[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

May 26, 2014 - 10:42 am

Hi Phorsha,

An exact figure is always hard to obtain because it depends on the block and also the WAPC conditions often set by the Local Council and utilities. For example, in Armadale you may have to retain a 100 year rain storm on site in soak wells, this could be $7k+ worth of work depending on the block, works needed and soil type etc.

I would put a round figure of $25k to $30k, and its rare to see it lower. The most common conditions are:
– Fencing – $70-$120 lineal meter (and you may need to remove old asbestos fences)
– Leveling/raking site – $2000
– Demolition of Structures – 0 – $5000+
– Underground Power – ($750 Synergy + $2000 works – possible meter upgrades needed too)
– Sewer ($6500 Watercorp + $3000 works)
– Storm Water 0 – $7,000+
– Drive Way Cut In $0 – $3000
– Surveyor + Subdivision Plan ($3500)
– Statutory Fees ($4000+/-)

http://www.cliffe.com.au

• This reply was modified 9 years, 11 months ago by  Kent Cliffe.

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

April 30, 2014 - 1:54 pm

There are a few areas to consider, but with any negotiation it isn’t just limited to the items discussed:

Settlement Date: Motivated sellers generally like a quick settlement, Home Sellers to Home Buyers like a settlement date that coincidence with the settlement of the property they plan to buy. Also, rent backs are quite attractive to some Sellers.

Finance Terms: Cash is the strongest, but if you play your cards right finance can be competitive too. We coordinate 5-10 business day finance terms with our brokers. Have a per-approval letter to show to the Selling Agent, but be sure to white out the max budget and do it in a way that doesn’t suggest a max price was even there.

Special Conditions: Be sure to have contract conditions which protect you. I never recommend using the Selling Agent’s clauses as they are there to protect the Seller. Speak to a solicitor and have a good working order and or building inspections clause written up.

Acceptance:Always have a reason that you need a quick answer. For example, you could be looking at another property so you need a quick answer on this or some Buyers have work commitments to head back up North. This way the Selling Agent knows there is a deadline and reduces the chances your offer could be shopped around.

Price: Never start on a whole number (i.e.$400,000) this too a Seller just looks like an initial offer. I would always recommend odd numbers ($397,235). The other item is to increase in decreasing increments so first counter may increase by $9537, next is 6,221 and final is $3648. This looks like you’re closing a gap to your max budget.

Psychology: He who cares least wins negotiations. So be sure to have plenty of options and a plan B to fall on. The other tip is if you have a spouse, parent or a partner and there is a single person signing the offer. You can play them up as the bad guy and deflect any negative sentiment or price increases on them.

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

April 28, 2014 - 12:19 pm

It funny when people talk about ‘growth areas’. There are two distinctly different types of growth which aren’t related – despite the spruikers trying to make you believe otherwise. When most people think growth, they think of areas which are having a huge amount of properties being built and guess that this ‘growth in dwellings’ will translate to growth in property prices. The second type of growth, as just mentioned, is price growth. Interestingly, the factors which lead to the former growth (increase in dwellings) often contradict the fundamentals which translate to price growth.

This is due to the level of supply increasing and putting downward pressure on property price. Our research suggests, with the exception of zoning changes, the ‘supply fundamentals’ will play a bigger impact on property prices in Perth over the next 10 years than ‘demand fundamentals’.

The Demand Fundamentals are; infrastructure, transport, schools etc.

Supply Fundamentals are; supply on market, geographic bottlenecks, green fields supply etc.

So to make sure you buy well in Perth my advice is to target areas which have little to no future supply and modestly growing demand drivers.

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

April 24, 2014 - 12:56 pm

For clients I have switched my strategy a little due to the rapid growth in some metro markets.

The main fundamentals are:

• Stay within a 15km ring of the CBD, unless going coastal.
• Target areas with a low base
• Seeking areas with low supply on market (Balga etc. traditional has high transaction volume)
• Target land value (70%+)
• Seeking properties with an unrealised additional upside – rezoning etc. (not the stuff in Joondalup as everyone knows about it)

The main thing that has changed is the low base rather than chasing the market up to the $600k+ figures for most full sized blocks close to the CBD.

