Forums / Property Investing / Help Needed! / Buying existing house

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  • Profile photo of JayaJaya
    Participant
    @yjsreddy
    Join Date: 2017
    Post Count: 4

    Hello everyone,

    Please guide me what to be considered while buying an existing house.I’m a first home buyer, I have no clue on Australian housing market.

    Thanks in advance.

    Regards.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,168

    Hi Jaya,
    That almost sounds like “How long is a piece of rope?”

    If you can share what you are wanting from this house, and any/all constraints, like – is it for investment or “own home”, any particular location, return required, can renovate or not, etc it should allow us to give a more meaningful answer.

    Don’t forget, we don’t know you – so unless you tell us more about WHAT you are wanting in a house, we really can’t help.

    Benny

    Profile photo of JayaJaya
    Participant
    @yjsreddy
    Join Date: 2017
    Post Count: 4

    Hi Benny,

    Thanks for the reply. I have seen one of the house in my interested suburb which was built in 1968 however it looks from external & internal good as they renovated 6 years ago. As it is near to 50 years, does it must to have building / plumbing inspections done by the specialists before buying?. I’m first home buyer. Apart from this , I got one more question, for a first home buyer, it’s good to buy a rear land & build the house or a old house with sub-dividable rear land in near future? Both costing me same, so I’m fully confused, few of my friends suggesting to buy a rear land & build the house and some other suggesting buy a old house with rear land which can be sub dividable in near future. The above described house claiming as zoning going to change from R17.5 to R30 within 6 to 12 months, which can be sub-dividable. Please suggest me.

    Thanks in advance.

    Regards,
    Jaya.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,168

    Hi Jaya,
    When buying an existing house, I would always get a building inspector to take a look. Maybe a plumber too, if you have a special concern with plumbing.

    Re the land – I always like older homes that have big land – especially if the Council is about to re-zone. Going from 17.5 to 30 is nearly doubling the number of houses in an area. It means you are allowed to build on a smaller block than before. Jason wrote a very good article here about that :-

    https://www.propertyinvesting.com/r-zoning-codes-for-western-australia/

    I presume you are looking in Western Australia, but you didn’t say – they use that type of code though, so I hope Jason’s article is of help to you.

    So, if you buy an older house on larger land, AND they re-zone to R30, then you might have a block big enough to be able to build two more houses in the rear. Lots to check though, but it offers you the chance to make more money by building and selling two more houses and their land in the future.

    I would always prefer an old house on big land with room at the rear, better than smaller land to build a new house at the rear. I hope that is a help,

    Benny

    Profile photo of JayaJaya
    Participant
    @yjsreddy
    Join Date: 2017
    Post Count: 4

    Thanks Benny for valuable information.

    Regards,
    Jaya.

    Jaxon
    Participant
    @jaxona
    Join Date: 2014
    Post Count: 130

    Jaya I would lastly like to add, you get what you pay for.

    Seek a really good Financial planner, or specialised real estate agent/broker that understands property investing.

    They may cost but if they earn/save you tens if not hundreds of thosands then thats money well spent.

    Profile photo of JayaJaya
    Participant
    @yjsreddy
    Join Date: 2017
    Post Count: 4

    Hmm. Noted , Thanks Jaxon.

    Profile photo of CherryCherry
    Participant
    @investmore2017
    Join Date: 2017
    Post Count: 5

    Good luck, Jaya! You got two experts in there. Whatever your final decision may be, just make sure it’s worth it and you’re happy with it. I agree with Jaxon though that we get what we pay for. :) Personally, I prefer new house with big land. :)

    Cherry
    Email Me

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,168

    Hi Cherry,

    Personally, I prefer new house with big land. :)

    If you are at the stage where you can afford to build them for yourself (and not be taking some solution product from a H&L developer), I agree with you, Cherry.

    ;)

    Benny

    Profile photo of StevenSteven
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    @steven1982
    Join Date: 2017
    Post Count: 52

    Not too sure if I am getting the wrong impression here, but I do somehow get the impression that you make it sound like you have a grudge against new properties or H&L packages.

