All,
I thought it might be a good idea to share the process of my buying an IP in here – always happy to get your inputs.
My situation:
1. Budget 400-500k though can go much higher; 1-2 bedrooms; suburbs adjacent to Brissy CBD. Reasons:
a. 1-2 Bed, this is because I am after rental income. My research found that the smaller size properties are better at cashflow but worse on capital gain. I prefer cashflow.
b. Qld 4005, Qld 4171, Qld 4030 – the occupiers are professional workers. So should be good, responsible tenants. Rather than finding which suburbs, I determine what I want ie. professional tenants in areas where there is plenty of rental demand and rent is reasonably high. Then select a few suburbs to focus research on – just any 2 or 3 of them, because the rest would not make much difference.2. Buyer’s Agent: I don’t live in Brisbane. Was going to find a buyers agent, but decided against it. Because cannot justify why, despite never been to Brisbane (your views are welcome, am happy to be proven wrong). These are the services buyers’ agent do (according to their association – REBAA):
a. Gain an edge by having your own advocate who is representing your interests 100% throughout the purchasing process. Understand the complexities and processes of buying by providing objective information, advice and support. Cattleya’s comments: mmm…, ok, but not convinced why they would be.
b. Save time by searching for and analysing property on your behalf. Having someone do this for the buyer often results in a more efficient and faster outcome.
c. Negotiate to obtain the very best price and terms. Cattleya’s comments: I am doing my own research, have a list of the prices for selling as well as rental. I know the rough price per bedroom is around $170k-$200k, depending on condition. I know I don’t want new buildings and I can rely on valuers and the bank to tell me if it is really overpriced.
d. Source the correct property in the right location with better prospects for capital growth and/or rental yield. Cattleya’s comments: I am buying in suburbs surrounding CBD – Qld 4070, 4171 and 4005. What ever the risk of bad suburb / street, I think, cannot be that bad simply because of the suburbs are fairly expensive. Wouldn’t get anybody that bad.
e. Access databases and information not readily available to the public, including increased access to properties off market.
f. Eliminate stress by having one representative looking after your needs, rather than dealing with several different selling agents. Cattleya’s comments: Arrange finances – I already have ANZ supporting me.
g. Other concerns I have: They are not regulated, there is no reliable performance criteria, the fees (2-2.5% purchase price plus other expenses) are quite high, and the ‘other expenses’ adds up too.3. Investment Structure: was going to use a limited company structure but have not found a good accountant who understand company law and tax and be investor friendly. I do not need an accountant who tells me what cannot be done. I want them to tell me what my options are given my objectives. Am still looking and did talk to a few, but they are:
a. Not enough qualifications / experience – their Linkedin profile
b. too geeky / not investor friendly – skyped them,
c. insist on getting paid before talking to me – well, I’d like to know what I’m buying
d. their fees are too high. They asked for >$1000 for setting up a company and I know it costs almost free / very little money using off the shelf company website suggested by ASIC.4. Finance: Got pre-approval from ANZ, found the properties I am interested in.
5. What now: Speaking to RE Agents – tip, when they tell you the price, be silent for a few seconds. Their reaction to the silence will tell you more honest info. For example if they insist it is ‘cheap’, it is usually not.
Thus far, anything you think I should’ve done differently?
Wish me luck. Will keep updating this post as I go along.Cattleya
Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
3. Try a lawyer for this as it is legal advice – Corporations Act. Tax agents can only advise on the tax aspects.
You will find the asic fee for setting up a company is something like $465 – plus the time for the advice and the administrative set up costs. Do you know the legal consequences of being a director of a company, how to structure a company, shareholder structure, land tax issues etc.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Cattleya
I thought I would give an opinion of a buyer’s agent to hopefully give you some more information. I only help clients buy property in Adelaide so I have no vested interest in getting you to use a buyer’s agent for a Brisbane property, however I thought you might find my comments useful so I thought I would comment.
