What criteria do you follow for finding property?

Do you have a certain criteria to determine what is a good property?

 

Yes.

Not on a busy road
Close to shops/schools
In an area that appears undervalued
Potential to develop or otherwise add value
When walking through the house it must have the right feel

The last point can't be quantified. All I know is that some properties make me feel good and most don't. There has been some research into this

How Does Your Personal Environment Impact Your Wellbeing? | Taking Charge of Your Health & Wellbeing

 

Your strategy(CG,CF)
Location
Price
Type
Twist

 

Yes - the 4 key criteria which I have outlined in one of my lessons:
What I learnt out of buying 7 properties

I would want to tick a minimum of 2 out of 4 criteria before doing next level of due diligence.

This is my first set of criteria to be able to quickly filter out the potentials from the rest before looking into the next level of DD.

Cheers,
David

 

This really depends what you want to achieve from property?
I try to run it like a business, so I would look at Macro levels first, like economics, employment, population, government spending first, between states, to narrow down say to 3 states to invest in. Try to buy at different levels of the cycle against the mentality herd, bought in BRI in 2000, only prices started rising well by 2003, against the trend.
Then I would eventually narrow down to suburbs, income/wage growth, infrastructure, more demographics there, then eventually to even properties within a suburb, eliminating buyer objectives like slanting down hill houses, not next to busy roads/right next door to shopping centers/school (close by OK but not next door), power lines, basically what would appeal to owner occupiers, with Reno potential or larger blocks.
There are many ways to invest into property hence why I spend so much time on this forum asking what investment strategy do you adopt, be so precise and decide, then try, if it works, continue duplicating when possible, if not change or learn from some successful mentors.
There are so many aspects, it's like running a Pizza business, what will make you succeed, why some do and some don't, it's not all about the pizza only, wouldn't you agree?

 

It ultimately boils down to 2 things for me.

1. Am i buying great value and
2. Can I add value in some significant way.

If the answer is YES to both, I'll buy.

 

This is definitely not an "every purchase" criteria but if you can see a way to add value and manufacture equity on a purchase then this can be a positive. Even if just a minor cosmetic renovation. For example, on a house that needs paint and carpet and has no air conditioner...you can probably do all three for $10,000-$15,000 depending on the city. If you can get get another $30 a week rent then then you are doing well on a cash flow basis (minimum 10% cash on cash yield) while increasing the value of the property immediately. Easy stuff and not too expensive.

- Andrew

 

Buying when a property presents value & value add potential
Selling as long as it makes sense (cash in on growth, use funds elsewhere, cut losses etc)
- makes sense to me!

 

Great value is when you can buy a property add some renovation whether cosmetic or structural, or redevelop house/land, so you generate extra equity, or extra rent or both. Basically if you can generate either you come out ahead...right?
Nobody here claims we have a crystal ball into the future but many people stick to their strategy.
And prices were soaring in Sydney then Melbourne and then market turned around.
The widespread downturn represents a median not a constant across all suburbs, there are macro and micro economics at play. The smart property investors would spread their risks and investments across few states especially if you understand there are cycles at play in various states and at different times.
Just see the chart below which illustrates median price changes within few states:

Why do you assume Sackie is selling too late, have you considered some sell to take opportunity elsewhere? In addition he is doing a cosmetic renovation where he plans to add more equity than he is putting in so Sackie can pull out more (yes it may not be the top of the Sydney market but it was bought sometime ago and he will still profit and can deploy funds for investment elsewhere). I actually sold in VIC prior to boom (I had no crystal ball), but I deployed funds elsewhere to be invested, say in other states.
There are many other reasons why some of us may sell, upgrading to a more expensive purchase favours property downturn or no change rather than price upturn.
Hopefully that explanation helps.....

 

Some great ideas on this thread.

Let's say we are talking about "buy and hold" investing. I start macro, and look for suburbs within 20km of the CBD. Generally speaking for investors, suburbs with a train station would be in scope.

Then I look for:

L - land content (apartments are find as long as they are low rise)
L - Location (Walkability, close to transport etc)
L - Layout - no bathrooms off the living room; no bedrooms at either end of the house; L shaped living rooms if possible.

I personally don't fetishise getting the "deal of the century" as others have suggested. In 20 years time I am not going to remember that I got the property at 5% off it's market value (what is "market value" anyway?).

I look for timeless properties that I will be happy to own in 20-30 years from now. Yes, I negotiate hard as well.

For developers and renovators, you can add "imagination", "creativity" and "problem solving" to change the equation of what becomes important.

Hope this helps.

 

Some just don't understand what 'opportunity cost' requires or what it even means. And I doubt anyone is always on top as property prices fluctuate all the time all over, here and all over the world.

So such comments as, "I know if i would have bought Bondi property 12months ago I would be very disappointed with losing my equity!", don't even make sense, unless someone thinks they have a crystal ball and can always pick tops to sell and bottoms to buy (really???). Lost equity is only lost if it was realized too, and no property, suburb, state, country prices or property all over will make constant equity gains...

I am thankful you share your knowledge whereas some will suffer from 'tall poppy syndrome', which for some reason is mainly prevalent in Australia, not all countries abroad, very sad in deed....(or is it a man thing?).

I am in property for the long term but like you I will pull out some equity if I see an opportunity cost elsewhere to invest. I don't really develop but will renovate, buy and mainly hold, it just works for me as we have alternative sources of other incomes (earned or passive).