    Anyway, from the amount of information I studied and the numerous seminars and workshops that I come across… to me, whether we buy new properties or old… whether we buy those solution properties or problematic properties… it all comes down to circumstances and preferences.

    An example may be that Chinese renters (especially young overseas students who come to Australia to study their uni degrees) simply prefer to live in new houses with little land rather than old houses that require constant maintenance. So if you are targeted at this particular market, then H&L package might just be the right property for you. Under other circumstances, probably stay away from H&L.

    Another example would be in Melbourne and Sydney, Asian residents simply prefer to live in Townhouses that are close to big cities rather than houses that they consider to be “problematic”… a good example is I have friends from Taiwan who simply refuse to buy a property from someone who died in that property no matter how great that property is, because they consider is “Bad luck”. Another example would be the Chinese believe “a super cheap property in an area with no infrastructure or transport is not worth it no matter how big the land is” and they generally refuse properties that fit into those category. So your target audience will at some degree determine what property you will invest into as well.

    Some investments are probably “fine investments” on their own or “good investments” given their unique circumstance… although they may pale in comparisons to “excellent investments”, but to call them “bad investments” is probably not fair either.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,168

    Hi Steven,

    I do somehow get the impression that you make it sound like you have a grudge against new properties or H&L packages.

    I’m not sure I’d call it a grudge, but simply that some properties are better for investors than others. And, as you just saw in my response to Cherry, if you have the skills/knowledge/wherewithal to be able to build your own properties, then go for it !!

    One option that you made reference to, was purchasing a townhouse closer to a CBD. Now THERE you might find me pricking up my ears and paying more attention. See, to me there is a HUGE difference between buying a solution property from a developer in one of the new “greenfield estates” or alternatively buying a new townhouse in a small block close to all amenities.

    I have long been in favour of “buying in well-established suburbs” and that can be new too, if the $$ work out well. But mostly (for new investors) buying an older property in established areas gives them a better chance of finding an investment property that can return them some useful $$, either as Income, or Growth (or even both). You won’t find too many opportunities like that in North Lakes, Pimpama, Morayfield – or any other greenfield developments !! So yeah – I guess I am more against “some new properties” rather than being against “new properties”.

    Thanks for the comment though – it is good to be challenged and to have to think long and hard about my own biases before replying. ;)

    Benny

    PS For others who may not have seen this link,
    https://www.propertyinvesting.com/buying-investment-property-off-plan-dumb/
    …it does warn about OTP or H&L purchasing, and what we need to be aware of if considering doing so.

    PPS

    but to call them “bad investments” is probably not fair either.

    Hmm, I didn’t see where I did that in this thread ???

    Profile photo of StevenSteven
    Participant
    @steven1982
    Join Date: 2017
    Post Count: 52

    I guess you are right… though there can also be a lot of counter examples.

    Not sure if you might have seen the topic I raised in relation to a suburb in Victoria called “Rowville”. Jaxon and I discussed about that in the thread.

    Only a few years ago, this was one of the least popular areas. Nobody wanted to buy properties over there. People laughed at those who actually bought properties in that area.

    Then for reasons I myself did manage to find out, Asian migrants just moved in there, and within a few years, they pushed up the academic schools that made the local school more popular, and then a lake was built there, and other facilities came up in no time.

    The result is before we realize what happened, Rowville went from an unpopular area to an area where housing price shoot over the roof. And now, those who bought in Rowville only 5-6 years ago, they are all laughing.

    In one of the seminars I attended, the instructor used a term called “the Push Factor”. Basically it means a previously unpopular suburb that is largely off the investor’s radar, happens to experience rapidly growth due to residents “push” into that suburb. The reason behind why residents “push” into a previously unpopular suburb can vary, but the point is the push factor is able to drive good growth.

    Rowville is such an example of Push Factor. And the instructor believes a few suburbs in QLD will likely to experience such push factor too. Now, contrary to your suggestion, the instructor believes Morayfield will be one of those subrubs. I myself don’t know enough as I don’t reside in QLD so I won’t make a decision on that without doing more studying yet.

