Forum Replies Created
syee,
look up this article http://www.theaustralian.news.com.au/story/0,25197,24326606-14741,00.html
google the names of the growth plans for each capital city ie Melbourne 2030 for Melbourne, as mentioned in the article. You'll get a feel for how the cities are going to grow. property appreciation is underpinned by population growth – that'll give you a lead to where you need to seek.
That's the macro view to get you going.
good luck!
Hi,
avoid places where it's restricted to just students(either as renters or buyers)…in the fine print of some projects they are quite restrictive, and the more so, the lesser the value those properties should be.
also, avoid those that come with lease-back deals where you are locked into long-term leases.
In general, stick to properties where you have clear control, and total flexibility to 100% of the marketplace. Be prepared to do the hard yards as a landlord rather than the seemingly "easy" option of lease-backs and letting pools tempting you with guaranteed high returns with no vacancy – it's likely you're making someone else rich when you avoid risk and take the "easy" option.
I just did both. Not long ago I posted a unique studio property and managed to get lots of enquiries on Gumtree, so it's worth the effort. There are a couple of other free sites that may be worth posting on as well – see below.
melbourneexchange.com.auandwebindustry.asn.auhi pagey9,
fyi, just remember that student accom is a niche, and therefore you are removing yourself from the wider market. it is generally better to invest in a property that have widespread appeal and reach(to give you greater renter options), although there may be times that niche is so high in demand/short supply that it's attractive at times.
some shortfalls you'll most likely find:
1) financiers either don't want to lend on these or may lend less 80%
2) it's competitive and not very sustainable
3) you can only rent to students, and you can't live in it yourself/use it if it's vacant(unless you're a student)
4) when it comes time to sell, it also attracts a smaller segment of buyersregards.
Hi Louise M77,
generally speaking, residential property investing is simple to understand, a lot of it is common sense. One's intuition is pretty handy too. Things like property data, demographics, social trends, lifestyle trends are all powerful indicators to where people want to live and therefore where properties will appreciate more.
I echo Jonchu's sentiment to research yourself a little bit, but you don't have to "see the light" upfront. I myself found that like all things you won't really know the blinding vision until you take the leap of faith, and you'll refine along the way with your 2nd, 5th, 10th, 100th purchase…as you evolve your properties will form a common identity. Zto make a start it's enough to have a hazy destination, a sense of where you want to go with this.
My 2c worth – 1c is to understand the power of leveraging(money and non-monetary resources). That is the most powerful tool of property over other forms of investing. The other 1c is the magic of compounding – "the rich get richer, money begets money"
I should correct myself and say my parents were always property believers and instilled in me that buying property is a great way to build wealth. So I realise they are in fact role models to me there, and got me the break when I was 18. My dad said something to me this year that I never knew – he said that in Chinese circles, our clan(or dialect group), is historically poor and uneducated. However, there are two things they strive for despite the odds – 1) to give their children a good education, and 2) accumulate property. When he said that, another few pieces of the puzzle to my genetic makeup just fell neatly into place.
My parents came from poor families, however my dad was one of the first in his generation to get a university degree. Through my parents sacrifices including unrooting an established life to come to Australia, I gained the benefit of growing up in Australia and getting a uni degree myself, and now in a stable job. My parents were strong savers and lived modestly, however as investors they had mixed degrees of success.
Growing up there were no strong mentor figures or role models who advised me to get into business or property, however my parents did buy some property, and in fact helped me buy my first property at the age of 18. I was holding down 3 part-time jobs at one stage while in uni – the usual waitering jobs. I've always been a dilligent worker(1st job at hungry jacks at 14) and managed to save up along the way.
That first property was a basket case for the 1st 7 years or so I held it. It was literally the cheapest house in the cheapest suburb in Perth at the time, about $55K in 1991. But I managed to squeeze out a 2-lot subdivision , and the area underwent urban renewal, then of course the Perth boom unfolded.
From 1996-1999, I was in a dream job however I lost my savings to share speculation and a bad bout of casino speculation. I was virtually cash broke. It was such a waste of money, and more importantly the time wasted was such an opportunity cost towards greater things I could've achieved. Anyway….the saving grace was that I learnt these tough lessons early in life…
After that first purchase in 1991, I did not buy another property until nearly 10 years later, something I regret. It meant missing out on the Melbourne boom around 1999/2000. However since then I have aggressively invested into property, and have made the most of my opportunities in the last 2 years. I have virtually trained myself to absorb every bit of info about property investing in my spare time. It is a passion. I sat down this year and made a skeleton plan with some unbelievable targets, don't know how I'll get there yet however it's a compass to know where I want to get to. I hesitate to say what it is, however since there is anonymity, my property plan is called "$40m at 40". The $40m is gross market value of property. I am 34 now, and control just over 10% of that figure currently so the foundation is there…dream on I know, but heck I might as well dream big. 6 years, with some natural compounding along the way, is what underpins it.