Remember what JR said, don't need to help all, as some could kill you with trying, some will get it, some won't!

Hopefully this post will put a smile on your face!

 

Hey, awesome spreadsheet. Do you mind sharing an editable version?

 

Not vested interest but are invested there for their strategy, which may mean never to sell or pull out equity for other 'opportunity costs' elsewhere.
Some of you develop, but some of us just still buy and hold and may do cosmetic or some structural renovations to add value or receive a better rental return. My strategy is to have multi-million $ portfolio with the aim never to sell, and what is wrong with that?
I personally prefer to invest now in suburbs with proven long term CG+, with a lifestyle factor close to water, with certain criteria, so no I don't know what will happen short term, but my IP in surrounding suburb of Coogee (N and NE aspect, 2 minutes to beach, premium renovation, bought for cash, higher rental return), I consider a golden goose which lays me golden eggs! I don't really care how much in unrealized equity it went down recently in my case, as the income it generates at present is relevant to me (will check equity loses or gains on paper say within 5 years time....). It actually represents opportunity to me, say within the next two years...
I have been out of this forum for a while but I notice a lot of 'negative noise' being present...and some of us like to think we know it all, so now I understand some will just concentrate more on the details at present whereas some will just concentrate on the big picture or general picture ahead, or their strategy instead (hopefully that makes sense?)
Luckily, for me I just prefer to sow some positive thoughts in my brain....hence plan to do some gardening and travelling instead.

 

Sorry not mine I just copied it from the article below:
What we can learn from Australia's median house prices from 1970-2016 - Homely
I have posted this many times.....

 

The amount of BS on this forum...on the moment..is doing my head..in....the numbers people are quoting are absolute trollop.

Perhaps...ya need to come and visit the Eastern Suburbs of Sydney it is carnage out there..I am watching that market...the game for property changes as you get older.....just buying and holding..ain't going to cut it. It is the same with the USA...if there is a recession...it will wipe people out....unless you bought in San Francisco, New York, LA, Chicago. which is similar to the Sydney/Melbourne markets..next recession places will drop like lead balloon has always happened in the USA. Sure it drops 20-30%..in UK...Australia..NZ...but there is a floor here....not like the 80% drop in the USA....

Well..lets leave on a positive ...I luv this song....I am just an ole gambler tryin' to break even...I am just lookin for an Ace that I can keep...every hands a winner and every hands a loser...

 

I agree with what is happening BUT I am no expert about what will happen in the future! All I will quote is MR blog about:
Why investment markets are not predictable

 

Well...cycles are pretty much a surety in Australia.....I have made my money based on this. I don't pay a lot of attention to MY as he has vested interests. Only a couple of years ago he was negative on Brisbane...but all of sudden in 2016..he is positive? What changed...a buyers agency service?

You can be spot on...but you need to pick the underlying trend.

The issue I have found ....is that some people keep holding properties far too long..this include my self via painful experience. Holding forever is possible but be careful that you don't pass an property needing massive renos to the future generations.

I plan to sell down.....and diversify....

 

The article was provide by MY, BUT the actual words were extracted from Morgan Housel of Motley Fool. He recently quoted a 1981 speech by Dean Williams of Batterymarch Financial Management, saying it may have been the smartest investment commentary he’s ever read.
So I did not say I follow MY, I read many including his blogs as I am open to information, yet make my own conclusion, but I like the actual speech about investment predictions (nothing to do with MY, he just quoted a speech of someone else!).
Agree with what you say about renovations, have started maintenance on some earlier ones (paint, carpet changes, appliances as they need, some landscaping) for the next 10-20 years or so on some properties, as I really do not plan to sell.
And all properties in time will require renovations, part of doing this business I suppose but still can claim capital expenses if sell or depreciation on items spent.

 

Well...I don't plan to hold...i have 30 now...but time I am 70 about 18 years from now...I will have well under 7-8.....so essentially selling 1-2 per year...based on cycles....I will have no income so an easier decision.

I will also max out super to $1.6m via some of the sales...that should get me 80-100k via a pension after 60k. Remember that they will increase the $1.6m threshold once inflation reaches 100k...it started from memory in 2017...so based on 3 years...of inflation of 2.5%...we should reach the first 100k point to $1.7m threshold towards the middle of 2020. The in 2022 we should hit $1.8m! So by time i am sixty around 2027..we should at $2m threshold and at 5% withdrawal..i should get 100k tax free. . At the same time with current rules you can contribure to super till 65 without any work test ...

 

Gee, we are in proximity with similar age....maybe?
I like that you have a plan, most don't, and I see where you are coming from....lots of IP management, maintenance and work!
Hence why I modified my investment strategy and too are slowly planning my exit plan.
Have less IPs then you, may have lower LVRs too, but have heaps investments in various entities including SMSF. SMSF has been generating 6 digits income long time ago...the plan was to grow Super alone to $10M when it was all tax free, but after recent changes I changed the plan, decided to concentrate to accumulate outside of Super instead.
Will quote here Redwig quote from one of his posts, can be applied to property as well:
“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.” -- William Arthur Wood

Buy things and build things that pay YOU monthly.
Buy less things that require a monthly payment from YOU.
Repeat for several years.
The end result is wealth.

So just remember to adjust the sails in case more Super changes arrive! I have lost faith in Super and think more changes will occur there, so just be aware, hence why for IPs I still don't plan to sell, but owning in different structures helps.
Having alternate sources of income gives choices to plan and move ahead.