The other day I was having lunch with a friend who started telling me that he has recently bought a number of investment properties, of course the fact that he’d bought three properties in the last nine months was a surprise, yet he also informed me that he bought two of them sight unseen, he said he uses a Real Estate Calculator. As my eyebrows rose, he told me “purchasing an investment property is about facts and figures, not about what it looks like”. Facts and figures?
So it turns out that many property investors use programmes that are available over the internet to analyse the potential returns and gains of an investment property. I later searched the internet to find a number of solutions available on the market. It seems that the most common ones are PIA by Somersoft, Real Estate Investar and iPropertyCo Property Analyser. Each of these programmes seems to vary greatly in price and complexity. Interestingly the iPropertyCo version was totally accessible via the internet so I could use it on my Apple MAC.
So I learnt something new this week and now I’m spending some time scrolling through the internet looking for an investment property with the use of my Real Estate Calculator, oh and some guidance from my friend too.
Ni Nillix
Great to hear you have an active investor as a mentor who is able to cast an eye over your decisions…
I personally use PIA by Somersoft and find it is very good, the reports the software will generate and the ease of entering 'what if' calculations are great… don't know the others so can't comment there.
Very skeptical about this – properties can look great on paper, but later on you can find yourself without a tenant for long periods or with no capital growth after a year because you didn’t do proper due diligence.
There is no substitute for using your eyes, ears and common sense. For example, when you visit a potential investment:
* Look at the quality of the fixtures and fittings – this will indicate how much you can depreciate. If you’re trying to maximise depreciation, avoid refurbished places.
* Note the orientation and privacy of the property – if it’s too noisy, dark, cold, hot or lacking in privacy it won’t be attractive for tenants or they won’t stay for long.
* Walk around the neighbourhood and note the nearby facilities. Is there public transport nearby? Cafes? Shops? Schools? Parks? These are the facilities tenants want to live near. Having all of these nearby will increase the value of your property over time as land close to such places becomes more scarce.A smart investor takes the time to do their due diligence in order to ensure they make the right investment.
“purchasing an investment property is about facts and figures, not about what it looks like”.
True. But what if there are bikies living next door or a drug den out the back?
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
Yes well due-diligence about the facts on the property would certainly uncover any issues with Bikies living next door and getting a depreciation schedule done would cover the fittings component. Actually my friend advised me that he always gets a dep schedule done and in one case before the cooling off period. That’s a pretty good idea.
Additionally, I’ve been using the post sales data through Australian property monitors and Residex and they have good stats about the vacancy rates rents and values.
Cheers
Hehehe cat among the pigeons. I have bought sight unseen (went and saw it week before settlement). The bikies live across the road and seem very nice, couldn't really tell since they were revving their engines and wearing a lot of black leather.
But since my tenants don't seem to care that they live in a house on a main rd, without a bath tub and with bikies across the road why should I? I think the drug den would put me off as a buyer tho…..
I think it is about strategy, knowing the area and about understanding the risk. There is always a chance that a perfectly good, brand new inner suburb property can stay vacant (as I found recently) because the tenant pool is no good at that particular time.
Just my opinion!
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeAgreed – and if you got good cash flow from your drug den even with some vacancy, if could still be a good investment. Actually, that’s a good thing about the iPropertyCo Property Analyser, it allows you to play with the vacancy rates etc so you can work through different scenarios.
I have just looked at a property that i personally don't find very appealing, however, it's proximity to all facilities is excellent and the rental facts and figures show a great return and about 2% vacancy rate over a very long time frame (10 plus years.) Needs some work done to it, just doing the number crunching to determine if i go ahead with it or not.
Sonya
sonyasal wrote:I have just looked at a property that i personally don't find very appealing, however, it's proximity to all facilities is excellent and the rental facts and figures show a great return and about 2% vacancy rate over a very long time frame (10 plus years.) Needs some work done to it, just doing the number crunching to determine if i go ahead with it or not.Sonya
Sonya, don’t just go on facts and figures and facilities. What is it that you don’t find appealing? I only invest in IPs that I personally could see myself living in e.g. lots of natural light, not too noisy, secure entrance, courtyard or large balcony etc. This way, I will attract like-minded tenants who are more likely to be comfortable and stay longer. Having facilities nearby isn’t enough – the place itself has to be homey. You can always renovate and add the depreciables.