Many of your points about buyer’s agents are noted, but I guess the greatest benefit I find my clients are seeing is that when you are interstate it is hard to get a ‘feel’ for a property or an area without seeing it. Now I am not sure how many properties you will go and look at but if you have to fly down and look at the property to inspect it each time, this can become costly in both time and money spent on travel. You may want to look at 10 properties before you sign a contract, and a buyer’s agent can inspect them on your behalf and get you to only come down when a property looks like it is suitable. A buyer’s agent should be able to significantly reduce the number of times you need to travel to Brisbane to inspect properties. Then there is also after you buy the property, making sure that everything runs smoothly and the property is handed over in a reasonable state, and that you have access to suitable property managers that the buyer’s agent can manage their progress.
Yes using a buyer’s agent can be an added cost, but for many people that are time poor and unfamiliar with an area they can find the service as a huge value add. Maybe it is worth talking to a buyer’s agent just to see what they have to say, most of them should offer a free consultation, and they may already have something suitable for you.
All the best with your search for the right investment property.
Adelaide Buyer’s Agent | Independent Property Consulting Adelaide
http://www.ipcproperty.com.au
Email Me | Phone MeStefan Miraglia - The Adelaide Buyer's Agent from Independent Property Consulting
RE 1. the post codes you have picked are quite different areas – price wise and demographic. From your description I’d say 4005 is your area. Stick with a 2 bedder – even professionals like having space. Especially in this day where more of them work from home. A lot of developers here have a 1:3 ration for 1 vs 2 bedders in developments.
2. If you don’t know Brisbane a buyers agent is a good option. Of course there are black sheep – just like in every industry. But they should be able to give you a fixed fee – either in hard $ or as percentage. The other alternative are the websites and that will take time.
3. I had advise re buying a shelf company – all up it was about $800. So less $1000 is correct considering their time input. You can do it yourself if you under stand what is required. That would save you the fee but it’s still around $500. I am not sure I understand what you want from an account – you already know what you want (ltd). So do you want tax advice? if it is legal that’s the lawyer talking not accountant. And if they tell you what you can’t do that should leave you with what can be done. And I can’t blame them for charging for detailed advice – that’s how they make their money.1. Budget 400-500k though can go much higher; 1-2 bedrooms; suburbs adjacent to Brissy CBD. Reasons:
a. 1-2 Bed, this is because I am after rental income. My research found that the smaller size properties are better at cashflow but worse on capital gain. I prefer cashflow.Hiya,
I’d suggest avoiding 1-2 bedroom properties close to Brisbane CBD for 2 reasons. Firstly you’ve suggested you like cashflow and these will be severely eaten into by strata levy / body corporate fees. Secondly because there’s about to be another 1000 apartments in Brisbane once http://www.news.com.au/finance/real-estate/new-brisbane-residential-tower-to-become-citys-tallest/story-fndbalka-1227114828591 is completed. This will majorly effect the supply / demand equation for 1-2 bedrooms close to Brisbane CBD and everyone will have to reduce their rents (and thus their cashflow) to compete.
With your budget, might I suggest 2 x 250k cf+ 3 bedroom houses in Adelaide metro area instead?
Cheers,
Dave
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This reply was modified 9 years, 3 months ago by
D.T..
D.T. | DT Property Management
http://www.dtproperty.com.au
Email Me | Phone MeAdelaide Property Management - whole Adelaide metro
Terry Waugh, Stefan Miraglia, KatarinaH, DT your wise counsels are much appreciated and I am taking all your inputs into considerations as I go along.
My status now,
1. Area – Qld 4171 so Bulimba, Hawthorne and Balmoral, for 2-3 bedroom flats. DT, thank you for your input re. 1000s of new developments in Brissy. It gave me cold feet and second thoughts, but I decided to be brave and go ahead with Brissy. Simply because other states have their own warnings, for example NSW and Vic are over priced and predicted to crash soon. Adelaide and Perth are smaller and reliant on commodities which has been on a downturn.