I also feel that the new budget may result to cuts to first home buyers and if this is the case the would be a good opportunity in the sub $550ks for a few months while that buying group drys up and heads further into H&L.

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

January 25, 2013 - 3:44 am

Hi Jenna,

It is great you have come to be online forums to ask about where you should go from here. Despite the overwhelming support for subdivision, it is not the instant rags to riches that most people suggested  it to be. I will try to debunk a few myths and hopefully share with you a clearer direction.

Well selected inner city villas and townhouses still have strong capital growth and in some instances I have seen this growth to be superior than development sites. However, when selecting these high performing  properties you still have to apply some sound fundamentals. these fundamentals include:

• Purchasing a villa with a higher land component value. despite the land size been generally smaller than  a subdividedable block  you could still purchase villas where the land value is 70% or more. Historically,  properties with high land component value tend  to outperform the market as land price growth is greater than property value growth.
• Seek areas which are going through a demographic enhancement. The areas which are already nice probably will market perform in terms of their upside. I like to purchase in suburbs where there is plenty of future demand which will drive growth. This future demand is often attributed to improvements of infrastructure and gentrification of the area.
• Look for suburbs where the supply is limited.  in most inner-city suburbs there will be no further greenfields,  however look  to the suburb  zoning and see if there is going to be a steady stream of future villas and townhouses coming onto the market. This continued supply will hamper capital growth.
• You can still add value to villas through renovations and refurbishment or strategic acquisition. This  is when you purchase in a complex where the land size justifies a development significantly larger then what is on the complex.

Sub division generally has higher capital growth because the land value that you are purchasing is normally high. For novice investors,  they attribute the land price growth as there development margin but in actual fact this may have just been organic market growth. When selecting development sites I would urge you to consider the following:

• Many development sites at the low end of purchase price are actually unfeasible to develop in its current form. Taking Morley as an example if I was to purchase a subdividedable block around the $530,000 mark this is what my figures would look like (these are very general, but give you an idea):

Purchase price:  $530,000

Buying costs: $22,000

Finance net rent: $15,000

Renovation costs: $30,000

Subdivision costs: $25,000

GST: $10,000

Selling costs: $15,000

Reno house value: $400,000

Block Value: $230,000

Net equity created from sale: $13,000

Basically after all the costs, risk and headaches for 9 months you would be making $13k and then paying a portion of that in tax. There are two things which will make these numbers look better,  firstly you'll have to pay duties and holding costs regardless and secondly you might get some market growth which will boost these and sale values.

In saying all this, well selected development site are great investments (probably marginally better than inner-city villas and townhouses)  but the development is not what makes developer sites great. It is the land banking which will pay off in the long run! You can still get great capital growth from villas just make sure you apply the same fundamentals –  high land component value and value add through renovations.

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

January 24, 2013 - 9:44 am

Hi guys,

Best of luck with the renovate and flip project. As well as working at Momentum I renovate/develop property on the side to help generate further income to feed into my passive portfolio. There is a group of property investors that meet on a monthly basis, you might like to attend. http://www.propertymeeting.com.au

I can't stress this enough, but if you're looking at flipping property make sure you are 100% confident on your numbers. I always say to people that you should work back from a sale price. No matter how nice the renovation is, the market will dictate price. Unfortunately, renovating property is less about colour selection and making the property look nice,  it is more about tight budgets,  strict deadlines and negotiating well.

Whenever I look at a deal I use the following feasibility:

End Sale Price: $400,000 – Based on other properties renovated that have sold using Pricefinder/RPData

Buying Costs: $12,000 – duties and settlement agent costs

Holding costs: $15,000 – 9 months of interest at 5.5% (because you're still be paying interest  after it sold before settlement)

Renovation budget: $30,000 –  costings based on trades doing the work

Selling Costs: $20,000 – agents fees, marketing, and settlement fees

Your Profit: $30,000

Purchase price: $293,000

So the very basic rule of thumb is buying a property for $100,000 less than your end sale price.

