What's that feeling?

Totally cool. How can you lose with advice like that? I mean property always goes up, right?

 

I'm not sure it's "too hot", its just that it has taken me quite some time to sneak up to a handle on current values. There is admittedly some urgency, but I'm not inflating my offers based on this. It so happens that I think good buying is in my backyard, but there is absolutely a deadline on this, and once this happens then my progress may be slowed. I have no experience buying remotely, nor the time to do the required research at this stage! I made some very interesting contacts today, has been a long time coming together who are keen to help me start a small scale development cycle/process/business model, so let's see. It slowly feels like the background is falling into place, and it's nearly time for the actual property to take centre stage. If that makes sense.

 

Hi Leo,

If you don't mind sharing, what key points about place would make it prime for capital growth in the nearest future ?

Say, if you've already identified where in the cycle a state is in, what makes a suburb or property more likely to have better growth than the others in that state ?

Say if in the same state one suburb has a rental yield of 7% and another at 4% ....the capital growth of the latter would have to ideally be much better in order to make up for the higher hold cost. How do you predict that the lower yield suburb will grow better in the nearest future ?

I've enjoyed reading your posts and would love to hear your tips on this since you've obviously done really well with your investments

 

Honeydew, post: 160667, member: 564"]



Say, if you've already identified where in the cycle a state is in, what makes a suburb or property more likely to have better growth than the others in that state ?

Thanks for your comments @Honeydew . I’ve enjoyed sharing my ideas as much as I’ve enjoyed learning from others on here. I think a lot of the answers to your questions really depends on the individuals own financial situation, strategy and goals. So this is just my personal approach which has worked for me over the years. Wish I had a crystal ball though.. would be much easier!


1. Assuming you’ve identified a state that you believe to be at a ‘buyer advantageous’ part of the cycle: for me that’s between 6-9 o’clock. The first thing I do is to determine how far from the CBD is ‘acceptable or desired’ for most people to live in that particular state. I believe there will always be a huge desire for many people to want to live as close to a CBD (or an up and coming CBD eg Parramatta CBD) as possible. Sydney is much larger than say Brisbane, so for Sydney I roughly look up to 50km from the CBD, maybe even a bit further. Whereas Brisbane I generally wouldn’t go more than 15km-20k, (but this is because that’s right for me and meets my criteria). It might be different for others. Of course my limits will change and expand in time as closer rings to the CBDs become more unaffordable for most.

2. So let’s say for Example QLD is the state I have chosen and a 15km circumference around the CBD is my limit. Then I identify suburbs within that 15km ring that meet my finance criteria. It might be that I can buy as close as 9km before it goes over my finance. So identify those suburbs all around the CBD that are 9km away. Then I try to find value suburbs. Eg if a 9km away house is 700k but a 10.5km house is 550k ( a rough example), it might suggest that the ripple effect may soon move towards the neighbouring suburbs, and its better value to buy at the 10.5km mark for a lower by in price.

3. I also look at demographics closely. If a particular suburb is 80% homes and 20% units, for example, I will always buy what the predominant demographic of any area want. To me it means higher demand for that type of stock and also strong demand to rent it. I also always look at the vacancy rate for the particular type of stock I’m buying. I don’t care how good a deal is (unless it’s super brilliant) I will not buy stock in a suburb with an overall very high vacancy rate.

4. Also look to make sure the amenities around that suburb are adequate aswell as acceptable transport for that area.

5. For me, I personally also won’t buy something I can’t add value to in some way. This is a big one for me. I want to be able to do a cosmetic reno or structural work or maybe development. But I have to be able to identify a way that I can add value to it, OR, buy the place at an absolute bargain, and therefore BMV and adding value this way from day one. I think most if not all of my properties were bought BMV (in my opinion) and most of them were also able to add value in some way. But this strategy works for me and I’m sure there are many other ways people utilise that works well for them.


Say if in the same state one suburb has a rental yield of 7% and another at 4% ....the capital growth of the latter would have to ideally be much better in order to make up for the higher hold cost.


This is actually not always the case imo. I have bought some places that the yields were higher than inner city places but had better CG percentage wise and it was because of affordability. The outer ring sunurbs were just much more affordable so they had a large spurt of growth, more than some of the ‘blue chip’ suburbs. I think people will often flock to the more affordable suburbs when they a) simply won’t get finance for closer ones and b) see greater value in moving out a little further. Also as amenities and infrastructure/transport expand out, people are a lot more willing to move to middle/outer ring more affordable suburbs imo.


How do you predict that the lower yield suburb will grow better in the nearest future ?

To be honest I can’t answer this because I don’t factor it into my strategy/buying criteria much... My philosophy is really much more about:

1. Buying at the right part of state cycles.

2. Buying under market value as much as possible

3. Make sure there is ability to add value. (I never, ever buy new. It just doesn’t meet my own criteria).

4. Make sure the property I buy is strongly in demand by the demographic in the area. (eg no over supply, no OTP units in massive, high strata building, not buying a unit in a suburb that is 75% freestanding homes etc etc).

Sorry for such a long reply.. it's just really hard to give any kind of meaningful response in 3 sentences. I actually had like tripple what is typed now.. but i cut it down to a shorter version.. waaay to long.

Hope it helps a little though.

Cheers

 

Thank you Leo !!!
Very smart and awesome tips great posts as always

 

Thanks. No problem @Honeydew

 

@Bran I know how frustrated you are feeling. It took us over 6 months to buy our last IP. We missed out on one early on by 5k I still think about. It will happen for you and it might come when you least inspect it. The one we bought ended up being an easy purchase and felt right so I guess it should feel like that when the time comes.

 

The first one is always the toughest. It took us approximately 8 months of 'missed' opportunities. But the one we settled on we saw in the afternoon and signed on the same day.

Looking back, we are glad we 'missed out' because we ended up with something great. Sure we had to come to terms with it being pricier than what we lived in, but no regrets so far. I think we got over that price issue when we got to the one after.

And it does make us feel fancy to spend that amount. At least on an IP, because we can't justify such a big expense for a PPOR at this stage of our journey.

 

I like " when you least inspect it" !