In closing, the self-help and motivational books are all there to unlock one's potential, there are not many "money secrets" left unpublicised so it's down to applying the small cachet of them that works for you. And the self-visualisation and actualisation of dreams and goals – "imagining yourself getting to that place", really does work.
You would have to say that on pure macroeconomics, the Australian domestic economy is very strong, and on property demand and supply, it's very rosy for those holding property. I hold a very bullish view for the next 2 years on nearly all capital city real estate within 10km of the CBD or anywhere regarded as blue-chip, in middle and high end suburbs. Interest rate rises if relatively gradual will not materially affect these markets.
The real great danger is the ripples of US credit crunch if it shuts down the supply of loans/finance here in Australia.
For Melbourne, I'm guesstimating we are still at most 11 o'clock on the back of tremendous migrant and student influx. Jury's out on Adelaide – still way cheap in certain areas considering some great stimulatory factors on the horizon(for me, could still be about 9 o'clock where I am interested). Sydney – 7 o'clock for the good mid-tier areas.
State land tax is probably higher as well under a trust.
Similar experience to you, a lot more hassles with trusts. Some bank officers have no real understanding of trusts, in the end they will want all sorts of personal guarantees. ANZ and NAB did accept it in the end.
My other half and I are divided on the issue. I still maintain that asset protection under something other than personal name is worthwhile in the long run, however it is likely the costs are higher and the tax benefits are lower(the really smart tax cookies will debate this). And more hassles with the banks. From personal experience, perhaps my outlook is to consider it for higher value properties (say>$500K) with the view there is more to protect over time, and perhaps leave smaller properties under personal names, with minimum equity, and cover with all types of insurance as how the financial adviser tackled it.
I have been self-managing a cluster of 1 & 2 bedroom apartments in the Melb CBD near Vic Markets for my family, all in the same building. It does tremendously well and achieves close to 10% gross rental yield. It rents out like hot cakes as it attracts both students and professional working people alike. In agreement with the other comments, apartments are not great capital growth assets, however the ones I manage are great income assets that supplement a greater property portfolio. Only a handful of apartments are worth having. I have searched most of melbourne CBD but cannot find apartments in other buildings that justify further investment based on rental yields.
To summarise, good 1 bedroom apartments could be a good stepping stone towards bigger capital growth assets. In my experience they have been greater income producing that 2 bedroom ones. I wouldn't even contemplate 3 bedroom in the CBD.
Hope that helps.
I'm not your financial planner, so take this with a few grains of salt. If you can stomach it, I'd advocate sticking to the areas you know (whether local or further afield), and by doing extensive research, go for the best capital growth area you can afford even if the current yield is sub 4%. You're right, you mostly can't have both capital growth and high yield at once, however with time you can achieve the high yield by chipping away on 2 fronts – you can count on CPI increases on rents in long run(if not more by value adding), and you can pay off the loan as you see fit. Both these will lead to higher yield over time, but you can't manufacture the location to be closer to the CBD, or change the image of the suburb on your own.
Those who overemphasis positive cashflow may head down the wrong path in the long term and miss out on a very strong capital growth story in the capital cities of Australia.
Hi Stumunro,
Coincidentally I tallied things up and it's about 65-70% leverage across my property portfolio. Not quite at the stage of using equity to service debt however I am open to another property acquisition in the next 12 months which will push things higher. I understand the risks of debt if taken to the extreme, however I'm at a stage in life where it's right to take a few calculated risks. I do not turn a blind eye to the doomsayers, but the way I see it, it's probably only a 20% chance that 2008 will be a down year for property in Australia, > 50% chance my portfolio will add to its paper profits, and therefore I am planning to be aggressive for another 2 years or so, then buckle down and maybe even liquidate a bit sometime in 2009/10. As previous post says, the first few shocks is likely to play out over a 12-18 month period and the govt in power will be keen to cushion the blows(after all which PM in power would like to be the bad guy in spoiling a 16 or 17 year economic growth.prosperity party?).
What are your own views?? All my comments are personal views and by no means expert, but hey every investor should form a view of the macro world when they invest. And the levels of leverage is also personal, there is no right or wrong levels across time(ie should be highly geared when the conditions appear low risk, and the converse when conditions are shaky). After all, if Trump was ever shy of extreme leverage, I don't think we would know who he is today.
Hi,
Not sure about apartments – you should visit their display or if unable then give Mirvac a quick call or visit their project website. I visited the estate earlier this year and the mix of architectural styles wasn't to my entire liking. You can tell that some designs won't date gracefully. It's probably booming but so is the rest of inner Melbourne and the west. All the ugly ducklings in the west up to Maidstone is now pretty solid, and a friend of mind says he's seeing buyers coming from the east of Melbourne because they've been priced out there. And the Docklands office factor will certainly add to the buyers seeking the inner west.
The Western governments and their respective reserve banks have given us a taste of their intent – that of being the White Knight in any impending crisis. The Fed swiftly cut rates by 0.5% while the Bank of England bailed out Northern Rock, which otherwise would've folded under a bank run. You can bet that little Johnny or Kevin for that matter will use their might to cushion any financial or housing crisis when it happens in Australia, and so they will intervene and while not averting disaster, will buy time, as the US and UK have bought time.