<moderator: delete advertising>

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

January 24, 2013 - 9:29 am

Hi Goatus,

I can give you some pointers as I am often dealing with agents on the opposite side of the fence. The  good agents are the ones which make my life a little harder than normal.

• Get  a few different agents to appraise your property and get a feel for the market. No matter how attractive it sounds ( even if they could have a buyer)  don't  necessarily go with the agent that has promised the highest price.  A common strategy especially in this market is to list  then crunch the vendor on price. However,  this will hurt you in the long run as most of the interest on your property will be the first couple of weeks.
• Find out what marketing strategies will they implement when listing your property. Personally, I would want most  of my money spent on good online advertising with professional photos.
• Ask for a customer service charter, this is great to set your expectations on how frequently and for what reasons will contact you.  if the agent doesn't have a customer service charter I would say their listing style is very ad hoc.
• Ask or a list of properties that they have sold within the last six months. Make sure that the average listing days and  discount on market is common for your area. You can find a lot of those statistics out on the REIWA  website or alternatively purchasing a subscription to Price Finder/Rp Data.
• Ask for  between 5 and 10 previous clients phone numbers, pick a couple at random and give them a call.

Never tell the agent your bottom line, because if you do this as the offer which you're going to get. Always, ask them to present all offers but give them as little feedback as possible on what price you would accept.

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

June 25, 2012 - 2:24 am

Hi Vegas,

Rivervale has some great fundamentals as posted about above. However, the suburb is very different on what you're looking at buying. As I wouldn't buy an apartment there, but a villa or house might be okay. This is of course dependent on your budget.

Also, location within the suburb is very important as parts of it have a very high concentration of State Housing Commission properties.

Hope that helps,
Kent

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

May 31, 2012 - 2:32 am

Hey Bacon,

We have a PM arm to our business and I can give you some info on the corporate leases:
– They tend to like fully furnished properties that are kept to a good standard. That means linen replaced frequently, repairs be tended to fast, furniture is of a good standard etc.
– The apartments are better centrally located, but anything in the Golden Triangle should be alright. However, it is better if it is a new complex.
– A lot of these companies go through relocation agents, so it is important to find an agent which has a good network of  relocators.
– Wear and tear could be more on the property, as there are people moving in and out of it on a more frequent basis.

However you have to ask yourself, what is the advantage of this? Also, be sure to check the lease or agreement to know your rights and their rights. I have heard of contracts with fixed lease reviews that aren't market adjusted. This could be alright now, but what about next year if the market is as buoyant as it is now.

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

March 2, 2012 - 2:00 am

With Price Finder it's $110p.m. for price data. Cancel it after you have downloaded the information.

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

March 1, 2012 - 2:13 am

Hi Laury,

It's traditionally hard to get advice, because as you can see most of the commentary is coming from the Eastern States. Not that they are bad, but they wouldn't know the difference between Balga and Bunbury. Also, a lot of what people say is opinion, not data/research.

Firstly, I would recommend working out what you want. When I often meet clients for the first time I have about 30 questions I will ask them, these include:
Do you want capital growth in your property so you'll have enough equity to buy another one?
Are you fine for equity but do you want a good rental return?
What is your investment horizon?
How much time can you put in the investment AND/OR research?
Do you know how much you could put aside for into an investment per week?
Are you seeking tax dedudctions?
…The list goes on and on…

Once that is done, we use a Top Down Bottom Up investment approach.

What that means is you want to eliminate your options, down to just a few, like a gigantic property sive (ill show you below) .

Important
Don't fall for the 'Backwardation' Fallacy that I see way too many people fall for! That is when people buy a property or decided on an area and go out to find evidence to "justify" why it's a good area after the fact (this is most common when people buy close to them – because they know more "good" things about there area than anywhere else and that's because they have not lived anywhere else) – give me any area and I can find positives. So the key is compare area for area and eliminate the bad ones.

