How to Choose a Good Investment Property and Spring Update

Welcome to your September edition of propertybuyer’s market update.

In this edition we will look at:

1. Spring market update
2. How to find a good investment property
3. Seminar 14 October - Finding positive cashflow property in Queensland
4. Client stories
5. Inspiration Corner - Thoughts of the month

1. MARKET UPDATE –By Rich Harvey

According to the market respected RP Data-Rismark Home Value Index, Australian home values rose by +0.9 percent in the month of July 2009. This brings total capital growth in the first seven months of 2009 to 5.9 percent.

Residex have also just released their latest figures which show that Sydney’s median house price is now at $599,000 (watch this space as it moves well over the $600k hurdle in coming months). In comparison Melbourne is now at $509,500, Brisbane $455,000, Perth $474,000, Adelaide $383,000 and Hobart $353,000.

In the prestige market there has been a perception that if your property was on the market then it was a sign you were in financial trouble. Equally, vendors have been reluctant to sell now because they believe they will achieve a higher price as the market sentiment improves. However, as Australia has artfully dodged recession and unemployment is not nearly as bad as first predicted we are seeing confidence return to the property market.

Across the country the most affordable 20% of properties, the middle of the market and the top 20% of properties are now all recording increases in their values. After bottoming in the March quarter of 2009, the top end of the market has now begun to improve. The median value of Australia’s premium property market is still 8.1% below the March 2008 peak but early evidence suggests the top end is following the broader market into a recovery.

For those people who have the financial ability, now appears to be a good time to purchase more expensive properties at competitive prices. The prestige market has suffered due to few active buyers and a higher than normal amount of stock on the market which has led to price falls and reductions in the asking price of many homes that are being advertised for sale.

In the first home buyer market (sub $600,000) competition has been intense between buyers with many more properties being listed for auction - particularly in the East. The first home grant will reduce by $3500 on Sept 30 and then back to standard $7000 on December 31. I expect to see a levelling of demand in this sector from early next year but not much impact on pricing. I also expect to see an increasing number of investors coming back into the market attracted by low interest rates, rising yields and potential for capital growth on a rising property cycle.

Auction clearance rates are generally considered to be a reasonable measure of real estate market sentiment. When market conditions are subdued, auction clearance rates tend to be poor; and when market conditions are buoyant, clearance rates are generally high.

This was certainly demonstrated through most of 2008. As the Global Financial Crisis unravelled, clearance rates averaged about 45 percent meaning that less than half of the properties put up for auction sold at, before or after auction.

With conditions in Australia’s real estate market improving, so too have auction clearance rates. Since the start of the new calendar year, auction clearance rates have improved consistently, now averaging about 70 percent across all auctions based on a weighted average across each market.

To get a professional buyers advocate on your side sourcing and negotiating the best opportunities throughout Sydney and Australia then please call us on +61 2 9975 3311 or email us for the easier way to buy property. Click here to send us your Wishlist…

2. How to Choose a Good Investment Property

I get asked all the time by clients and prospective investors “How do you select a good investment property?” Let’s have a look at some of the key questions and criteria you should consider when making a decision to invest in property.

How do I decide where in Australia to invest?

Before deciding on a location, investors must first work out their borrowing capacity and investment strategy. Are you investing primarily for capital growth or yield? Choose a price point you can afford and one that has strong rental remand (i.e. low vacancy). Once you know which strategy will work for your personal financial situation, then its time to start searching. So many people just jump in and ask for the next hot tip rather than taking a strategic approach to property investing.

The key to finding hotspots is to seek areas that have:
• Limited land supply for mass developments
• Large infrastructure projects (train/ freeways)
• New/ expanding industries
• Rising population
• Consistent rental demand
• Stable/growing employment
• And areas experiencing “Urban renewal.”

We look for areas that have had a consistent trend in capital growth. This is usually related to suburbs with good lifestyle appeal, close to the CBD, along transport corridors, close to quality education and shopping facilities.

Australia has some great property markets for investment and we are at a stage in our property cycle where we are undersupplied with housing. According to the Housing Industry Association we are currently short around 40,000 dwellings pa which means prices will rise as confidence returns to the market. However, this does not mean that you can just go out and buy any property and hope for good growth.

What elements do I look for in deciding whether an investment property is a good opportunity or not?

If I had to pick one factor above all others in choosing a great investment property it would be the “scarcity value” or uniqueness factor that drives my decision. Does the area have special amenities that make it a highly desirable place to live? One tip is to follow “water and coffee” – i.e. areas near beaches, waterways, cafes and with lifestyle appeal.

Some of the other elements I would consider include:
• Value-add potential – can you do cosmetic renovations (e.g. flooring, kitchen, bathrooms and make instant equity growth?)
• Rental yield – check local market vacancy rates
• Zoning – is it residential or mixed use?
• Proportion of investors vs owner-occupiers in the suburb – you don’t want to buy a generic property that competes with every other investor for tenants.
• Parking – this is a valuable element.
• Street appeal – are surrounding homes attractive or rundown?
• Aspect – does it have enough natural light?

