Join Australia's most dynamic and respected property investment community

How do you decide on a suburb to develop in

Discussion in 'Development' started by tgan, 4th Mar, 2016.

  1. tgan

    tgan Member

    Joined:
    4th Aug, 2015
    Posts:
    18
    Location:
    melbourne
    Hello developers! Hope you can help me out here. So I have decided to enter the world of developing! I seem to be ok with working out the numbers etc and have made contacts with people who could assist me with working out what I can put on the proposed block and what it could potentially cost me etc. But of course I need to find the block!
    So where do I start?
    I know that I can spend about $500k to buy.
    Do I just look at every suburb in Melb with a buy in price of about $500k?
    How do i locate the right suburb?
    It appears that this first step, the step of narrowing down the suburb/s seems to be for me the biggest hurdle.
    My intention is the do something small given it would be my first. So something like keep the front house and build one or two out the back would be ideal.
    Any tips and tricks would certainly reduce the countless hours I seem to be spending on the real estate sites without much success! :confused:
    Thanks in advance guys and gals ! :)
     
  2. Skilled_Migrant

    Skilled_Migrant Well-Known Member

    Joined:
    21st Jun, 2015
    Posts:
    688
    Location:
    Melbourne
    Your budget should locate the suburb for you.
    Try Melbourne's west (not the new estates/suburbs) as the older suburb's (altona meadows, sunshine, albion, laverton, hopper's crossing, werribee) have ample block sizes to allow you to do what you want in your budget.
    Since you intend to subdivide, a block near the trains station and other facilities would be preferable.
    See MTR's advice here from another post.
    Good luck.
     
    Last edited: 4th Mar, 2016
  3. Tranquilo

    Tranquilo Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    342
    Location:
    Mascot
    I'm no developer but you need to know what your end product can sell for.
    Check other sales in the area for the type of development you plan on doing.
     
    Leo2413 likes this.
  4. ottg

    ottg Well-Known Member

    Joined:
    29th Jun, 2015
    Posts:
    60
    Location:
    Perth
    Great question. Use a similar approach you will use for stock market analysis - finding quality shares. My view is: to measure is to know - thus you need to do some data analysis.
    To determine which state: I use both free reports and paid reports
    To determine which metropolitan area: I use paid reports but more specific use paid data for further processing. How?
    a. Identify the parameters in the data that are most important and apply a weighting factor
    b. Identify those parameters in the data that can indicate a fast recovery or exponential recovery or exponential growth.
    c. Sort the data by postal code from smallest to largest and use the metropolitan ranges
    d. Calculate the incremental change from one year to the next for (a) and (b) for rental yield & capital growth
    • Incremental growth from one year to the next
    • Average of the incremental growth over a 5 years, 4 years and 3 years
    • Total annual incremental growth over 5 years, 4 years and 3 years
    • Average of the annual growth over a 5 years, 4 years and 3 years
    e. Create a quality grading system that determine those ‘better quality’ areas that will provide a competitive advantage because most investors will most likely rely only on the standard reports available
    f. Sort each area per median price from maximum to minimum. Select for price range above and below the median house price to work with. Note while the same grading criteria is used their score will be different because the number of areas included to compare against will be less. Take the top 5-7 of each postal code range.
    g. Filter for your best performance areas across all postal code ranges - now time your purchase by observing the economic clock. Keep this close to your chest and observe what the market does and other says. Fine tune over time.

    Note you can skip the above just like in the share market and get lucky or not so lucky - your choice!
     
    LexieY and Propin like this.
  5. theperthurbanist

    theperthurbanist Well-Known Member

    Joined:
    5th Aug, 2016
    Posts:
    215
    Location:
    Perth
    Hi @ottg , what report (paid and free) sources do you recommend? (If state specific, FYI I'm specifically looking for some ideas on areas to start looking in within Perth.)
     
  6. Leo2413

    Leo2413 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    5,787
    Location:
    Sydney
    Forget reports. You know you're interested in Perth so reach out to successful Perth developers on here. An hour of their time is more valuable than any report imho.
     
    Mick Butterfield and Perthguy like this.
  7. theperthurbanist

    theperthurbanist Well-Known Member

    Joined:
    5th Aug, 2016
    Posts:
    215
    Location:
    Perth
    Absolutely. Very keen to network with some PC Perthies. I also like to read widely though, and if there are some highly regarded reports out there I would certainly be interested in hearing what they are. As you mention I'm definitely set on Perth (this time around), so for me now it is about deciding which suburbs in Perth to focus on (and... when).
     
