When you should compromise - May 2019
May 30, 2019 / Written by Rich Harvey
It feels like for the first time, in a long time, positivity is stepping back into Sydney’s property market.
The Coalition’s unexpected election win coupled with APRA’s more relaxed stance on finance guidelines has brought a return bout of confidence to the capital.
Economists, researchers and property pundits of all shades are predicting that a bottoming of the Harbour City’s property market, and its steady transition to recovery, look imminent.
So, could right now be the best time to make a move on significantly discounted investment opportunities?
I mean, quality blue-chip suburbs are more attractively priced than they were at the peak of the boom two years ago. Prospective buyers who would’ve once been locked out of these locations are now within striking distance. While this is true, facts are that securing a holding still requires some give-and-take from buyers – but what should you compromise on? Is it best to seek the worst house on an average street in a great suburb? Is the busiest street in the most desirable area a great idea?
Here are my thoughts on when you should flex your dream-investment tick list to lock down an excellent opportunity.
I remember talking to a property investor about a decade ago who spotted gentrification spreading from the premium inner-city pocket of Surry Hills. He saw opportunity and decided to act.
This buyer couldn’t quite afford the outlay for a cracker-quality property in Surry Hills, but wanted to take advantage of the urban renewal. So, he moved just a little further away from the epicentre of growth and bought a terrace house in neighbouring Redfern.
It was at a time when saying the ‘R’ word in real estate circles was met with raised eyebrows and agape jaws.
“Redfern! You mean THAT Redfern! An area of crime, low socio-economic status, social housing and not a lot of buyer demand?”
But this investor suspected the renewal would eventually spread its way to Redfern… and he was right.
This forward-thinking gent compromised on location and immediate demand in order to position himself for long-term growth. And he has cleaned up. Redfern is currently hot, with a range of lifestyle amenities and renovated homes that keep bringing in new crops of affluent residents.
Right now, similar locations located adjacent to blue-chip suburbs are in the midst of change and will benefit from both the market recovery and spreading gentrification.
If you’re eager to own part of a blue-chip location, but can’t quite afford it, look at what’s happening across the way. Are there price-accessible neighbouring suburbs that have strong growth fundamentals and good upside in the future? Think outside the box – or the suburban borders – and compromise on immediate location to seize opportunity.
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If you’ve got your heart set on a premium postcode and stepping toward an adjacent address isn’t on the cards, I still have some sage advice.
Even within these seemingly unattainable suburbs, it’s possible to compromise on some of the things that push up a property’s price.
Compromise in these instances isn’t such a bad idea. As is often said – a rising tide floats all boats. You may not be able to afford all the fundamentals that will guarantee maximum capital gains, but that doesn’t mean you can’t still make a handy profit on a ‘secondary’ holding.
One obvious compromise is going for a large-sized apartment over a house when price is a factor. In some sought-after areas, would-be homebuyers will look at these as an alternative to a big family house. But they should have decent outdoor space, good-sized bedrooms, quality finishes and be well located. And in almost all circumstances, they should have a car space.
Another option is to look at properties that are ugly ducklings. In premium suburbs, many big-dollar buyers want finished homes that are ready to go. They don’t want to compromise by buying a renovation project.
This provides an opportunity to you, because there’s potential to add value to a property by breathing new life into a tired old home.
My tip is make sure you’re compromising on the cosmetics, not structural integrity.
Investing in a property that’s structurally challenged is risky. Some of those remediation works can be costly to correct. Always know what you’re biting off and make sure you’re able to chew it.
Another compromise that can still result in dividends is a busy street frontage. Having a home that front a main thoroughfare will present cheaper buying, but think about your ‘end users’. Future buyers and tenants, particularly young families, won’t love a busy street. But if it’s a spot near great bars and restaurants, and positioned closely to public transport, then young professionals mightn’t mind.
A tip – construction techniques can help with security and noise attenuation. So, look at the moves you can make to ensure a quieter living space that keeps the truck horns and brake-pad screeches on the other side of your walls.
Think carefully about the options before diving in, because not all compromises are equal in every location.
For example, investing in a part of a prestige suburb that’s home to light industrial properties is a compromise that won’t work everywhere. In areas known for ‘reclaimed’ spaces, like Alexandria in inner-Sydney, the rebirth of industrial to high-end residential and lifestyle hubs is working. But in other suburbs, this transformation can take time – and in some cases, won’t happen at all.
Another potential compromise is buying adjacent to a service station, but I think it’s a risky move. They’re busy places at all times of night and day. They’re brightly lit, noisy and smell like fuel – so, not a great option.
For every potential compromise, weigh up the pros and cons as well as the impact on your investment return.
Understanding when it’s smart to compromise really comes with experience. So, if you’re stuck on how best to invest you hard earned dollars, there’s one thing you should never compromise on – and that’s great advice from an experienced, independent buyers’ agent. Make sure you contact us so we can lead you through the lists of ‘must haves’ and ‘can live withs’ that will ensure a smart decision on your next purchase.
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call us on 1300 655 615 today.