I am heavily leveraged into high capital growth property. I have an eye towards the worst case, however I am walking a tightrope and am open to further property acquisitions so long as the fundamentals of supply and demand of housing shows no signs of changing whereby supply of inner-city housing remain well under the demand. Time will tell if I make the right moves.
Same with Salacious…learnt from missing the Melbourne 2000 boom by buying in big in mid/late 2006, reaping paper rewards now. Also dipped into Sydney and planning to buy some more. Sydney is ripe for the taking, and best time to buy there was late 06-Feb 07 in hindsight.
as for steady boom this time around, not too sure with all the excess money floating around…in the 10km radius Mel CBD you could generalise that prices have escalated 40-60% in a short period. I could see another 20-30% in some areas over the next 18 months barring any interest rate or global jitters. Steady or high ramping, is everyone's own interpretation.
Lostie,
I echo the sentiments here that say it's worth DIY so long as you can see the benefits, as there'll be downsides(which is greatly reduced as you get more experienced). Think of it as running a business, as they say you need to be hands on to learn anything and also protect your investment better.
When you self-manage it's not just for saving a few pennies. You learn what's going on around the area. For example, I manage a group of apartments in Melbourne CBD and through handling the enquiries first hand, it led me to realise how many people were seeking furnished accommodation because they were on 6 month contracts or study. And the huge numbers of white collar professionals esp from India suddenly in melbourne, hence it surge of Indian eateries
. That's what you call having a finger on the pulse, seeing first hand who and what sort of demand your property is attracting. Most property managers won't tell you much unless you ask.That's the beauty of self-managing – the people you meet from all walks of life, the things you learn that become life skills, and it has the potential to lead you to bigger things. For me I plan to build a substantial property portfolio so I am motivated to learn all I can about property, as the saying goes you get what you put in. But as you get bigger, there will be a balance to delegate property management to property managers if it takes time away from finding the next acquisition.
PS: I find you can be both professional yet forge strong bonds with good tenants. A tip, if you're self-managing your property, is to "white lie" and say the property is owned by several partners/family members, or the owner is your relative, to create an illusion that you are more a property manager than owner and can't give them discounts etc without consulting others. i know in this particular case it doesn't work cos the tenant is the previous owner, but for other cases it can work. I know because I manage my relatives' properties as well as my own, and find this works well.
Stretch yourself and try and get closer to Frankston centre where a lot of development money is going in. I prefer Seaford as close to the bay as possible. That should be your goal rather than go inland. Also, in time, there may be a difference in price b/w properties west of Eastlink vs east.
Given you're an investor, try for an older house that you can improve over time if it gets you into a superior location. I an speaking ignorantly, however looking objectively, it's unlikely those 2 suburbs have anything unique to offer in the long-term, that's not to say it may appreciate slightly due to the Eastlink.
Hi Reno,
Since beginning of this year it's really taken off, stories that locals and interstate investors as far as WA are buying up on the seemingly no brainer that these areas are undervalued considering how close they are to water, with Frankston development boom and Eastlink to come.
So reinforcing your perception that it's really heated, the good properties are snapped as soon as they are listed and hard to find anything decent for less than $350K, but stick to you criteria and you'll do fine…I missed a really top opportunity(a street wedged b/w nepean hwy and rail line in Seaford) by procrastinating 1 day too long and would you believe got trumped by an offer that was 20% HIGHER! No regrets, I got onto some other top opportunities in inner city Melbourne after that.
Still keeping an eye on Seaford and Carrum…
Hi Karen,
try going to the websites of developers in your city. Don't forget quasi-state development bodies (Landcorp, VicUrban)
Units/apartments – Meriton, Central Equity,
Houses – Mirvac, australand, Stockland, Lend Lease etc
Not advocating these particular brands however once you start on this track hopefully it'll open your eyes to the projects in your area of interest. But for really small developments <10units say, you do need to drive around, speak to agents etc…
Echoing the others, off the plan has its perils and you need to understand the market, and it's still a big risk after that. Having said that I recently took a calculated risk with an off the plan purchase of a high end house in an inner eastern blue chip suburb of melbourne, completion 2008. Fingers crossed as elements look OK – cycle on an upswing, reputable developers, good product (the house) in a great location, reasonable pricing that is looking cheap as the general Melb market gets hotter.
One way you can find out is either visit properties in the area on auction day, and read the vendor’s statement. it will contain a council or land tax certificate and council valuation on land. Size of land is not often published but you can check with the agent and put 2 and 2 together.
The desktop version would be to simply ring up those agents and request that they send you a copy of the s32, either electronically or by mail. That will save on your time and petrol.
Regards,
Scarecrow7
“In times of crisis, both danger and opportunity are present”
. That's what you call having a finger on the pulse, seeing first hand who and what sort of demand your property is attracting. Most property managers won't tell you much unless you ask.