  8. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,740
    Location:
    Perth
    What is your budget? There are some deals coming up in the Bedford/Bayswater area that could be worth investigating further.
     
  9. theperthurbanist

    theperthurbanist Well-Known Member

    Joined:
    5th Aug, 2016
    Posts:
    215
    Location:
    Perth
    Hi @Perthguy , I'm still a bit off executing a strategy (I think). Atm I'm working through:
    • Establishing what I can afford (finance broker has almost finished my 'finance strategy'), so that should shed a bit more light on budget etc, which will affect -and be affected by- whether we do a duplex or triplex project.
    • Learning - both about location research and developing. As part of the location research I will definitely take a look at any recommended (develop to hold) suburbs. I probably won't pull the trigger though until I have a few other ducks lined up in terms of development- education, systems, contacts, etc. I want to hit the ground running.
    A good deal is a good deal, but I don't think I have too much to loose by not jumping into Perth STRAIGHT AWAY. Really glad to hear there are a few sights stacking up tho.

    I actually own two properties in Bayswater, so whilst I think it is a good spot (obviously) if I am about to add another 2-3 properties to the portfolio I think for diversities sake I should pick somewhere a little different.

    Cheers!
     
    Perthguy likes this.
  10. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

    Joined:
    9th Jul, 2015
    Posts:
    1,078
    Location:
    Perth
    Have you considered using a BA (buyers agent) as i had one source my most recent development and pretty happy with the outcome. Cost me 15k but small fry in the big scheme of things, hopefully :D

    Can flick you some reputable BA contacts if you like?
     
    Last edited: 9th Sep, 2016
  11. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,569
    Location:
    Sydney or NSW or Australia
    I have a very big dartboard of each area that is of interest
     
  12. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,740
    Location:
    Perth
    Oh, ok. Then I would look at Belmont, Cloverdale, East Cannington, Beckenham and Thornlie.

    It's tricky running scenarios on these sites in the current market. Rents are way down, end values are down but some asking prices have not been adjusted to match the market.

    For example, this property is $885/sqm

    reiwa.com - 81 Hardey Road, Belmont

    whereas this one is $745/sqm

    reiwa.com - 18 Raleigh Street, Belmont

    They are probably both overpriced!

    The R20 blocks are cheaper, obviously. I reckon this one is worth a look at. $578/sqm could work better.

    reiwa.com - 61 Arlunya Avenue, Belmont
     
    theperthurbanist and Matt Ad like this.
  13. theperthurbanist

    theperthurbanist Well-Known Member

    Joined:
    5th Aug, 2016
    Posts:
    215
    Location:
    Perth
    Great, thanks for your advice @Perthguy . I will definitely explore these suburbs in my location research. Out of interest, what is it you think these particular spots have going for them?
     
  14. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,740
    Location:
    Perth
    Belmont and Cloverdale are close to the City and airport but still affordable sites and demand for 4x2 dwellings. East Cannington and Beckenham have been undervalued but zoned for development. You can buy close to the train line or near the new leisure centre. Beckenham particularly can be cheap but end values are low too. I think as the area is redeveloped, prices will increase in the future. Thornlie has been undervalued. I would look closer to the train station and/or shopping centre. Numbers are hard to run now because development site prices have dropped but end values have dropped too. I personally like all these areas because you can buy a development site under $500k and that's all I can afford :p
     
    theperthurbanist likes this.
  15. theperthurbanist

    theperthurbanist Well-Known Member

    Joined:
    5th Aug, 2016
    Posts:
    215
    Location:
    Perth
    I have used a BA in the past and have definitely given a lot of consideration to using one this time around. There are lots of pros and cons and I can pretty easily convince myself that $15k may pay for itself, but given the current market I am keen to do it myself this time around, for the following reasons (which may be worth others considering):
    1. Time is on my side. If I spend 3-6 months educating myself and researching locations and sites, the Perth market is unlikely to have 'run away' in that time - in fact it will likely be better buying then.
    2. I want to learn. So essentially I'm paying myself $15k to spend the time learning myself, rather than paying that money to someone else.
    3. The margins on Perth small developments seem particularly thin atm. A $15k hit to profit isn't going to help things.
    Of course there are a bunch of reasons why a BA might be a good idea, but that is the topic of a whole other thread...
     
    Perthguy and Colin Rice like this.