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Reproduced with permission.
In this series of articles, I am outlining my “Golden Rules for House Hunting”. So far, we have looked at Rules 1 to 6:
1. Buy the worst house in the best street.
2. Look for streets with redeeming features.
3. Look for improving areas with easy access to the city/beach/facilities.
4. Capital growth is dependent on Location, Land and Looks.
5. Avoid buying near adverse locations.
6. Consider if you could resell the property in the ‘bad’ times.
This week we look at my seventh rule:
Golden Rule #7 – Check out the local knowledge before you buy.
I have written on this topic in the past but just in case you missed it, below are some tips on what I mean by “local knowledge”.
Drive/walk/ride the streets
I find that there is nothing better when researching areas to invest in than to actually visit the area and check it out for yourself. The first thing you should do is just go around the streets. Driving is quickest but walking and riding provide you with a better “feel” for the area as you can use your sense of hearing and smell to assist you with your information gathering. When driving, it is often just your sense of sight that you rely upon.
When moving around the area, have a close look at the people, the housing and the types of cars in the driveways. Also pay particular attention to the sounds you can hear and if there are any odours in the area.
• People – Are there many new shops with lots of young children around and well-dressed parents pushing prams or is it an area with graffiti, vandalised bus shelters and gangs of teenagers and young adults wandering the streets in the middle of the day. The first area mentioned has signs of a growing population with a healthy amount of discretionary spending whereas the latter has signs of an area in need.
• Housing – Is it an area where the gardens are neat, housing is well kept and owners are willing to spend money on major renovations or is it full of streets with car wrecks in front yards, no visible signs of house-proud ownership and many homes in a state of disrepair. I’d be considering investing my money in the first area mentioned.
• Cars – cars are a reflection of the people that live in the area. If there are plenty of utes and 4-wheel drives, there are probably many young men in the area. If the Ford Focus, Toyota Yaris and sporty Mazdas are the dominant vehicles, there could be many single women living here. Lots of large black BMWs, Audis and Lexus? This is a sign of wealth. Lots of small black BMWs and Audis? Indication of an upwardly mobile demographic with money to spend.
• Sounds – The loud noises to listen for include; aircraft – too close to the flight path/airport. Sirens/PA announcements? Too close to industry and factories. Can you hear semi-trailer and truck horns, trains? Too close to main roads and train lines.
• Smells – Can you smell sewerage? It could be that there is a sewerage treatment plant nearby or this area is downwind from the plant. Hot metal? Industry/factories are nearby. Rotting seaweed? Although it is beneficial to be close to the beach you don’t want to be in area which is renowned for seaweed being washed ashore, especially in the summer time.
When going down the main street, focus on the number of “For Lease” signs and empty shops. If there are not many “For Lease” signs in shop windows and any empty shops look they have only recently been vacated, this is a sign that the local economy is doing well and people in the area have money and are willing to spend it.
However, if there are many empty shops, some look like they have been vacant for years, the street is littered with “For Lease” and/or “For Sale” signs, shop fronts look neglected and no-one is making an effort to give them a makeover, this is a worrying indicator. This could indicate that the area is in decline and should be one reason that you would avoid investing in the suburb.
Spend some time at the local shopping centre
Everybody needs to go shopping at some stage so visiting a shopping centre can provide you with an insight into the sort of people that live in the region. Keep in mind that the bigger the shopping centre, the further people will travel to get to it so if you want an accurate cross section of the people that live in the immediate area, you need to visit smaller shopping centres e.g. neighbourhood shopping centres or the shopping strip in the main street. A large Westfield shopping centre will attract people from kilometres away, not just the locals.
There are a few things you need to watch for when you are at the shopping precinct.
• What types of shops can you see? Are there many “two dollar” and “bargain buy” businesses in run down shops? Are there up-market women’s clothing boutiques and jewelry shops in superbly fitted out buildings? An up and coming suburb will have a mixture of both. In the early stages of the suburb’s gentrification, you will find up-market shops replacing bargain buy shops but the buildings might still look run down. However, as more and more expensive businesses move into the area, more and more buildings undertake makeovers and renovations. For long term capital growth, you should be investing in areas that are in the early stages of gentrification.
• What sort of meat is the butcher selling? If it is just chops and sausages; this is an indicator that there is not a high level of discretionary spending in the area. If there is a variety of expensive steaks and other cuts of meat, it is a sign that people in the area have money to spend.
• Wander through the newsagency. What publications can you see? Are they business and finance magazines, the “Australian Financial Review” and “The Australian” newspapers and expensive gifts or is it mainly local newspapers, soft porn and hotted up car magazines. A suburb that has newsagancies that stock expensive gifts and a wide range of glossy business and investment magazines is one that indicates a wealthier demographic resides in the area.
Have a coffee/meal at a couple of eateries
When visiting the café or restaurant, the best way to help determine whether it is a wealthy or up and coming area is to read the menu.
Go to a café on a Saturday morning at about 10:30am. Is it full of 25 to 40 year olds, reading the Australian Financial Review and twittering on their smart phones? Does the cafe offer just the basics; tea, cappuccino, flat white, caffe latte and hot chocolate or do they offer herbal teas and coffees such as affogato, macchiato and for the children, babycino. Don’t just check out the different types of tea and coffee but also look at the prices they charge. A café that has a wide selection of teas and coffees and relatively high prices is a reflection of the people that live there; an upwardly mobile demographic that have money to spend.
Check out the local pub on a Sunday afternoon. Is there a jazz band playing in the courtyard, a wide selection of imported/boutique beers on tap and a relatively high percentage of women, drinking wine? Or is it mainly VB and Tooheys on tap, horse racing on the big screens and not a glass of wine or woman to be seen anywhere. A gentrified suburb has more of the first type of pub.
Visit the police station
You can ask the police questions over the phone but if you take the time to actually go to the police station, you might also see the type of people that frequent the station. One of the main reasons you are seeking information from the local police is you want to find out which pockets are notorious for crime as they are the pockets you want to avoid. Not every street/block in a suburb is worthy of your investment dollar. Find out which are the less desirable areas and avoid them.
Happy House Hunting!
Written by Peter Koulizos, university lecturer, author and buyers advocate.