Top Down:
1) Look the State government future projects (big ones that make people want to live there.) Eliminate areas which don't have much going on for the next 10 years. This is a demand factor.
2) Look at the State Governments "growth projections" for future land supply. Eliminate the areas which have lots of future supply. Supply factor.
3) Look at the councils of these projects and see how far they are along and what demographic these projects are targeting. You want a future affluent demographic. Demand Factor.
 4) See the councils plans for future supply, make sure there isn't too much new super high density stock or green-fields. Supply factor).
5) Look at individual suburbs and which ones are over/undervalued close to the catchment of these new projects. Demand/price factor.
6) Check the suburbs supply on market and make sure its got a falling trend or consistently low. Supply factor
7) Find the best pockets within in the suburb.
Eliminate negative streets i.e (ones with State housing, flight path, slope, bad vibe, busy road, etc. etc. etc.)

Bottom Up:
9) Wait for properties to come up in your target areas,
10) Work out what they are worth and make offers accordingly.
11) See if there is any opportunity to add value or "value" that the market doesn't see.
12) Check the Building, Electrical & Pest – have good contract clauses.

I hope that helps and feel free to PM me.

 

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

February 29, 2012 - 2:00 am

Pros:
Higher Rent
Higher Deprecation.
Residential Tenancy Act doesn't apply on leases <60days or for Holiday Accommodation.
High end market is often corporate tenants.

Cons:
Higher management fees & advertising costs.
Higher maintenance costs.
Costs to maintain furniture.
Most banks don't take rental income into account if lease is <6m or not a proper lease.
Higher vacancy rates (not always).
Very volatile

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

February 28, 2012 - 2:39 am

Hi Laury,

I would recommend rather than using TIC for your next purchase to pick someone from: http://www.rebaa.com.au/

Take action when you feel comfortable about carrying the cost per week.

There is some opportunities around Perth Universities. However, often this benefit has already been factored into the property price. For clients who have a similar requirement (such as having easy access to a uni). I have been purchasing properties within 1 or maybe 2 planned future public transport services away from a major university. These clients will get the future capital upside once it's constructed (such as being in walking distance to a new train station) – but they aren't paying a premium for it now.

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

February 22, 2012 - 9:12 am

Hi Luke,

Yeah I agree our supply constraint isn't as bad as Sydney, but at the same time we aren't yet the size. If we keep our population projections we will be the size that Sydney is today in 30 years+/-.

The Metropolitan Regions Scheme is to grow Perth along the coast, down towards Mandurah and up to Two Rocks. There is green-field land available in the councils of Joondalup, Cockburn and Armadale, but also it is held back by water catchment areas and cost of swampland reclamation etc..

Under Directions 2031 (WA govt plan) about 40% of new housing avaliability is earmarked for urban infill (as Perth is very low density compared to other Capital Cities). This basically means boosting rezoning density of inner city councils.

The opportunities I'm seeking for a clients is development sites or draft future development sites close into the CBD. Would it to be great to own 3 or 4 duplex/triplex sites within 5ks of Sydney's CBD? You would be a very happy camper!

Lucky its not unachievable for most WA people at the moment, but as we see with Melb/Syd, this doesn't last.

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

February 22, 2012 - 8:26 am

The problem with opinion is that everyone has one and only hindsight will prove correct.

I'll sight my sources:
– Tight rental market pushing up rental yields.
 Median Rent: $400/wk Vacancy Rate: 2.5% http://reiwa.com.au/Pages/Home.aspx

– Tight labour market pushing up wages (we are currently the second highest paid state).
http://www.ausstats.abs.gov.au/ausstats/subscriber.nsf/0/DBE855896D8CA36DCA2578FB0018533C/$File/65230_2009-10.pdf

– 4 years of flat line property prices has made this place one of the most affordable capital cities.
http://economics.hia.com.au/media/House%20price%20to%20income%20ratio%20-%20FINAL.pdf
* this is a little old, but I would say even more in favour of Perth as incomes have remained the same or increased and property prices have been stagnant (decreased).