What is better, a flat, a townhouse or a house?

Again it depends on your price point and strategy. It’s critical to choose a property to suit the local market. Houses have much larger land content which is great for capital growth but lower yield, while units generally have a higher yield. Units typically have lower maintenance requirements (but you pay strata fees) while houses have higher maintenance. A townhouse sits somewhere in between.

With the average household size declining to 2.5 persons per household and falling, it is likely that smaller dwellings in close proximity to the city will become more in demand than large McMansions in the suburbs. Our research shows that the optimal strategy is:
• Units in and around the CBD
• Townhouse/ Semi/ terraces in inner and middle rings
• Houses in middle and outer rings

My tip is to buy close to median price of the suburb so if you ever needed to sell in the future you have a wider market to sell to (ie. consider your exit strategy before buying). Who will buy after you? Don’t go in with rose-coloured glasses.

Is new better than old?

New properties will generally have a better quality of finishes and fixtures, provide a greater level of tax depreciation, higher rental returns and lower maintenance. However, older properties provide investors the ability to renovate and buy at a lower price. Developers have to make their profit margin and this is passed on to buyers. Older properties tend to be better located along transport corridors closer to the CBD. We have been able to buy old properties for 2/3 price of a new property. Buying a new property from a developer early when they need pre-sales or late in the process (when they get their profit out) can bring opportunities for investors.

If you are considering buying an investment property and would like to get the upper hand with a professional buyers’ advocate representing just you (not the vendor), sourcing and negotiating the best opportunities throughout Sydney and Australia, then please call our team on +61 2 9975 3311 or email us for an obligation free chat. Click here to send us your Wishlist…

3. SEMINAR - Topic: Finding positive cashflow property in Queensland
(NRAS and other strategies).
Wednesday 14th October 2009

Our next seminar will look at how investors can purchase an NRAS property to obtain a positive cashflow of over $75 pw. I have invited Graeme Shiels, Managing Director of Property Queensland as our keynote speaker. Graeme will discuss:

• Why parts of Queensland are ideal for property investment
• How to get a $15,000 rebate on purchase
• Ipswich - Brisbane's growth corridor and it's potential for growth
• NRAS - a summary explanation
• Positive cashflow from 100% borrowing with NRAS

Rich Harvey will also give a brief overview of what is happening in various parts of the property market and his prognosis for the rest of the year.

With low interest rates, rising rental yields and a property market rising from the correction phase, now has never been a better time to get into investment property.

Recent Government policy changes in the housing industry have resulted in the creation of NRAS – the National Rental Affordability Scheme. The scheme aims to create over 50,000 new dwellings for affordable housing. The Government will provide over $8000 pa in subsidies to investors that buy approved NRAS properties with payments linked to CPI.

You will also discover how to get a rebate when buying through propertybuyer of up to $15,000. Because we don’t take sales commission our clients benefit directly from our extensive network of agents and developer contacts where we have negotiated a better deal. You will not be able to buy properties like this at a cheaper price.

Click here to book your seat.

Speakers:
Graeme Shiels has 40 years experience in the property industry in South East Queensland, Sydney and Melbourne in various roles including investor, developer and property investment consultant. In Sydney, he has owned more than 40` properties in Mosman, Fairlight, Manly, Dee Why, Cremorne, Clifton Gardens, Bondi, Bellevue Hill, Artarmon, Camperdown, Drummoyne and Lane Cove.

Graeme has held a Queensland Real Estate License for the past 20 years and has assisted clients in purchasing properties in the Gold Coast, Logan, Brisbane and Ipswich regions of South East Queensland.

Graeme has an impressive list of testimonials from his highly satisfied clients, stemming from the professional and personal service he provides to his clients. With the assistance of his finance director he is now concentrating on delivering NRAS properties to his clients in prime areas of Ipswich.

Emily Willy has been an accountant for the past 16 years. Her qualifications include a Masters Degree in Commerce from the University of Queensland and she is a fully qualified CPA. Her past roles have included working as a Senior Auditor with PricewaterhouseCoopers, Management Accountant with Downer Engineering (ASX listed) and her most recent full time external position was as the General Manager Finance of a dual listed public company on the ASX and NASDAQ. Her expanding duties at Property Queensland have meant that she now contracts full time as the Finance Director, particularly being responsible for NRAS evaluation.

Rich Harvey, founder and Managing Director of propertybuyer will present many tips that could propel your knowledge to the next level. Rich Harvey is a professional economist, licensed real estate buyers agent and experienced property investor. Rich & propertybuyer have won numerous awards, including the prestigious National and NSW Telstra Business Awards and was most recently named the 2009 “Buyers Agent of Australia” by the Real Estate Institute of Australia (REIA). He was the winner of the NSW Real Estate Institute (REINSW) "Award for Excellence" in Buyers' Agency for the last 4 years running.