    In the thread, Jaxon and I had a discussion about whether investing in Rowville a few years ago would have been considered as good investment. One of the things I commented is that “it appears that for many experienced investors, they may not like the idea of investing in Rowville a few years ago because there is always the possibility that ‘what if Asian migrants never push into that area'” and I also commented that one of the things from the seminar I heard is “investing in a new area before the area experienced growth” is considered as “speculating” rather than “investing”….. and to that Jaxon countered by saying “everything is technically speculating until they are implemented”.

    I have a feeling that, a few years earlier, Rowville would probably be considered as a “green estate” in your opinion too.

    So far, I am still weighing up my options, but I do like the idea of “if I know an area is going experience good growth, then I would like to get into that area before the growth happens, rather than getting in there after the numbers have already gone up”.

    Jaxon
    Participant
    @jaxona
    Join Date: 2014
    Post Count: 130

    Steven I think your focusing on a semi truth and Benny correct me if I am wrong but,

    Gold is found in dirt, not in the town window.

    What I mean is, there is gold in the town window shop but the money is made in the mine and dirt.

    The upscale for profit is in turning a problem into a solution.

    now, you will not! and I would love to see evidence otherwise, or advice on how to find them regularly, find the same deals from new developers that have not gone bust, it does not happen often or at all and when it does its usually on a large scale that skips the price bracket of most of the average property investors or is inside deals with large companies.

    I think one thing I stumbled on and believe is if your buying properties in “safe” areas for less than any builder could ever make profit in that area with a positive cash flow building, then its really hard for me to see much downside, verses new properties that are generally mass produced and statically don’t come close to the same returns.

    • This reply was modified 1 week, 4 days ago by  Jaxon.
    Profile photo of StevenSteven
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    @steven1982
    Join Date: 2017
    Post Count: 52

    Hi Jaxon

    Which part do you think is “semi-truth”?

    a) buy H&L packages? Because I am not a big fan of H&L packages myself. All I said previously is there are certain unique circumstances where H&L package might just be the right for those circumstances, but otherwise stay away from H&L Packages.

    b) The push factor? It is one thing I heard from one of the many seminars I attended. Seminar run by someone who is already financially free. I can’t really imagine this being a “terrible advise” unless the instructor at the seminar is not doing it himself/herself or is not financially free himself/herself

    c) Move into an area that will experience good growth early rather than waiting until number already go up? I am a big believer in that.

    An example is China, in 1970’s, China was still running a “planned economy” model, and that changed starting from 1978, where Chinese government tried to run a “free market economy” model instead of “planned economy” model.

    The first batch of people who quited their “stable job / job that made themselves comfortable” as soon as the government announced such a transition all made a huge fortune. Those who followed suit 10 years later hardly found success.

    Then came the digital age. Jack Ma was one of the first business man to go into eCommerce in China, he founded The Alibaba Group (think of that as a Chinese version of eBay or Amazon), and he made a fortune with that. Those who “waited for a few years for eCommerce to mature before acting”, either made crappy profit or went bankrupt shortly afterwards.

    So I am a strong believer of “get into a market with good growth before the growth happens, rather than waiting until everybody knows about the market and there is already someone else who is dominating in that market”.

    So with areas that are already “safe”, where the conventional method of “dig and and find something undervalue” might take too long or the process end up wearing me out… as such I *might* prefer the alternative of studying the areas and if there are sufficient and scientific evidence to suggest a particular area is about to experience good growth, then get in there early rather than after the growth already takes place.

    As there is a saying in Chinese: every vegetable has a “hole”, find and secure a favorable hole early and grow big in that hole, rather than having to fight for a good hole later when good holes run out.

    Which part do you think is “semi-truth”? a or b or c? or all of them?

    With regards to “Gold is found in dirt, not in the town window.”

