1st investment property

[Ken]

gday,

I have been in the stock market for 6 months or so. I have done okay, without being outstanding considering how well it has gone.

I want to get a 2 bedroom unit in melbourne. Somewhere around the inner city region region, caulfield, malvern, glen iris, malvern.

I am looking to spend around 280k-300k.

Any advice from experienced property investors.

Should I pay a little bit extra and get a newish town house a little further out, or strictly go for location?

Whats the key in picking 2 bedroom units up? what do I look for? how do I know what they are worth? When realestate.com has property for sale at a certain price are they generally asking more than they want?

How do I go about it?

cheers

p.s

I dont trust real estate agents.

 

[ROE]

Land value appreciate, building depreciate
Better to get a big block with old house than new house with small block.

 

[Lex$]

Land value appreciate, building depreciate
Better to get a big block with old house than new house with small block.

Very true.

 

[nizar]

Land value appreciate, building depreciate
Better to get a big block with old house than new house with small block.

Agree wholly.

 

[Ken]

can't find land in zone 1 of melbourne for under 350k. all out of my price range.

 

[marklar]

I want to get a 2 bedroom unit in melbourne. Somewhere around the inner city region region, caulfield, malvern, glen iris, malvern.

I wouln't call those inner city, Richmond, South Yarra, Carlton, Fitzroy can pass for inner city.

I am looking to spend around 280k-300k.

Is that total? or with 20% deposit on top of that?

Any advice from experienced property investors.

Location, Location, Location. Close to public transport, quiet street, close to shops, schools, etc.

Should I pay a little bit extra and get a newish town house a little further out, or strictly go for location?

Whatever suits your investment strategy... how much maintenance will it need?, are you -ve gearing?, do you expect to live in it at any stage?, can you sell it quickly if you need to?

Whats the key in picking 2 bedroom units up? what do I look for? how do I know what they are worth? When realestate.com has property for sale at a certain price are they generally asking more than they want?

Research, do the hard yards, go to auctions & watch, talk to agents, etc. Take everything with a grain of salt, don't get your heart set on anything and chase it's price up.

I dont trust real estate agents.

Nobody does

m.

 

[Ken]

I am seeing the bank tomorrow.

I think I can buy around 300k with 50k deposit, after you include fees.

I earn around 42k a year.

 

[tech/a]

Ken

Roe is right in general terms.
Small inner city blocks even with units on them can still command big $$s.

I dont know Melbourne well so will speak in general terms.

Work top down.

(1) What is rental demand like and what can I expect to get as a rent return from each area? (This will help you decide gearing) Aim for positve gearing or as close as possible to it---include all outgoings. Your available deposit will govern gearing to a large degree.

Before I forget get a good landlords insurance policy which covers everything I use Elders.

(2) You should first aim at making as much as you can in the front end (The buy). So firstly get a good idea of 2 bedroom prices of recient sales in the last 6 mths. I have a mate who works as a valuer in the Govt so I'll get the right contact for you in VIC and post it tommorow.

(3) Then find out growth% for the last 2 yrs Property Investor Mag will give you that. Its due to publish Unit Prices in FEB edition---good timing!
You want high rent and growing prices in the area you are looking at buying into. Look to see if prices have grown too quickly in this area if so they maybe inflated---over 30% in anyone year or cumulative years is cause for concern---steady growth ok I look for around 10-20%. Once I buy it I like MORE!! Take time to research why one or 2 of your selected areas may out perform others.

Often there will be glaring reasons---New Shopping Center---New Schools---a new freeway to it. Industry growth---go to the local council and see if anything big is on the drawing board.

(4) Location Location Location.

(5) Check titles,Check encumberances,Check sinking funds if the apartment is in a Strata or Community title group.

(6) There are PROFESSIONAL buyers in most states who can find what you want.

(7) NEVER EVER make a VERBAL offer ALWAYS put it on a contract and submit it to the vendors agent---he has to present all written offers.

(8) Find a good conveyencer they will look after the documents.

