I have been interested in property investing in a long time and have been reading but would actually like to become proactive. Time and time again i have come across people saying "do your research before hand", "do your research beforehand" and "do your research beforehand". Having never bought an investment property before i don't exactly know what i should be looking at and for.
As i result I would like to ask how everyone went about their research when looking for investment opportunities and why they took these specific steps in their researching routine. What are your sources of information and why? What do you look for when researching (more specifically what are the indicators which get you interested).
Thank you much so in advance! I'm hoping that I'll be able to actually do something besides just putting money away for my first deposit.
HendrickNathan BirchParticipant@nathan-birchJoin Date: 2004Post Count: 189
I buy based on numbers.
Buy below market value, within an area supporting infrastructue 7,000 min pop, and yield of 8% in CBD's and 9-10%+ in regionals.
Search until you have success.markh3084Participant@markh3084Join Date: 2010Post Count: 43
There are numerous books that cover due diligence, pop into your local library and go to the investing section, I'm sure you will find a hand full that give different approaches to this process. Bonus, they are free, too!Ryan McLeanParticipant@ryan-mcleanJoin Date: 2010Post Count: 547
For me most of my research is done online. I look to invest in areas outside of where I live, so having the internet at my fingertips really helps me get a lot of information about an area.
I have spent countless hours of RE.com.au looking through property after property after property. The more you look at properties the more you get the know the market for the area you are looking to buy in. Over time you get a good feel for the expensive areas, the must avoid areas and what is a good price and what is expensive.
When I find a town or a suburb I want to invest in I will then do some research on the suburb. I will search firstly for population numbers. As Nathan said I avoid towns that are under 7,000 people. I then look for population growth/decline. If people are moving out of an area then I try to find out why. Is there a drought? Is the area based on one mine and it is closing down? Less people, means less buyers and therefore properties can sometimes decrease in value.
I will then look at the dynamics of the area. What are the people like that live there? How many people are renting vs owning. How much do people earn? What is the unemployment levels? Where is the government housing located? That sort of stuff.
I hope that gives you a few ideas of how I research.sam2011Member@sam2011Join Date: 2010Post Count: 123
i think your best option is to start reading a few books, i have read some of margaret lomas books and also steves book and the knowledge you get from those two books will go along way in helping you research. They are good in the way they show you what you should be looking at and what not to look at. then you can use their methods and start researching using the tools whcih are freely available.
some of the things you should look for are infastructure upgrades, councils vision, any plans in the area and alot more…..
i have a blog where i have listed all the free tools i use when researching areas and properties, have a look and i am sure you will find something valuable in there.crustyParticipant@crustyJoin Date: 2010Post Count: 127
Hendrick , . My preferred method is to just get out and do it. If you know what you want/ afford . Perhaps start in an area you are familiar with. Have a quick look on the computer to get an idea on values, but more is not neessarily better. Spending endless hours in front of a computer will get you now where except procrastinating, my self I cant stand it and wouldnt buy property if that is what I had to do. The joy I get fom property is in the acquisition, by getting out and talking to agents, builders , devolopers shop keepers, any body, and renters . Go to opens for rentals You can learn alot from people looking for rentals about what they want / where/ availability/rates/occupations etc. Even find some tennants. know what they will pay. Then go and buy accordingly to get a possitve cash flow property. Find a type of property that is in short supply it maybe a small unit or 5br house or land in a particular area, that has a general oversupply tThere may be a shortage of a particular property type that has only just occurred. A perceived over supply may have ended, because of cheaper prices has resulted in all of a sudden people realise theyre cheap and the stock vanishes. No-One will realise this unless they are on the ground looking and usaully the seller wont realise the tight supply. If you can negotiate a long settlement you may even be able to resell before settlement for a good profit if the short supply becomes known. Alot of very useful up to date honest info can be obtained for free. You can get far more info and a far better feel and understanding for an area in a fraction of the time you spend on a damned computer. Just by getting out and looking. some–one will give you some leeds. A gem will pop up and bite you on the arse, that you wont find on the computer. Dont rely on dubious and usaully out dated info on the computer or you will be buying today on what the market was more than 3 months ago.
Thanks so much for all your help everyone! I wish I had knowledge to contribute to these forums, but I'm extremely knew to this. Hopefully in time I can be of service to someone here!
