New Investor - What to look for

Hi all, First time poster and soon to be first time investor. I’m currently in the process of getting my finance sorted, and am quite excited for what is to come. However I have a few queries, which I’m sure we all do when we first start out. We all know the main aim for an IP is to make money, and this comes with a lot of research, my main question is; for you what is the most important part of looking into a property? Obviously, you want as much rental yield as possible as well as capital growth, so what do you look at to ensure you have the best chance of a high, constant rent and a lot of capital growth? Here’s a few major factors I believe we should look for:

- Previous years capital growths
- Current rental yields in the area
- Vacancy rates in the area
- Closeness to schools, shops, public transport
- Median house price in the same area (and is it better to be lower or higher than the median?)

Then there are some other factors we should take into account:

- Cleanliness/attractive suburb and street
- Cleanliness of house
- House amenities/cleanliness/livability

Are there any other major factors I have missed? Out of those listed (and any others you may have) What do you believe is the most important, and why?

The main thing I would like to know is what is the first thing you look into before getting too deep into research for a property (Eg: do you know a website that shows capital growth for the past ‘x’ years, so you look to see if the capital growth is positive before you would go any further?)

Sorry for all the questions, I just want to make sure I am taking everything into account and speak to lots of others who have been through this all before who could teach me a thing or two Thanks for any help.

 

if you are looking for properties that have grown in recent years, and are clean and attractive.... try a property seminar selling sydney new builds. (Read the sarcasm.)

 

Honestly, nearly none of that list.

I would be looking mostly at the value of the property I was buying, versus what other potential properties are around that price bracket.

 

Thanks 'thatbum' but while i realise the inportance of value of a property, and ensuring that you aren't overpaying for a property; surely value only goes so far if the property is in a location that isnt growing? Unless of course that part of the 'value' of the property is the location and potential?

 

Your list helps you identify the high competition, already had growth, value is already built into the price properties. That's the opposite of what youre trying to do.

Often a 'valuable' property is one that is old and unattractive, in an area that hasnt seen growth or fallen for a few years, in a dirty street. Notice you conditions say if the property doesn't have positive growth youre not interested. So Sydney is a screaming buy?

 

Point taken, and no sydney is not a screaming buy. So if looking for an area that has fallen or is untidy, is it really just a case of research and find out why it has fallen, and see what future developments there might be that will turn the falls into growth? (Such as new shops, new schools, new public transport etc.)? Because i assume its not 'its been falling recently so the only way to go now is up...'

 

where would one find statistics on a specific suburbs income (growth)?

I can find stats on the current income per individual and household but not previous years. I have however found state wide income growth statistics but want to benchmark it against certain suburbs.


am i missing something?

 

Look at Western Sydney since 2010, the established suburbs, not the new ones. Any new trainlines? New schools? Not really. Its because Sydney had been beaten down since 2001. Sydney was at the bottom of the cycle. For buy and hold, macro beats micro. The best buys are when you have no concrete reasons to believe it's a good buy.

 

Value can be had at any condition, it only ever depends how much you pay for it.

Houses are a product, and that means they are subject to laws of supply and demand. So the easiest stat to look at is GDP - how much money is circulating in an economy, and how fast is it growing? Look at each state, what job sector is moving. where would people who work in those sectors want to live? Ie. in the last few years, its been financial services, insurance, and infrastructure. those people live in Sydney and Melbourne.

Going to a suburb level is perhaps too narrow, and especially with such diverse dwelling types in each, it will not give you an accurate indication of different buyer demographics. that is where things like rental yields come in to it, because that will tell you the difference between genuine demand - how much people want to pay to live somewhere (renting) vs. price speculation (investor purchasing).

As a first purchase, and especially in today's super-heated market, consider foremost how to mitigate risk and do not under-estimate downside. run scenarios of "what if" we have a recession, prices fall, rents fall, jobs growth stalls etc.

 

Here's how I would do it in a perfect world but admit that I do some not all of the below:
1. Look at your price point
2. Finalise Suburbs that fit the price point, then rate them for below points and aim to buy the best you can afford. Afford being a key word, as its a long term game, don't put too much stress too early on that you burn out your serviceability
3. Are they next to suburbs which have already boomed? That's a plus. Is no one looking at them due to a reputation? Do people have biases right now? How long will that last?
4. How close are they to city? How long does it take on public transport to get to city?
5. Check out infrastructure and amenities in those suburbs, how close or not it is to trains, shopping centres, hospitals schools, beaches, playgrounds. Are there many Cafes opening?
6. Check out those suburbs on the ground, note who's on opens and buying: locals? Chinese? Others? Couples? Singles? People dragging lil kids along? How do they speak and talk? How polite or not are they?
7. Travel a couple of time during peak hours on train, what kind of people are getting attracted by that place
8. Check if majority is owner occupiers, how do the streets look, are the gardens maintained, any beat up cars in drive ways, shutters are a on the Windows? Massive new builds?
9. Check property location within the suburb, good or bad streets, right or left side of station, does one side create a commuter headache and the other doesn't?
10. Check land size and development potential of the property. Call up council, understand what they will or won't allow you to do
11. Is the property brick or concrete or wood, how will it be maintaining it?
12. Call an REA, or check on realestate sites on rental ranges: low to high. What can you realistically achieve. How has rent grown over a few years?

And that's it. For me anyway.

 

^^ That's a pretty great response there.
Here is a brief list I have

• Prefer blue chip stock with more growth over yield
  
• Free standing house
• 3 decent size bd
• 600 sqm and high land value to house value ratio
• Require minimal work (cosmetic work only)
• Avoid new house since houses deteriorate in value (faster at the beginning) while it is the land that appreciates. 10 years old is a a good age
• Low maintenance
• Close to amenities and easily rented
• Within walking distanct to transport to CBD
• Desirable suburb where people prefer to live (eg not a high crime lower socio economic area)
• Near shops / shopping centre / school / hospital
• Away from industrial / commercial warehouses
• Tree lined street
• Not on main road
• Avoid sloped land and corner blocks if possible

Indicators to look for

• Growing population
• Infrastructure spending
• Government investment
• Private investment
• Commercial investment

Also "below market value" is more important with high yield low growth properties. Blue chip properties grow so much in value over the long term that if you pay a bit more over what it's worth doesn't really matter as much. This is especially so in a rising market. Saying no to an extra 20k and after 3 months missing out on every house as values rise and now everything is 50k+ over what you originally thought it was worth and you totally screwed yourself.

 

Thanks for your help everyone. When it comes to research, what websites do you find yourself looking at, and what do you specifically look for?

 

I go for land size primarily, brick and tile house and the closer to amenities the better.stock standard