(9) Find a great rental management company with a great track record--- ask around. 12-16% is the norm for rental management. We do our own---but you must know the tennancy act backwards.

(10) Insist on Direct debits for rent payment.---insure against default see above.

(11) When making an offer find reasons why someone wouldnt pay top $$ from YOU if you owned it! Now take a value off your offer. Dont think an offer is rediculous it maybe the only one they have had!

(12) Always have a building inspection.

(13) Get a great accountant to set you up properly ---take the time FIRST to get setup from the financial end before you buy!

(14) Lastly factor in the possibility of 10% interest---still comfortable??

Join one of the Realestate Forums---there are some pretty savvy people out there.

Happy investing.

OH about agents.
I have some great contacts who are agents---they want my business so they call me whenever there is a "Bargain"---Read quick sale wanted.
After I have knocked them back a few times they get the idea of what I call a bargain.--- get on as many books as you can --- go see them tell them what you want and YOUR limits. YOU DECIDE VALUE --- if they are showing you rubbish tell them not to bother until they can show REAL value---they'll soon get the idea.

Be as TOUGH as NAILS.

 

[tech/a]

Hmm your going to be severely NEGATIVELY geared.

See point 14.

Borrow interest only.

 

[theasxgorilla]

Further to Tech/a's suggestions...

These are a few things specific to making money with a single unit that I've picked up (as opposed to owning the whole block):

* The smaller the block the better. 1 of 4 is better than 1 of 24. Privacy and noise are usually better the fewer units on the block. This will help with keeping secure tenants.

* When you buy (initially) outside is more important than inside. Why? Because in a strata/common title situation you can wait many long years for anything significant to be done on the outside. Find a place where someone else has already fought that battle recently.

* Try to find something unique about your unit relative to others in the block ie. street frontage, balcony with a better view, ground floor with a terrace/outdoor space.

* Desirable architecture like period or deco beats 50/60/70s brick venereal hands down. Some of the apartment buildings in Malvern, for example, might even be heritage listed. I know this is the case with some in Toorak.

* Try your darndest to buy a unit in a locale where there aren't many units but there are a lot of expensive houses. I bought and sold a 2br unit in Black Rock rencently. There are more units in a some streets of Mentone than there are in the whole of Black Rock. IMO this is the biggest opportunity to make money with units.

* Try to buy into a block of units in one of the best streets. This will most likely NOT be a street with lots and lots of other units.

* Consider that the only part of an apartment that you unilaterally control is the inside (and the outdoor area if you have one). For this reason, contemplate buying a property that was reno'd in the mid-to-late 90s. You can still rent it immediately but when your budget and skill/knowledge is ready you can reno the place and look to sell for a profit...or get it valued and leverage the equity into your next property.

For what it's worth, don't compromise on location/suburb.

Hope this helps.

The ASX Gorilla.

 

[insider]

If you're the renovation type... look for the potential like:

-See if you can add another bedroom
-See if you can cost effectively extend
-Spend all your money in the areas most used ie. lounge, kitchen
-Realise it's all about presentation so if you renovate your kitchen be smart, buy cheap doors with wood grain laminates then put the money saved into some really expensive stainless steel handles makes the door look expensive...
-here's a really cool sales pitch... colour coordinate the living areas the colours of a peacock feather... WOW people will say
-Create a drought resistant garden
-put a water tank (don't register it just to collect the rebate, Bracks has a plan to tax everyone with water tanks)

To name a few, I can't give all my secrets away...

Have you ever considered a roomate to help pay the mortgage?

 

[macca]

Some really good advice here.

If you would like to visit a property forum, I find this one is very good

http://www.somersoft.com

Happy hunting

 

[Bronte]

This forum is certainly well worth a look
Also check out Ian & Jan Somers books:
'More Wealth' & 'Building Wealth"

 

[Bronte]

The '1st investment property' is always going to be the most difficult.
After that...when you know the numbers work...it becomes a lot easier.
The very best of luck Ken