Hendricksecureserver1Member@secureserver1Join Date: 2010Post Count: 13
Personally I start with http://www.realestateinvesta.com.au – they source all real estate listings from all the major real estate websites and allow you to search with multiple parameters such as reduced prices, mortgagee sales, sales that are well below the median price point for an area, yield, vendor finance offerings, properties with development potential and more. Makes it much simpler to find the better deals in the first instance. Hope that helps.CorieParticipant@corieJoin Date: 2009Post Count: 113
secureserver1 is correct in pointing out the Real Estate Investar is a great place to start with your research.
An understanding of different property investing strategies and due diligence is still a must, but Investar definitely cuts down on the time and effort involved in creating a shortlist of the kinds of properties that match your strategy.
Please be aware that the upfront costs are waived if you purchase via a registered Real Estate Investar partner.
Please don't hesitate to contact me if you require any further information.Jacqui MiddletonParticipant@jacmJoin Date: 2009Post Count: 2,539
Hi Nathan Birch, what type of properties are are you finding that return 8% CBD areas? (eg are they actually in the CBD, or fringe suburbs, or suburbs say 30km from the CBD? are they regular houses rented to families? 8% is a very nice number!!)
Thanks heaps everyone! Been learning alot from going to my first seminar or two and will be hitting up as much as possible in the next year.
Alot as helped in pointing me in the right direction of what i should be looking for when making a purchase.
Once againt thanks heaps!goldiesMember@goldiesJoin Date: 2010Post Count: 115
I was in your shoes about 5 weeks ago. I have read 5 books since
2 of Margaret Lomas'
Steve's 2 books
and Investing in Real estate for dummies
Margaret's – 20 must ask questions before you buy – is a great one. It gives you links to websites to find all the data you need and i couldnt put it down
READ READ READ!
And then get out and meet some real estate agents.
I have 3 in my area calling me weekly because i emailed them what i am looking for.
Make them come to you.
ENJOY!kong71286Participant@kong71286Join Date: 2009Post Count: 261
Hendrick – It's good to see your enthusiasm and that you are willing to not only educate yourself, but to also ask for help and advice. However, before you buy any properties I think it is crucial that you take time to think about what it is you ultimately want to achieve and why you need to achieve this. If you are looking at real estate as a medium for wealth creation do you want cashflow, capital gains, or lump sum cash? And what time frame are you looking at? These questions will ultimately determine the property you should buy
Thanks for the replies guys!
goldies: Thanks for the advice. I'll definately look into those books. And it's great you've become very active by speaking to agents. You're definately ahead of me. I'm still not up to that stage yet as I'm still a full-time student. I don't want to waste their time by finding me suitable properties when I'm not even a serious buyer.
Kong71286: I guess for me the goal is long-term wealth creation through growth. I guess the standard story is to use cashflow from rents etc. but i'm the paranoid type and have been trying to think of a way to reinforce my serviceability with lump sum cash by selling some things on the way to keep myself alive. So to summarise primary goal is growth, secondary is short/medium-term flip to support the primary goal. What do you reckon?
Thanks once againPlaya ChickenMember@playa-chickenJoin Date: 2004Post Count: 128
Even if you’re not a serious buyer, you could start by learning your “patch” of where you may like to buy in the future. That way, if a deal does pop up you will know it’s a deal, so when you have money to spend, you’ll already have your criteria in place and know what to look for and how to do good due diligence. Don’t not do anything just because you don’t have the cash today, who knows, you might find a great deal and be able to joint venture it with a friend or family member.
Good luck researching.
Vickykong71286Participant@kong71286Join Date: 2009Post Count: 261
I apologize for being blunt, but I think you are a bit all over the place and aren't 'Focused' enough… On one hand you want to take the passive approach with long-term capital growth, and on the other hand you want to take the short term active approach of flipping properties. I think its best to focus on one thing at a time and to do it really well, instead of spreading yourself out too thin in terms of resources and time, which can be inefficient
In terms of achieving Capital Growth I think it all comes back to the simple law of 'Supply and Demand'
Amongst one of the key factors that affect capital growth is the 'location'
- How close is the property to the CBD?
- How close it it to areas where there are jobs?
- How close is it to the sea?
- How close is it to shops, schools, hospital?
