded through a lot of data to get there. Once you are there, it's about going that extra mile to close the research loop. This level of depth personally has led me to make better, more informed decisions (and meaningully informed at that!).

Best of luck

 

I'd just buy a house in Deception Bay or Logan. Quick paint, new carpets and rent out achieving neutral-positive cash flow. It will probably go up in value and hasn't cost you anything. I see there is a few houses close to the water at Deception Bay for reasonable prices. I'm not saying this is what you should do, I'm saying this is what I did in a similar situation to you.

 

My intuition would be to get as close to the CBD as possible. Land locked area. Preferably a house but my budget does not allow for that so a townhouse would be the next best option. Closer to the CBD would hopefully bring better tennant choice rather than the lower socioeconic areas where I can afford house and land.

Listening to the Property Counch Podcast last night Episode 005 | Four Pillars of Mastery - Asset Selection - The Property Couch 80% of your return should come from the location that you buy in and 20% from the property.


@C-mac - thank you very much for that write up. I will read over it a few times and digest it all. Yes my goal is to build up maximum equity (ideally $50k-$100k) within 5-7 years to purchase another property.

 

I have pre-approval for $400k. I would prefer to spend around $330k which gives me a bit extra buffer.

 

Go with your intuition. I had a choice of buying an older unit in Nundah for 175k in 2009 vs a house in Margate for 251k. The unit is now worth 320k and the house is worth 365k. You see the growth. Nundah is 6 ks to city Margate is 25ks.

 

It's not uncommon for investors to want to see a fairly rapid appreciation in the value of their asset.
And, as some have shown, it is certainly doable.

And when you see the impacts "sooner rather than later" it has on the return on your investment - you can understand why.

(In the spreadsheet below, it is called "Net CF", but think of it in terms of cash flow and capital gain)

 

The house may go better now over the next few years though due to unit oversupply

 

Maybe....the issue is that the 6 packs are sitting on a lot of land....in some instances the owners would be better to pool together and sell to a developer as the land component is worth as much as the unit will sell for....

Areas like Nundah, Annerley have huge demand as they are very appealing to hipsters..

 

Yeah I see what you mean. In this case the its a $320k unit vs a $320 house.It worries me that growth might be over already at that price.

 

an example only there are other suburbs

 

The bank.

My PPOR is worth around $600k, I owe $186k on it. With thanks to a broker from the forum I have an equity release of $100k and preapproval for $320k. So the ceiling is $400k but I would prefer to leave a buffer.

 

I like to imagine myself signed on the dotted line of a contract on a particular house or suburb and think do I feel excited and confident or nervous and worried. This usually helps my focus for an area for research. Most people either fall into category of wanting to be close to cbd or happy to get something better in an outer hub.
We like inner Cbd properties even when sums look good further out. But that's our strategy and what we feel comfortable with. What are you comfortable with?
If it is inner cbd in Brisbane I suggest increasing budget if possible.

 

Median house prices in the Ipswich corridor (Goodna, Gailes) seem to still be below their last peak in 2008. Units/Townhouses median price in suburbs just out of the CBD (Annerley, Greenslopes)seem to have peaked in 2014 then dropped a little in 2015 but now building up again.

Question is what is set for more CG in the next few years. I do like that land is limited close to the CBD but am worried about oversupply of units. I also like that you can get a house with land in the Ipswich corridor but there is plenty of land to be developed out there..Its a tough one.