It’s time to play a game of “which would you rather?”
An investment property with a great floor plan and a daggy fit-out or a freshly renovated dwelling with living areas located in places that make you scratch your head?
A location under a flight path but close to the CBD, or away from a flight path, but further away from the city?
In episode 36, we discuss “Buying the wrong property and/or the wrong location” No. 6 of the top 7 Critical Mistakes.
Listen as David Johnston, Cate Bakos and Peter Koulizos take you through what exactly is a ‘wrong’ location and property, tips that will help you spot a winning location, pocket, street and property, and many of the key questions to ask yourself about what you’re willing to compromise on. Because unfortunately, compromise is inevitable. No properties will rate as a 100/100.
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- Buying the wrong property and/or the wrong location
- The regret of buying the wrong property
- The population paradox: Why more people doesn’t always mean higher prices
- Sample location selection checklist
- SQM research
- Why you need to plan for your future home when buying an investment property
- Why short-term investing has long-term consequences
- How to assess and select property like an A-grade Buyer’s Agent (Ep. 7)
- Misunderstanding what makes a good property investment – #2 of the top 7 Critical Mistakes (Ep.32)
- Interpreting data to uncover an outstanding property and location– and how to sort the gold from the lies, damn lies and statistics! (Ep. 8)
- Why the land-to-asset ratio of a property can determine its future price growth
- The critical mistakes of property investment – starting without a plan
- House hunting is a compromise so target the most important factors
- The top 5 mistakes property investors make
- Making the first move – why the first property you buy is the most important of all
- How data can help property investors identify gentrification before it happens
- How to succeed with Property and Create your Ideal Lifestyle
- Mortgage Strategy 101 – YouTube video series.
- How to assess location – there are three points you need to assess: macro location eg city, micro location eg suburb, and the location of the dwelling eg pocket, street and plot of land.
- Macro location – what state and city. Find out what are the capital growth prospects of that city, what is the rental yield and does it marry up with your cash flow goals? Look at the population size and how is it changing? How about the economic growth and average weekly income?
- Micro location – which suburb, pocket within the suburb and street. You want to be looking at the same sets of data as you look at for macro location and compare them against the city. Ideally, you want the suburb to be outperforming the city. Eg: the average income of the suburb is higher than the average income of the city. Conversely, you want low population growth in the suburb which highlights that there is scarcity of land and dwellings.
- Dwelling – the individual property and property type within the street and the suburb. To make it really simple, you want to be near the things you want to be near and away from the things you want to be away from.
- Pretty streetscapes – with scarcity comes fierce competition. Pretty streetscapes are streets that have a consistency of properties that are beautiful properties, most likely older property. Usually they are not on main roads or roads that are driven as a cut through between main roads. It’s harder to get council approval for development on these because they are tightly held and protected.
- Purchasing on a main road – sometimes this compromise makes sense if you really want to be in this postcode. Ask yourself whether living in that suburb overtakes the pain of living on a busy road and be sure of the answer before you purchase.
- Flight paths – are they are a deal breaker? It comes down to altitude and the number of flights passing through. If you can wave at the passengers on the plane, you can always mitigate the circumstances by double glazing your windows and insulation. If you live in Sydney or Melbourne, there is hardly a property that isn’t impacted by flight paths but some much more than others. How does that impact the investment potential?
- The suburb is not the be all and end all – a suburb may be generally considered a good place to buy, but if you are on the outskirts of that suburb, the property may miss the mark. Suburbs with train stations are highly desirable but if you have to walk too long to the train station, it is really not ticking that box.
- Which would you rather? A great floor plan with a daggy fit out or vice versa? If the property is nicely renovated, the rental potential is higher. However, it is harder (and therefore, more expensive) to change a floor plan that it is to spruce up some finishing’s. You want the house to have good bones – that is the floor plan and architecture which is very expensive to change.
- What classifies as the ‘wrong’ property? Any property that underperforms in your portfolio or a home that you are not happy with.
- Cater to the target tenant or you may have a vacancy on your hands.
- Buy a property with owner occupier appeal – it is the home purchasers that fuel value growth.
- Buying a bargain – while you may think your literally stealing this property, stop to question why is it a bargain? Chances are, there is a great reason which may make it a poor investment. Examples include
- Converted industrial property which is still zoned as industrial, meaning that you need a commercial loan, that comes with commercial rates and a bigger deposit.
- Or maybe the kitchen has been gutted and not completed – the bank won’t touch it.
- But invisible issues are sometimes the worst. Always get the contract reviewed by a solicitor because agents are not obliged to bring any hidden nasties to your attention.
- What makes you buy a wrong property?
- Lack of planning – don’t shop for property how you shop for jeans!
- Talking to the wrong people. Especially if they are good at sales. Get independent help!
- If you’re on a quest to find that unicorn – perhaps you should ask the leprechaun where it is. Compromise is a reality that you need to make peace with.
David Johnston- The Property Planner’s Golden nugget: have a structure and a process to how you are selecting property. It might sound boring, but it’s part of spending some time knowing why you are doing what you are doing and what you are looking for in a property. You’re more likely to make a decision that’s going to be right for you, and at the end of the day give you a home you love living in or put more dollars in your pocket
Cate Bakos – The Property Buyer’s Golden nugget: check out google street view for an example of some pretty street scapes. Try Seddon Street, Browning Street and Tennessee Street in Seddon Victoria. These are fine examples of beautiful streets and amazing street scapes.