    I agree with that… although I also think those who make big profit are those who take the initiative to find the gold before anybody else and be the first to dig up the gold… by the time everybody knows about gold in a certain area and a “gold rush” happens in that area, it is no longer so profitable.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,168

    Hi Steven,
    There is a lot of truth in what you are saying:-

    The result is before we realize what happened, Rowville went from an unpopular area to an area where housing price shoot over the roof. And now, those who bought in Rowville only 5-6 years ago, they are all laughing.

    Sure, this happens often – you might see a lot of renovations and/or old homes being bulldozed and newer ones going up. This is often referred to as “gentrification” where 50 year-old homes are pushed over to build new.

    Keep in mind that Real Estate increases in value in a “stair” pattern. Values can remain almost stationary for many years (and even drop a bit in that time), then can double very quickly. This seems to follow a similar pattern each cycle, and I fully expect Brisbane to be the beneficiary of this within the next couple of years as people get priced out of Syd and Mel. If you compare Bne median values with Syd and Mel, you’ll see a huge disparity today compared to (say) ten years ago. Maybe more investors than owner/occupiers will descend on Brisbane, as moving house interstate IS a big deal – but for an investor, not so big !! I’m expecting to see Bne’s median jump by about $300k over the next few years. Let’s see eh? ;)

    Those owners that do jump ship can set themselves up pretty well – sell up in Syd or Mel and buy a property for about HALF what they were living in, and pocket the rest (or, if starting out, pay about half the amount in mortgage interest). Of course, it means maybe leaving family/friends behind, but airfares are cheap eh?

    In one of the seminars I attended, the instructor used a term called “the Push Factor”. Basically it means a previously unpopular suburb that is largely off the investor’s radar, happens to experience rapidly growth due to residents “push” into that suburb. The reason behind why residents “push” into a previously unpopular suburb can vary, but the point is the push factor is able to drive good growth.

    This is true and, as you say, there are many factors. Gentrification is one, neighbouring suburbs values going thru the roof, local govt adding facilities, historical “stigmas” being forgotten with time, certain ethnic or other groups flocking there (often because of price and the desire to remain “in a group”), State govt opening better arterial roads or adding bus services, new schools, new employment prospects opening nearby (shopping centres, industrial companies), etc.

    A quick look at Rowville tells me it has been around since the 1980’s and grew rapidly thru to the 1990’s (schools added, etc). Now, taking your words, maybe other factors have led to a recent price growth. Rowville is near Dandenong – so, is Rowville up on a hill? Does it have great views? Has it received a lot of “money” as people build awesome mansions “high on the hill” to get the views (views can often add $100’s of thousands in value). When was it last cheap? Was it just 5 years ago that it soared? Did neighbouring suburbs also soar prior? Has Rowville become “gentrified”? If not, why is Dandenong’s median almost $200k cheaper? Is Dandenong likely to be “next”?

    A local could add a heap more, Steven – maybe you even have answers to some of the hypotheticals I mentioned there. Certainly, there are always reasons WHY an area soars in value. Find out what they are, and keep an eye out for similar areas !!

    Benny

    Profile photo of StevenSteven
    Participant
    @steven1982
    Join Date: 2017
    Post Count: 52

    Hi Benny

    Your responses are useful and interesting.

    Just some background info re: Dandenong vs Rowville.

    Dandenong is not all in mountains. While there is a portion of Dandenong / nearby that are considered to be “Dandenong Mountains”, but the residential area are on a pretty flat ground.

    Neither is Rowville in mountains and I don’t consider Rowville having overly good mountain views… though I am going by my memory of Rowville from some 10 years ago.

    The question regarding to why Dandenong is cheaper than Rowville is an interesting one, so let’s see:

    1. Rowville is currently very car dependent, it is much further from CBD than Dandenong is. My friends actually made a comment about Rowville housing price will probably go up further when a train line gets built, so I take that means currently there is no train stations and as such, while there may be some bus services locally, but getting in and out of CBD to Rowville means car is pretty much the only options.