You’d agree that any investment will have ups and downs and our survival is largely determined by our financial strength, strategy and luck. There seems to be no clear advantage of choosing one state to the other. I’ll just hold my nerve and jump in anyway. These are how I select the properties:
a. Since April 2015, I diligently list all properties offered for sale / auction in the area and the actual prices they were sold at. My data tells me that:
i. Bulimba is the most popular of the 3 suburbs. It has the most movements, generally more expensive than the others. The average prices (both offered and sold) are $286k per bed room in Bulimba (based on 82 properties), $264k per bedroom in Balmoral (based on 32 properties) and $254k in Hawthorne (31 properties).
ii. Hawthorne seems to have more houses, a lot of which are being gentrified into modern flats ie. a lot of off the plan purchases. Which I am not interested as these usually have high mark up and building and internal defects may not be apparent until a few months / years down the track.
iii. Most properties are sold not much different from their advertised price, though they are rarely cheaper than the advertised price. The ones auctioned are usually deemed to be favourite properties and hence more expensive.
iv. It usually takes 3 months to sell, although some are faster.
v. Rental wise, Bulimba also commands higher rates at $269 per room. The cheapest is Hawthorne at $193 per room. I also know renting is not a problem as the properties are usually gone by 3-4 weeks.b. I also get a report from ANZ about how much a place was last sold off. So if I made an offer, ANZ tells me when it was last purchased and how much. So I know whether the price is reasonable or not.
c. Discussions with agents to understand what they think. I listen very carefully to their intonation, words, etc. I believe this is where the ‘game’ is. Haggling.
d. I confirm the ‘look’ of the property through other websites such as Google map, domain / realestate.com and any other information on the web.
e. Overall criteria: definitely not off plan; difference in price must make sense (for example better buildings, etc); no swimming pool (translates to cheaper strata fees), and if possible currently tenanted, the rent also must make sense (if very high rent and cannot find any justification then something is wrong – alarm bells go off).
2. Yes Stefan, you are right I cannot agree more. I appreciate the benefit a buyer’s agent provides though I still struggle to see why they’d strive for my interests. Their reward structure simply does not incentivise them to do so. Having said that, I may later on change my mind and hire a buyer’s agent. At the moment though, I still think I am better off without them.
3. Yes KatarinaH and Terry, you are right, I totally agree. I am still thinking about getting an accountant / lawyer. Lawyers I contacted seem to be less investor friendly than accountants. Accountants seem to be more proficient in business concepts, though the ones I met seemed to be over burdened with their existing loads it felt more like a sausage factory where it is all about meeting their deadlines. My expectation is to find a business partner / advisor I can trust, long term relationship where we support each other. In the future there will be a lot more work re. conveyancing / legal, tax advise, etc etc. I suppose I need both accountant and lawyer and don’t mind paying on-going fees or a premium for a good reliable service.
Currently it seems a bit too late to create a company structure. I’ll just buy this one under my name and give myself more time to find an accountant / lawyer I like.
4. No exciting news re. financing. I am still with ANZ and totally happy with them. Service has been awesome, a few hiccups here and there but nothing major.
5. What now – I have made a couple of offers to the agents and expect these to be rejected. After all, nobody accepts first offers as they always ‘haggle’ for higher prices. I have also started looking for a conveyancer and building inspector to get ready for doing their bits.
I understand that this is where a buyer’s agent will be most helpful – face to face negotiation and all. I am just not convinced why they would strive to get the best price for me when his fee is on a fixed price and even more so if % of purchase price.
Thank you again for the advice, and do let me know if there is anything else you think I should’ve done differently. All comments are welcome.