– Limited new construction causing a short to medium term housing supply shortage.
http://www.perthnow.com.au/business/building-approvals-fall-in-wa-nationwide/story-e6frg2ru-1226031519653

– Migration population growth has just been revised up by the Planning Department.
http://www.mediastatements.wa.gov.au/Pages/Results.aspx?ItemID=148086

– More major mining projects earmarked for construction in Perth once we reduce this labour supply bottleneck. 
http://www.theresourcechannel.com.au/blog/other-wa-mining-projects-watch

– Geographic supply constraints similar to Sydney.
http://www.planning.wa.gov.au/dop_pub_pdf/mrs100_2007-Nov-29.pdf
* look at the hills to the east.

I don't know where you're getting your data for sales continuously declining, but last month January 2012 recorded 14.2% more land sale lodgements than January 2011 – this is a very large volume increase (year on year).
http://www.landgate.wa.gov.au/docvault.nsf/web/AU_BP/$FILE/BAP-JAN-2012.pdf

I don't know if you're missing what I'm saying but the rental vacancy rate state wide is 2.3% which means that you are going to have cost push inflation on rents. Wouldn't it be better to buy now and see rents rise, rather than wait for rents to rise (and then consequently be competing against investors coming into the market.)

Hope that clears up and makes sense of my claims. I do agree Perth doesn't reflect the rest of Australia, so I guess it's hard to pass judgement unless you're buying in this market.

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

February 22, 2012 - 1:25 am

We have been suggesting this shortage to our clients for a while. People migrating to Perth and very little new house construction – let the good times roll!

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

February 22, 2012 - 1:24 am

Hey,

It's correct what Derek said, the Perth market isn't a big place for auctions. I wouldn't like to put numbers on it, but probably about 1 in 20 properties are auctioned the rest are sold by private treaty.

There are some current economic conditions which make Perth a great place to invest right now:
– Tight rental market pushing up rental yields.
– Tight labour market pushing up wages (we are currently the second highest paid state).
– 4 years of flat line property prices has made this place one of the most affordable capital cities.
– Limited new construction causing a short to medium term housing supply shortage.
– Migration population growth has just been revised up by the Planning Department.
– More major mining projects earmarked for construction in Perth once we reduce this labour supply bottleneck. 
– Geographic supply constraints similar to Sydney.

But like any city there will be better performing areas and not so good performing areas. So it's important to make the correct selections.

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

February 15, 2012 - 2:52 am

Hi Daniel,

Have you thought of talking to a Stock Broker regarding your situation? Most managed funds have a 3+ year timeline for investment. If you get a good broker and explain your plan, they would be able to point you in the right direction. Most of my clients who use a broker and me personally stay away from IPOs and pay the broker on performance.

The SMSF idea is good, but most people need a minimum of $200k in their fund and you can't refinance and re-leverage. So not such a good strategy for a younger person.

If you want me to give you some names, let me know.

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

February 2, 2012 - 1:58 am

Hi Steve,

The problem with getting advice from a FP (even a fee for service advisor) is that they are not allowed to give direct property advice. Their dealer group won't have it as a licensed product and if they do give advice on it, and it hits the fan, they will be left with the bucket. Hence why they will always pitch you on exchange traded property trusts (this is a licensed property product).

A FP can provide you with a structured savings / investment plan. I have seen many of these from $500 to $5000 and they all make assumptions. The problem with assumptions is that no one can predict the future so you need to always be updating these plans (adding to the cost). These plans aren't a bad thing but they will only help you with budgeting for the year etc. If that's all you're after get the PIA software.

If you want actual strategic advice on where to buy, when, how much to pay and so on. That is where a buyers' agent comes into the mix. <moderator: delete advertising>

[Kent CliffeParticipant@kent-cliffeJoin Date: 2011Post Count: 110]

January 3, 2012 - 3:53 am

That's a good strategy, just stay away from brand new and look to buy in already well established suburbs (avoid house and land packages).