********************************************************************************
Gee Kate…. you might be limiting your investing really. That really lets out quite a big list of properties. There is a lot of things i wouldn't live in, but if someone else will and they will pay me to do so then I won't say no. Due dilligence is about making sure what you are buying is a good investment. If the pretty house/unit/flat is a good investment then fine but most of the time they aren't as good as the uglies. I also wouldn't live in commercial property but it would make a good investment. Sonya I'll leave the rest up to you.
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email Mesonyasal wrote:I have just looked at a property that i personally don't find very appealing, however, it's proximity to all facilities is excellent and the rental facts and figures show a great return and about 2% vacancy rate over a very long time frame (10 plus years.) Needs some work done to it, just doing the number crunching to determine if i go ahead with it or not.Sonya
Sonya, can I ask what investment property software you’re using? I’m using the free version at http://www.ipropertyco.com and I’m interested to learn if others are using it.
Relating to the comments about only buying a place that I would live in. I agree with Sonya, that’s not a very good indicator of whether it would make a good investment or not. Actually, if I look at the properties I would live in, I wouldn’t be able to buy one as they would be too heavily negative geared. In fact my friend advised me not to get hung up on whether I would live in the property or not as the fact is that within inner metro cities there is a shortage of rental properties. A friend of mine who is an agent on the Northern Beaches told me that the other month he did a Dutch auction on a rental property because so many people turned up to see it, he simply asked people to fill out the rent application and accepted the one with the highest rent.
I guess like anything, the facts don’t lie. Although it would be important to ensure that you’re property doesn’t have a power generator next door or full of cell towers that could give your tenants cancer, yet in saying that, if odd factors like that mean that the property can be bought for a lesser price, then perhaps you could get good cash flow on it anyway.
H8i Nilix,
I don't use any software as such, just do the numbers myself using the mortgage calculator on RE.com
DWolfe wrote:Due dilligence is about making sure what you are buying is a good investment.So true, Mr Wolfe (Pulp Fiction flashback!), but it’s not only about that. Adopting a more selective, patient approach has delivered me steady capital growth, high depreciables and long-term, happy tenants.
To me, due diligence involves taking into account a wide range of things, including figures and formulae, others’ war stories and common sense. The more information the better. Never trust the spin of one person – check all the facts and make an informed decision. You can only benefit from it!
***************************
I DIY manage with Rentwise.
Kate Melb,
Hey whats this DYI Manage with Rent Wise? If you DIY manage doesn’t that exclude you from being able to use Land Lord Insurance? It must be a load of work, thinking about the places I rented back in the day, calling people about leaking taps etc.
Nilix wrote:Kate Melb,Hey whats this DYI Manage with Rent Wise? If you DIY manage doesn’t that exclude you from being able to use Land Lord Insurance? It must be a load of work, thinking about the places I rented back in the day, calling people about leaking taps etc.
Not at all Nilix (my favourite Voyager character). No insurance exclusion – landlord’s insurance relates to the IP status of the property, not who’s managing it.
Barely any work at all, just paying the odd bill and fixing a once-in-a-blue-moon thing like a leaking tap. Few phone calls = no big deal. Got sick of paying PMs $1000+ a year to do 2 hours work and then you can’t even reach them on the weekend. All the legal info and forms are available for free, online and in plain English from the Consumer Affairs Department.
Only use PMs to find tenants, but all of mine are long-term now. After all these years I’ve never needed to go to the tribunal or evict anyone but might use a PM to help with that should that ever happen.
In the meantime, I’m taking the money I’d spend on a PM to invest in improving my properties, which increases the depreciables and capital growth and keeps the tenants happy.
**********************************
I DIY manage with Rentwise.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