Cattleya
Here to learn the ropes of property investing and hopefully help others as well.Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Latest Update:
1. My offer to a flat in Bulimba was accepted at $430k, 2 bed 2 bath and 1 parking flat, currently tenanted.
Strata is roughly $3300 pa, rental income is $21,840 pa.The flat was built in 2002, sales history:
Oct 2002 sold for $265k
Oct 2004 sold for $290k
Jul 2009 sold for $400k
Sep 2015 sold for $430kI think I get a good bargain because:
a. The current owner bought it for 6 years ago at $400k – which means only 7.5% increase in 6 years as compared to:
• the previous owner (held it for 5 years and got 37.9% increase)
• the Bulimba market annual growth is averaged 3.06% (according to RE.com.au) and 3.5% (according to Domain) for the last 6 years (the current owner gets only 1.25% each year).
b. This is the better property from the last one I offered (2 bed, 1 bath, 1 park asking price $420k, built in 1999).
c. At LVR 80%, this flat is positively geared or at least break even. But I want to make it negative gearing and hence borrowing the full purchase price at $430k2. Buyer’s agent – still don’t think I need one. Still think it is not worth the money… well, I am not in a financial position where I can throw away 2.5% of purchase price / $10k.
3. Lawyer, found one. Youngish, his profile says good integrity. I mean, he might not have the experience but so long as he does not make grave mistakes, I am happy. That’s the nature of business partnership, isn’t it. People make mistakes, so long as they are honest mistakes… oh well, you live and learn. It seems like lawyers are control freaks. He just ‘told me off’ because he thought I ignored his advice – but he had looked in the wrong page.
4. ANZ says financing of the full $430k is ok and I am to pay for other expenses. Cool, no dramas.
5. What now: The lawyer is now doing all the due diligence searches. Depending how things work, I probably keep him for longer term and do other stuff as well.
Fingers crossed, hopefully all goes well.
Lesson learned thus far:
1. Best to take interest in my investments (everybody naturally look after number 1, and therefore naturally I am the best person to monitor my own investments)
2. Never be too busy to understand my investments. Do the legwork myself as much as possible.
3. Be brave. If the numbers stack up, go for it. But also listen to the experts such as Bank, Lawyer and building inspectors.Cattleya
Here to learn the ropes of property investing and hopefully help others along the way. Not trying to sell anything.Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Cattleya,
That is great news! Congratulations!
Sounds like you have made a good investment and will be getting a good return which is great.
Just thought I would mention that not all buyer’s agents charge 2.5%. Some in Adelaide like myself charge a fee for service which is closer to 1%. So when your property portfolio is big enough to diversify into Adelaide, keep us buyer’s agents in mind! Because we may be able to save you in time and effort, not just money.
All the best with your new investment property and growing your portfolio.
Regards
Adelaide Buyer’s Agent | Independent Property Consulting Adelaide
http://www.ipcproperty.com.au
Email Me | Phone MeStefan Miraglia - The Adelaide Buyer's Agent from Independent Property Consulting
Final updates re. the purchase.
Settlement was done and dusted on 9 Oct 2015. My first property ever in Brisbane.Signed the contract on 2 Sep – so the deadlines were:
a. 5% deposit due in 5 working days – this is because ANZ imposes a limit of $10k daily transfer.b. Building and Pest within 1 week – I missed this date because of miscommunication with my lawyer. I thought he was organising all the searches and it was actually written on the form that he suggested the buyer (me) to organise this one. So asked for an extension until 23 Sep, along with other searches.
c. All other searches and finances due on 23rd. Met this deadline no sweat. The searches were all the recommended ones plus pre-purchase valuation. I wanted to know whether an independent valuation expert would have vastly different view from the agreed price. The report came back at the agreed offer of $430k.
d. Settlement on 2 Oct. Missed this one because the loan docs did not arrive on time – I should have checked that the mail was express. Instead I was pre-occupied with tracked or signed for mail. Anyway, lucky the vendor did not mind to extend till 9 Oct and the loan docs arrived on Fri 2 Oct leaving enough time for ANZ to prepare for settlement.
