One bit of advice for beginners in property investment

[2BAD4U]

Let's get this forum cranking.

If you could offer just ONE bit of advice for someone about to start their property investment journey, what would it be?

Mine - when looking for a property don't get emotional about it. You're not living in the home so who cares what colour the walls are or that the floor plan doesn't suit you or that you don't like the curtins. It is an investment and you are running a business. If you're saying to yourself "I wouldn't live there" remember, someone else will and probably is. Concentrate on the things that matter.

[MR.]

One bit of advise for property investment!

"Wait a bit" before you buy.... if it's going to be a pure investment property.

The purchase cost has more of a chance of coming down a bit further before it rises aspecially in Industrial and Commercial.

[Bushman]

Mine would be 'prices do not always go up'. So don't fly to close to those LVR ratios.

Even the big boys get that wrong - have a look at GPT today. Had to raise equity at a deep discount because they first did not factor in the credit crunch and then did not factor in the the fall in the Aussie dollar! So their 'look through' LVR was all of a sudden 47%. Silly...

[TheASXGorilla]

I believe the adage that you typically make your money when you buy, although you can also make money by improving a property, and/or if something improves the property for you eg. increased infrastructure, new zoning etc.

Regarding the first point, my tip would be to learn to evaluate property, and learn to do it in your chosen area at least as well as professional valuer. But being able to accurately assess value is only one part of the equation. Properties sell for above and below valuations all the time. Understanding how/why people buy or sell based on emotion allows you to identify when this has occured.

[Wildkactus]

one of the things I look for is a hidden extra, something that can quickly add instant value for little money, things like:
can the block be sub divided to add an extra dewelling
can you add an extra room
can the block be rezoned
can it be added to other blocks to make a development site.
could even be as simple as a cosmetic makeover.
the list goes on.

also as side above you make most of your money on the way in.
so buy at the wholsale price not the retail, you can pay to much.

[2BAD4U]

Bump. Few new members might have something to add.

[kincella]

depends who your market is.....young professionals, families, students...
young pro's will be slightly different to students and families....bit more upmarket for the entertaining required, but still close to public transport....
students are not so fussy....but families need bigger living, communal areas
all like public transport...in the city anyway....
I would not worry too much about curtains or flooring....easily changed without major costs anyway

I am considering a purchase this year...but the house will need to meet some criteria...with the end in mind....for a sale

I will want to renovate and refurbish in the future and sell it...so it will be in a nice area, close to the city,entertainment...and public transport
I will want to open it up....to a kitchen dining living area, and outdoor entertainment...later....
bearing in mind I prefer the older style close to the city....they usually have a hallway running down the centre and rooms coming off the hall....

I would expect to spend 100,00 min to turn it into a nice modern home....
am currently dabbling with some ideas....nothing concrete as yet....already missed out on a nice cheap prop that fits the ideas above...was 60,000 cheaper than expected but its gone..sold now

thinking buy a bargain, rent it out as is....as interest rates go lower and say after 12 months...then plan for a 3-6 months period for renovations.....
all above at nice low interest rates.....if the market is not recovered then rent for a further 6 months..
cheers

[Passive]

With any investment vehicle the best time to buy it is when it is on the nose.

In my time the following happen.

Interest rates drop - has happened

Sales volume drop - has happened

Houses on the nose - has happened

Rates keep dropping - has happened

Govts develop stimulus packages - has happened

Rents rise - has happened

Banks start throwing money at those able to borrow - about to happen

Then its anyone's guess when it all fires yet again and the foolish anti-property posters retreat into obscurity - change their nics - meet a girl - get together want to buy and then realise they were wrong in their prognosis and have to do the yards like everyone b4 them - slow learners!

[kincella]

its about to get a whole lot worse....back to the old adage...5% of the population hold 90% of the wealth...speaks volumes about the rest of the population....
always have plenty of ideas regarding property...latest is to buy a small one bedroom...as close to the city , furnish it and rent out as a serviced apartment...in the country they charge 500 pw, but a 2 bedr is only 600 pw..
at the low rates that I believe will be the go...I can pay a bit more because it will offset the lower interest rates....you pay a lot less for a one bedroom than a 2 bdr....just make sure its in a nice area. with nice entrance and lift etc...they are very popular in Melb..so assume the same for the other cities...on average the travelers pay 30% less than hotel rates.....

