Never about what you can and cant afford or what you can and cant do...its about what is a good deal => focus on the profits.
Amanda completed a no money down deal and has only been in the course for a few months.
The Formulae
Area choice: 3 areas to focus on.
NOTE: Just because something doesn't fit into these doesn't mean that won't be profitable - just means they may require more effort or $ to get the profit out of it
An area is not necessarily a 'suburb'. An area are places like Paramatta, St Kilda Council area.
Growth Rate: Steady 10 year growth or Fast growth in 2-3 years. Or if there a few different indicators (eg Sunshine coast about to house the biggest hospital in all of QLD plus roads, businesses are relocating and people are following). You want plans approved and underway, don't want just plans...use RPData.com.au and Residex or a Real Estate Agent for growth figures.
Surrounding Features:
Private school promitiy is good because it iwll attract those with high levels of disposable income.
If there is new infrastructure it means that other people have ALREADY invested in that area and they believe that area is tipped for growth or that infrastrucutre will tip the growth into the profit zone...
Don't relly on only one infrastructure factor eg just one major shopping centre reno isn't enough...its a lot but you'd want to see other things too
Shoulder Areas
Prices are going through the roof in one area, a lot of activity, looks great. But its at the boom time of its cycle, then its a good idea to move to shoulder area as prices are about to peak and at that point, people will look next door, for the next closest, similar area..."spill over area"
Not Too New
You don't want too much competition as it can make prices stall or go down because vendors are offering against each other...this is why a whole new massive developments are not the best idea. You want a shortage of supply and high demand.
Areas with Heritage and Height Control create lids on the supply, coupled with high demand = constant performance as they can't add more supply to meet the demand = constant demand.
Vacancy Rates
Need vacancy rates less than 2%. We want properties that are going to out perform the rest of the market.
Find the rates by speaking to as many agents as possible and find out how much of their list is vacant.
Rent Return
New areas in the $400K = $400 per week rent.
5% Rental growth each year...means next year should be $420 per week.
Demographics
Young professionals and gay communities - high disposable income, few dependents, (gay couples also have tendency to enjoy lavish lifestyles and house proud that keep things well and willing to pay more)
Make sure there is a minimum population of 40,000 with a high percentage of young couples. If majority is big families, they’ll probably want budget properties.
Demand
What is most in demand in that area? Are most sales units/townhouses/houses
If vacancy rate is low and majority of demographic is renting, then may have good cash flow. But good capital growth is often pushed up by home owners. The end home owners pay more for that property.
Therefore, you want a balance between renters and home owners.
Befriend the Agents
You need to get EVERY agent in the area working for you. Tell them you’re looking for more than one property. Here is my criteria…im not a buyer/owner, I’m an investor looking for more than one! Develop the relationship so that they’re calling you before things hit the market.
Speak at least once a week…”hey, (banter)”, got anything for me.
Give them incentives: once I get the property, you can help me rent it out and/or on-sell it when I cash in.
Need to make it clear that you can make it quick decisions. But mention: sometimes I’ll be quick sometimes I won’t It depends on the people I’m working with. I’ll do my best to not stuff you around, just know we can’t do all deals but we’ll do all we can!
Choose best 3 streets in area
Proximity to lifestyle, scenary and transport. Look at surrounding blocks and they are the highlight areas. Look at every property that is for sale first.
Make contact with all agents for each property and fill in the Property Inspection Template. You don’t necessarily inspect all at this stage. Use this to narrow down further.
If you’re looking interstate, use the checklist + google earth. Then get the agent to take photos of everything for you. If it’s still a possibility, get someone in that state to inspect it. If you can’t just make sure the numbers stack up first!
Notice:
Are properties on the market mainly new or old? Mainly houses/units/townhouses?
Deal
Make sure that the property has been on the market for more than 2 months – this opens up the plate for negoiation.
Find out the reasons for vendor selling up – tells tale son the time frames to settlement and level of desperation – or if something is wrong with the property (an opportunity to knock price down and add value yourself)
Don’t assume why someone is selling
Don’t assume what the vendor will accept price wise.
Mortgagee sale – often need a quick turn around time – need finance ready – which means you’ll probably need to put money down.
Unless it is like a wholesale scenario…go to the possessor and neogiate a price based on the fact that you’ll take multiple properties off them.
Eg deal in townsville ; went to possessor and said we’ll take a few if you can give a discount and they got 10% off the deal.
Not Too unique
If properties that are similar to yours are not being bought and sold, prices will not go up. If there are no properties like yours it probably won’t be in demand.
New or Old
New preferably; easier to hold, better cashflow wise and better deductions.
If old; make sure there is room to renovate/update. Or it is already neutrally geared (preferrably before discount/negoiation but if not, at least still room for updating and ability to create extra value on top of the negoiated neutral gearing)
If old; make sure there is room to renovate/update. Or it is already neutrally geared (preferrably before discount/negoiation but if not, at least still room for updating and ability to create extra value on top of the negoiated neutral gearing)
Choose ones that are larger than average in size than comparables in that area.
Make sure, also, that they are close proximity to newer, more expensive properties – this will be your comparison
Also need to be 20% cheaper than brand new properties of similar type. Older style properties will, in most cases, be of less value even after reno than new properties of similar type. And you need to create a good end deal for ultimate buyer whilst creating a profit for yourself.
Don’t Buy At Auction
You loose the ability to negoiate on your terms. You need control over the whole transaction. In Auction, you have NO control.
BUT if you can negoiate before the Auction.
Make sure they agree, in writing, to all your conditions and terms before the Auction.
The whole idea of the Auction is that they are trying to get more $ out of you by getting you caught up in the emotional roller coaster.
Selecting the property
Get the agent to run through the Property Inspection Checklist
Inspect the property yourself at different times of the day to see it in different lights.
Comparable Sales
Similar properties. When they sold. How much.
You’ll need these to negoiate your price AND your valuation.
Once you have these, you can then simply update your data. Have a file for each comparable sale.
Become an EXPERT in this suburb/area so you can quickly get a gauge on whether a deal is good or not.
You may find properties that are similar to yours but sold for less, but if this was six months ago…could just mean that the market is in an upward trend.
MUST ensure that there are some properties which are similar but that have sold mofr more than yours – so you know there is room for the price to go up!
If you cannot find any similar properties – without compariable its going to be hard to maintain your value (eg 3 bed unit, 70sqm. All other 3beds in area hav min size of 100sqm – none are even close to similar so you can’t even justify your price, let alone determine the initial value). Your property is either too big, too new, too small or too old for that area.
Some Rules
1bed untis sould b at leats 60m2 internally.
No studio apartments, serviced apartments, etc. as they are hard to get finance for = hard to sell
Choose area with 10kms of CBD – in which case townhouses and apartments as first preference. But make sure you just stick with what is in demand in that area.
2-3 bed apart within 10km of CBD needs at least 80m2 internally
Choose properties with a car parking space – if property has 3 beds, have at least 2 car parks. Unless property is right in the CBD, then property may not need space as properties with one don’t necessarily sell for more.
Townhouse/hosue min internal 120m2
Wollonggong.