Lessons learned:
1. Very very lucky to have a team of excellent professionals: lawyer, RE Agent, ANZ, valuers and building + pest inspection.2. Buying a property is like playing jigsaw puzzle with a lot of pieces. There is assessing market, get the right price, the right property, finances, legal matters, etc. I can try to fit all the pieces together or I can get somebody to do it for me ie. using buyers agent, mortgage brokers. But some ‘helpers’ are not necessary – I just need to make time and actually do it.
3. Everybody naturally looks after No. 1. Therefore, I only trust them if their interests are the same or at least not against mine. For example, lawyers / building inspectors – the fees are fixed and they are not linked to the vendor. I can trust them. Buyers Agents however, they naturally want to get as much money as possible, as fast as possible. So anybody who agrees to tie their fees to purchase price is blatantly stupid because the higher the purchase price the more money they get especially if they are buying properties the Buyers Agents themselves are selling.
4. Have to be very critical when looking at these people – a lot of them have no qualifications what so ever. This industry is highly unregulated – even ASIC cannot do anything.
– Given that membership to this website is open to all, it is easy to create ‘bogus’ customers and colleagues who then provide recommendations.
– Question everything they say. For example somebody says: Don’t do this and that because they are dangerous. But they do not explain why those are dangerous and yet at the same time you see successful people like Steve do these things all the time. Answer is, that somebody is out of their depth, doesn’t know what they are talking about. Why hire somebody who doesn’t know what they are doing?Anyway… good luck to all investors, hope you all get to financial independence safely.
Cattleya
On this website to learn the ropes of property investing and hopefully help other fellow investors along the way. Not trying to sell anything.Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Cattleya
Congratulations on your first property purchase in Brisbane! It is great to see that you have learnt a lot from your buying experience and that you have shared this with everyone as I am sure a few other potential investors will pick up a few of your learnings.
It sounds like you are a person who wants to learn and experience the full process for yourself, so you may not need to use a buyer’s agent. To me your comments show exactly why someone would use a buyer’s agent. Many people do not have the time or willingness to go through all of this and many people greatly benefit from using a buyer’s agent as they take much of this process away from them. A good buyer’s agent will help put all the pieces of the puzzle together on your behalf which definitely makes it easier, especially for those who have never invested before.
With regards to the fees paid to buyer’s agents, many of them negotiate this fee upfront and it is a flat fee (which may have been based on an estimated purchase price) so in the end there is no difference to the purchase price. I myself and a few other’s have moved to fee for service and it is a flat fee for our services, so you can be assured that the buyer’s agent is 100% on your side. And you can also check to see if the buyer’s agent also acts as a sales agents. Some buyer’s agents like myself do not act as a selling agent as well so you know there is no conflict for the buyer’s agent to ‘buy you one of their properties that they are selling’.
And you always have to ask for buyer’s agent qualifications. Here in South Australia you can check to see if they have a Real Estate License (RLA) and if they are a member of the Real Estate Institute of South Australia (REISA) or another professional body. You are correct in that there are some cowboys that portray themselves as ‘buyer’s agents’ with no qualifications or licenses, so be careful and always do your homework.
Overall I think you have done a great job and you will be fine acting on your own in future. But for many others, especially when buying an investment property interstate, I believe that using a local buyer’s agent in that area can save them a lot of time, stress and potentially money. As an Adelaide Buyer’s Agent I take great pride in helping those from interstate buy their first investment property in Adelaide so if you ever decide to buy in Adelaide, feel free to contact me as I will be happy to have an initial chat and hopefully put you in the right direction, even if you decide to go out on your own.
All the best with your new investment property.
Adelaide Buyer’s Agent | Independent Property Consulting Adelaide
http://www.ipcproperty.com.au
Email Me | Phone MeStefan Miraglia - The Adelaide Buyer's Agent from Independent Property Consulting
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