as for the stock market...I lost 80.000 when I finally gave up in Oct...its gone down since....so that is money thats dissapeared...gone forever....damned if I will go back for another go.....
in the tech wreck I eventually lost 50,000....but immediately took what I had left and bought 3 props within 6 months...in a similar climate to now...except for the low rates (non existent then) no one was intersted in props....I took no notice of the stock market...was too busy with renovations etc on the props....and by the time I came up for air late 2003 -2004...the prop market was hot...sold 2 props for 300,000 profit...difference between costs and sale price...but had only used about 30,000 of my own money.......
doubt if I will touch stocks again.....everyone else panicks and sells out brings your investment down....they may come back again ...but its the mental anguish of seeing red on a daily basis that gets to me...
with a prop....I dont care if others are selling....and its never the changes in mv that one sees with the stocks....nothing like it....
just stick my head in the sand with props...and watch that 100 year chart...
cheers

[Passive]

Interesting to see how much you made on actual money down Kincella.

With the stockmarket you can go trawling and pick up historically cheap stuff -question is will they maintain their dividend, you have to use the full quid if you have a portfolio. If portfolio is worth 100k - you need to have that.

For 100k I can buy 2 properties worth 400k and leverage and know the house will still be there tomorrow plus get tax benefits plus rental etc.

I still challenge anyone with 450k budget to go shopping in Perth within 20kms of the city to pick up a bargain. They are just not there.

Also what a terrific way to start your life by buying your own home and as the years go by, unwittingly you pay it off and it goes up with little or no effort. And even if you loose it what is the worst you can have happen -you become a renter -tells you clearly what the worst you can be - a renter!

[kincella]

I was way out in front on the stocks in Dec 07 and cashed some in with about 30,000 k profit on a spend of 10,000k...but that was money I put in for family...separate to mine..and I handed them the profits....
I still have to do some sums on the overall affect...I did take some good profits during the year...but at the end of the day...I just looked at my cost price and market value and the difference was a loss....if I check and find I did not reinvest the profits back into stocks the net loss may be less...but since I hate losses of any kind..would rather just recover money paid out....I deem the difference a loss...
I cannot guarantee I will make profits on stocks.....but I can guarantee I will make profits on houses....and more than enough to offset the loss on shares....plus the properties are a passive investment most of the time....whereas I find I have to spend far more time watching the stock market....looking for opportunites and wary of bad news....

as the current value of my prop investments far outweighs any losses taken on the stockmarket....all it will do is reduce my tax cost for the capital gains....probably looking at gains of 1.7 mill if cashed today....say 1 mill in profit, half of which is taxable and sends me right into the highest tax bracket...so 80,000 loss tax 45% saves me 36,000 in tax.....

ah well...now I feel so much better effective net loss overall is now only 44,000....ie if I had not lost that money I would have paid an extra 36000 in tax
grrrrrrrrrrrrrr

[kincella]

just came across this....returning 8% net of costs....unbelievable...the company leases off you and rents them out as serviced apartments....tied up for 5 years and another 5 year option....so after 10 years...or in the meantime...you are up for capital spend to upgrade the premises...and either sell or rent again...5 mins by tram to Chapel St, 15 mins to the city/CBD...
or a walk to Chapel St....

I drive past each week..shopping in Malvern etc...right near Dandenong Rd

cannot believe the price...about half ....
http://www.realestate.com.au/cgi-bin/rsearch?a=o&id=105095207&f=0&p=10&t=res&ty=&fmt=&header=&cc=&c=44830425&s=vic&tm=1230692768

[hitty]

Hi Passive
Noticed you said that you could buy two places at 400k on a 100k deposit, is that because of collaterail you have in other property or are banks and other financail organisations willing to lend at 90% lvr with no morgage insurance. Am intrested as I am trying to refinance a commercail loan on two residental properties but ownly have %95 lvr.

regards hitty

[Passive]

Yeah hitty - quite right - have enough equity to commit less but all that was used for illustrative purposes! Good luck anyway - maybe I started a little earlier than you!

Agree with your comment re north of Perth - suburbs like North Duncraig, Padbury, Craigie, Heathridge , Beldon etc and old part of Kallaroo seem to be both good value and selling well.

Cheers

[aedsys]

Australia offers many diverse living options and is a truly multicultural society. Based on historical trends in the property market and key economic indicators, the Australian property market is considered to be a sound investment opportunity.

http://www.ipbre.com/countryProfile/Australia/Market-Report/

We forecast that the property prices show the strongest growth in house prices over the next three years. Prices are expected to rise by 20.9% over the three years to June 2007.