    2. Dandenong at the other hand, has a train station, which is also a big train station. Behind Dandenong, the train line braches further into 2 train lines, with one going to Cranbourne and the other going to Pakhanam.

    3. Dandenong also has a very large shopping Plazza close to the train station, whereas Rowville, not so much. It still has local shopping areas, but the scale is likely to be not on the same level as Dandenong according to the description given by my friend.

    4. However, Dandenong has its problems. The big problem I can think of is its reputation. APEX gang originated from Dandenong, and it may be that the area is also considered to be un-safe. I had high school friends who lived in Dandenong for a few years and then decide to move out because she thinks some of the residents who live there (and they mostly look like they come from certain parts of the globe, but I won’t name them to avoid controversy) look and behave scary, and she moved out thinking Dandenong is not a safe area.

    5. I don’t know too much about Rowville in this regard, but I’d think if Rowville suffers from the same problem, then I’d hear about that from my friend by now.

    So I am thinking the “safe” factor and the “academic” factor, together with more Chinese/Asian living in Rowville compare to Dandenong are likely to be some of the big reasons why Rowville is more expensive than Dandenong (it appears any suburbs that Chinese migrants go to tend to end up becoming expensive much more quickly than the rest suburbs).

    ————————————————————

    Anyway, I have another property that I got contacted with an agent, which I’d like to seek some opinion from you.

    To summarize:

    1. It is a duplex pair, on a 525 sqm land
    2. The property specificatio is 6/4/2. Basically there is a wall in between, and each side of the wall makes up 3/2/1 and the floor plan is mirror image of each other.
    3. The cost is approx. 610K
    4. Rental appraise done by CBS property group (do you know much about them? do you think CBS does a good job doing valuation?) suggests if both side of the duplex pair are successfully rented out, then the rental income should be 700-730/week, so we are looking at 6% ROI. Not considered to be “excellent”, but not considered to be “crappy” either by the sound of it.
    5. The expected capital growth is projected to be 6%.
    6. Vacancy rate according to SQM report has been well below 2%, so sounds like the ability to find tenant should be fairly guaranteed.
    7. Agent also advises that I can sell one and keep the other for rental income instead of keeping both if I need to, but agent did specify that most people would prefer to keep both in their opinion unless they have a very good reasons to sell one.

    My concerns with this property:

    1. It is not on a corner block, but I think this may be less of a concern.
    2. It is brand new rather than second hand, and this is probably a bigger concern out of the two.

    What’s you opinion on this?

    Jaxon
    Participant
    @jaxona
    Join Date: 2014
    Post Count: 130

    So (A) was all I was refering to. there are exceptions to every rule mate, but generally New homes do not bear the same value, its just that simple.

    In regards to your above propsal I would ponder this, for 610k you could massively diversify with even a greater return

    -(200-250k) Rent 250-320 western brisbane (like Benny just said its such a big difference in price)
    -(100-150k) Rent 180-250 Rural but business based suburbs in Oz
    -(200-350k) Rent 250-450 A strageic purchase surrounding CBD

    That would be around 600k with a ROI of 7% now that extra 1% is massive over a working life.

    Look I am not saying this is the best choice, just one If I was you I would consider

    also would consider exactly what Benny said “Gentrification” options, also would look at a renovation profit etc.

    There are many paths and who is to say yours is not great/best, but Benny is on the money with the price difference from Sydney to melb to bris. I personally am not sold on what will happen, I think for me the Economy and the Financial system scares me and creates uncertainty to the stability of the future, the main thing is a believe Crypto Currencies will change everything, and the fact its a better way than the current financial system is scary because I have no idea how this all plays out.

    Jaxon
    Participant
    @jaxona
    Join Date: 2014
    Post Count: 130

    So I had time and wanted to show you an actual E.g. based on whats on the market and why I have value over that deal

    https://www.realestate.com.au/property-house-qld-redbank+plains-125216290
    Get this for 250k, rents for 325 a week

    https://www.realestate.com.au/property-house-vic-drouin-125842170
    get this for 270k, rents for $320+ a week

    thats already 520k for $625-$640 a week.
    now lets say you add a higher risk property to make it
    640k, thats an extra 240 a week which makes it

    640k for $870 a week = 7% return, also this would give you a good spread for brisbane growth, east melb growth with AMAZON and a smart property.

