Location Location Location; BS

I think Skater wrote a pivotal piece on “ You can’t make money in western Sydney” which was one of the best pieces of investment advice I have seen in ages. Simply written, straight to the point and a credit to her.
I will turn 60 this year and have purchased well over 100 properties and thought I should probably dispel some of the myths that are perpetuated by Agents and Advertisers. My favourite being the joke “Location, Location, Location” are the three most important things in buying an (investment) property.

They don’t even come into my top 20.

This myth came into play when the house had very little going for it and was overpriced, as a teenaged salesman, we were taught that every property is located well to someone. This was perpetuated in a funny radio gag by NZ comedian Fred Dagg known to Aussies as the late John Clarke. Needless to say I wasn’t a very good salesman. If it was a good property, I wanted me or my friends to buy it. If it was garbage I couldn’t get myself to sell it to some poor sap. So despite getting my RE license I only ever opened a Strata Management office, 34 year’s ago, but personally turned over many hundreds of properties.
These are the basic definitions of Location for salesmen. Yes tongue in cheek, but not far off the mark.

Busy Road = Close to transport
Far from anything = Quiet surrounds
Many steps up= high side of road
In a low place= peaceful surrounds
Cheap area = family neighbourhood
Overpriced area = exclusive neighbourhood
And you can guess the rest of the BS.

Location should only be of major concern if it is your PPOR. Quality of life is more important than money or investments so only buy and live where you and your family can be happy (with the least amount spent) until you are financially set up.

No one can doubt that the real number one item is price. No one wants to say this. But if you can only afford $500-600k then the best and most suitable investment at $1,300,000 is simply not an option.

Decide what you need as an income and that should be number 2. I never concerned myself with return on the property as I started investing pre CGT so would sell an investment when I needed money, IE marriage and a home, twins came along, business premises and the dream home.

Even today with CGT discounts, CGT is more lucrative for many (not all) than other sources of income.

My number one thing in buying is value today versus perceived value on sale date.
This is worked out as follows:
Generally land goes up and buildings depreciate from new, so try and fit the most land value into it as possible.
Look for a twist. Underlying zoning to be changed to a higher density, next to private school, expanding shopping centre, areas out of favour for a temporary reason, areas where the government has announced huge expenditure in infrastructure. These go up more than the dartboard guess of buying a new or second hand property in nice condition.

Look for properties where the demographic will change. Erskineville in Sydney is next to Newtown but 20% cheaper. That’s an example.

Find your niche. Skater mentioned a dirty smelly property that 9/10 investors would not have walked into.She found her niche. When I started I could pick a property that was suspected of termite damage and would inspect 10 with reports saying how extensive the damage was to find that in 10-20% it was only a leaking shower tray that caused rot and it was mistaken by pest controllers as structural termite damage. I made a few years wages out of 4-5 distressed sales spending hundreds and not 10s of 1,000s. As I grew tired of making smaller amounts my niche became buying blocks of flats in St Mary’s repainting and bagging them, strata titling them and selling them. Then finally I started with large acreages in the Hills.

I can’t express how important it is to find “what you can do better than anyone else.” At auction you will always pay more than anyone else is prepared to pay. So if you don’t have a niche, ie cheap finance, free labour, hard working ethic, patience etc. Then you may have paid too much.

Hopefully I haven’t bored you and as my wife is away for a few days, it has given me something to do until I pick up my Red Tomato tomorrow.

 

Don't do what everyone else is doing.

Totally agree. Mrs No Mates finds dogs of sites with fleas and a plan, I negotiate and implement solutions.

Therein lies the conundrum, what value do you place on at 1880's house?

 

Ok. Your getting very technical now. I own an 1830 property. I’d say it’s the oldest investment property on property chat. It used to be the stables for government house in Parramatta. So the horses lived downstairs and the soldiers had the luxury of living above the horses smelling their.......

 

Surely there comes a point where the house no longer has a depreciated value or that it's insignificant (to the first/current owner) but will have a much greater insurance value. Then there's the intangible value eg historical & contextual - what role does the property play/has played in the community/state/nation? Demolition or subdivision erodes/destroys these values.

 

I agree it’s much too difficult to work it out. So I’ll explain why I bought my historical commercial premises that was for sale for 11 years until I bought it. No body could see the obvious. The property (restaurant) sold for $3.2 million 11 years earlier, it fell vacant and remained vacant and for sale.
I looked up the airspace floor space ratio that could be sold above the piece of land occupied and valued the place at 8x what I offered $1.15m.
It took 9 months to rent but I get about $130 nettpa.
So you can see that it’s much too complicated to do a rule of thumb.

 

It's a good marketing pitch:
"Are buying QUALITY property?
Don't make the mistake of buying bad real real estate!
For a small fee I will show you exclusive QUALITY real estate"

Even RE agents slang term for such unquality properties is "****ters".