- How close is it to public transport?
- How close is it to a neighborhood that had boomed?
- Has public/private money been spent on that area?
The other main key factor to consider is the characteristic of the 'property'
PC_MelbourneMember@pc_melbourneJoin Date: 2010Post Count: 43
- How much land does the property have?
- How many bedrooms and bathrooms does it have?
- How architecturally appealing is it?
Replying a bit late, but I hope I can help. We were in your position in Feb of 2009. We had a whole bunch of money tucked away with the intention of doing something, but could never work out how because everything was all too hard. Below is our process:
0) Initially found Internet Listings & went to see properties for a month, and realized this was way too time consuming.
1) Formulated rules for investing for myself based on what I concieved as common sense.
> identified 5 Suburbs that I would live in, and I considered undervalued (Inner city west of Melbourne was what I selected)
> Decided that I wanted to invest no more than 10-15KM from the City. Because rental was less of an issue than rural areas.
> Decided that off the plan purchases were best for max depreciation & a general preference for new + stamp Duty savings.
> Decided max spend for any single property was $600K with a preference for 3 bedroom townhouses.
> Decided I was a cashflow investor over and above a capital growth investor. With the 10K rule in place I assumed things would grow.
2) Talked to a bunch of people in various industries that touched properties to get a feel pricing & and property buying process.
> Real Estate Agents, Mortgage Brokers, Builders, Conveyancers, Accountants, Property advisors, Web Reading.
> That took 2 -3 months, and I ended up more confused than when i started.
> Realized that everyone has opinions slanted towards self agendas and that nobody CAN give solid advice until wants are defined.
3) Took what I knew, and decided to formulate my own way of clear decisions based on math
> Find Properties over the internet that looked OK on face value.
> Understand the desired sell price. Whack 15% of that. Workout the mortgage payments on 1.5% higher than todays rate.
> Do the same internet searches for properties of similiar profile. Take the minimum rent advertised.
> Work out the variance between Rent vs Mortgage. If the variance didn’t scare me. Then I could go see the property.
> Upon seeing the property. Look at it purely as a tenant, and ask myself whether I would live there. If yes, then put offer in.
> There are exceptions to the above comment. less about the house itself. More about the st, access to transport, schools etc.
> I also built a software program that helped with the calculations and data so I spent less time doing it.
4) Started religiously reading property magazines for general property information & case studies.
All in all that took about 4 months. Overall realization is that the personal fear of parting with X dollars had me internalizing reasons NOT to buy anything. Information learned + working the math, assisted in the fear going subsiding a lot.
Long story short. Last year. After all this was done.
We bought 4 investment properties
2 Townhouses off the plan. (small 3 & 4 bed)
1 established Unit (1 bed unit)
1 House (4 bed house built)
I have no idea if what I did is normal or not. I just knew that I couldn’t commit to that much risk without knowing both knowledge and experience from other people. Reality was the biggest missing component was faith in the objective.
Believe you me, there were many many many sleepness nights working out how to get finance on all of them, and wanting to give up entirely, cuz it was all too hard. However today I don’t regret doing it. I have finally worked out that given the choice I do nothing. If I dive in one something, then I have a way to do it. No choice. Far more productive.
On all of the new, off the plan houses, I also knew I could sell them if I couldn’t get finance on them, so that bought some solace.
Since then, all investments have gone up. I have only recently had them re-valued.
Since then I applied for PAYG variation – Paying 1% tax is simply awesome.
Now we are working towards a strategy to buy our next 2 IP. We have hit the serviceability wall already, but I have a few ideas on how to make it happen.
Hope this helped.brisbaneJoshParticipant@brisbanejoshJoin Date: 2010Post Count: 13
Great comments PC_Melbourne. Your approach seems pretty similar to the approach I would like to take! Certainly a lot of good advice on this thread for Hendrick2.
Good on you for giving it a go….
Just a couple of quick questions if you don't mind!
1) What level of deposit were you putting down for each?
2) What finance structure did you use?Trust etc?
3) Were your loans interest only?
Like yourself have read much over the past few months and would like to hear from people that have only just taken the plunge recently!
Your help here would be much appreciated
JoshIntrigueMember@intrigueJoin Date: 2010Post Count: 208
PCMelbourne….. what is this PAYG Variation = 1% tax?