    Now in saying this, this is still a fairly avarage and crappy deal. I did that very quickly and you got to understand a 1% difference per year on 500k is $5000, thats massive when you think about how that sets your portfolio up. I think I can offer something you just wont find, far better than the above deals that I did in a heartbeat.

    Kind regards

    Jaxon Avery

    Profile photo of StevenSteven
    Participant
    @steven1982
    Join Date: 2017
    Post Count: 52

    Hi Jaxon

    I think that’s where you and I differ.

    Correct me if I were wrong, but by the sound of it, you work on such property investment as a profession and spend many hours this on a daily basis (whether it is with your clients or looking out for opportunities yourself).

    With me, I only get to do my research after business hours and for me to pour in such hours to work on property investment is unsustainable (unless I don’t care about my wife one day filing a divorce document for not spending enough time with her and our kid). Some investors even suggested that I adopt a “set and forget” strategy, but I prefer not, because I feel like “set and forget” strategy means I won’t be learning as much.

    For you, you sound like (again, correct me if I were wrong) already had your first pot of gold a while ago and your snowball is now rolling quite efficiently, whereas I am still digging my own first pot of gold, so our thoughts may be quite a distance apart.

    So you might already be at a point of saying “I want this investment to grow beyond 7% or else I will have none of it because otherwise my portfolio is not growing fast enough”, whereas I might be saying “my portfolio can get me there at a somewhat slower pace, but it still gets me there rather than making me go backwards, therefore as long as it doesn’t make me to backwards, I feel suffice”, and I might switch to the way you preferred method once I feel like my pot of gold becomes sufficient.

    You might achieve your dream goal in 5 years, whereas I might need 10 years to achieve the same goal. So as long as I don’t end up going bankrupt and get back to where I started, I probably don’t mind spending twice as much time as you do, and as such I probably don’t feel the need to push for a fast paced solution and prefer to take this at a slower pace. If you know what I mean.

    This is not to say I am trying to defy your suggestions, because I really like your suggestions. As you mentioned, 1% ROI can mean a big difference, so this is one good lesson I learn from you and I definitely will keep that in mind.

    Anyway, for the 2 links you sent, did you already buy them, or were you offering suggestions on “try to get them at the price you mentioned”?

    Especially this one: https://www.realestate.com.au/property-house-vic-drouin-125842170,

    It also sounds like a brand new home rather than a second hand home… My question for this property is, is the “marked price” the “final product price”? That is, no additional cost (such as additional test cost) or hidden cost (such as fence, backyard, etc… whatever misalliance cost)? Or do you expect some bits of extra cost “here and there” on top of what is already advertised?

    Jaxon
    Participant
    @jaxona
    Join Date: 2014
    Post Count: 130

    Steven I think what you said is really a great view and shows how self reflective and honest you are, espically to yourself. Its good you want “balance”, that is so great to hear, I am the same in a lot of ways (even though everyones balance is different). I admire people who do far better than me, but I don’t choose the same sacrifies they do, But one thing regardless of if its myself or anyone, good advice is rarely free and its works out generally cheaper to know what your paying for.

    In regards to the Vic property, I found that very quickly last night, its still on the market, you can offer $1 for it if you wanted, although I would assume the agent would laugh if not block your number.

    The marked price in my eyes is there dream, my goal is to reshape their eyes to what I see it being worth and hoping if an agent is part of the deal they help me as much as their cleint.

    Mate no comment on the property needing work, I havnt seen it, I have 0 idea but it looks very new and for the right price could be a good little buy (but once again I found this without any real effort).

    I would like explain that I could source a deal and teach you for less than a deal you would “likely” find by yourself, Either way, once again wish you the best and happy to give advice when needed.

    Kind regards

    Jaxon Avery

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