BOOK NOW BY CLICKING HERE

Date: Wednesday 14th October 2009
Time: 6.30pm – 8.30pm (Registration from 6.00pm)
Venue: Kamaraigal Room, North Sydney Leagues Club, 12 Abbott Street, Cammeray, NSW
Investment: $30 single, $50 per double
Early bird discount: Book before Sunday 11 October and only pay $25 single and $40 double
Book NOW: Call our office now on 02 9975 3311 or Click here to book your seat now.

We look forward to seeing you there.

4. CLIENT STORIES

As buyers agents we have a unique relationship with selling agents. In today’s heated market, some of these relationships are the key to our success. Selling agents like dealing with us because we present a qualified buyer ready to make a purchase. Our motto for dealing with selling agents is ‘firm but friendly’. Our allegiance is always to our clients. For buyers who are skeptical about our unique relationship with real estate agents and the overall benefits that these relationships bring to our clients we have included a few testimonials from recent transactions:

“Saul, it was a delight to work with you. Your decisiveness and understanding of your client made for a very smooth transaction. I also appreciated when you said you would follow up you did and to coin a phrase ‘you are a man of honour.’ I look forward to a continued relationship and many more successful sales.”

Kind Regards,
Deborah Vanderhoek
Director, L J Hooker Bondi Junction

“Saul, I just wanted to say it’s been great doing business with you in the past few years. You’ve done a great job in looking for suitable investment properties for your clients in regards to the returns on the properties, the locations, the types of properties etc... Your negotiation skills on behalf of your clients is exceptional and you always seem to get the deal across the line for your clients, making them very happy people.

Its always hard conducting business over the phone especially when you are dealing with so much money (buying properties) , but with your experience in researching and asking the right questions about the actual property, your clients can rest assured that they have picked the right Property Buyer to look on their behalf.”

Kind regards,
Leisa Le
Licensed Agent/ Partner, Forest Lake.

Buyer type: Home Buyer
Buyers brief: Renovated 3 bedroom townhouse in Sydney’s Lower North Shore
Asking Price: $995,000
Purchase price: $940,000
Saving: $55,000

Buyers’ agent comment – Matt Corbett:

With a budget of $1.1m, Gavin and Ashley were seeking a renovated townhouse between Manly and Neutral Bay, with excellent transport links into the city. They particularly wanted a solid construction with minimal noise from neighbours. They needed 3 bedrooms, 2 bathrooms and a lock-up garage for their motorbike and scuba gear, in addition to a second car space. During this time there was a shortage of suitable properties on the market, so I managed to locate a silent-listing through our strong agent network. It was a fabulous townhouse, beautifully renovated and set in a quiet street in Neutral Bay, yet within 200m of public transport and all of the amenities. We had to move very quickly before another highly interested buyer from overseas had a 3rd inspection. Consequently, we exchanged contracts late Friday and secured the property and my clients were thrilled.

What our clients say:
“Matt was endlessly patient with us as we vacillated between areas in which we wanted to concentrate our search. It was also useful to be able to pick his brains about areas, prices and value for money as we looked at houses in his company. But for us, Matt’s real value came in his access to “Silent Sales”.
We would never have known about the house we eventually bought if it hadn’t been for this knowledge and contacts. As soon as we decided to buy the house, Matt pulled out all the stops and exchanged contracts within 3 days. His knowledge of the processes involved really helped us to gain an advantage over the other interested party and without Matt I really think we would have lost out in the race to secure the house. He was very professional, thorough and friendly throughout the whole process.

Thanks Matt and propertybuyer for helping us with our search – I have no hesitation in recommending you to anyone who is thinking about using a Buyer’s Agent.”
Gavin and Ashley

5. INSPIRATION CORNER

“Good thoughts bear good fruit and bad thoughts bad fruit. The outer world of circumstance shapes itself to the inner world of thought.” James Allen

“What you see depends on what you're looking for” - Anonymous

“People will forget what you said, people will forget what you did, but people will never forget how you made them feel.” Maya Angelou

I hope you enjoyed your September update and we look forward to keeping you informed in the next edition.

Warm regards

Rich Harvey
Managing Director
Tel: +61 2 9975 3311
www.propertybuyer.com.au

PS…. YOUR REFERRAL IS APPRECIATED
Your subscription to propertybuyer’s monthly market updates are absolutely FREE! As a return favour, please send this newsletter to someone you know that would also benefit from the information. The majority of our business comes via referrals, therefore I would really appreciate your help. Please forward this email to a friend or colleague, by pressing the “Forward” tab on your email program and suggest they subscribe.
Many thanks. Rich