Advice for first IP $300k / buyers agent recommendations

Hi guys,

I am a man from melb in his 30s looking to invest in the coming year in an investment property with a budget of up to $300K. I described my situation in detail in this post: http://somersoft.com/forums/showthread.php?t=104532

I am a first time investor without much income presently going into the market due to an inheritance, who has been trying to learn as much as he can about property. I am thinking of using a buyers agent.

From what I've read it's a good idea to get a buyers agent who specialises in a specific area and knows that market well, so my first decision is where to invest. I realise that 300K won't get me much, so there are a few general areas I've been considering. They seem pretty standard and obvious, but here are my goals:

- I am looking for capital growth long term.
- A decent yield would be good, but capital growth is more important I think
- I want as low maintenance issues as possible, being a first time investor
- Keeping the place tenanted is important too, so somewhere with a low vacancy - Basically I want a boring conservative growth investment, as low maintenance as possible

I would like Brisbane as it's tipped to have good gains in 2015, but I don't think I
can afford there.

I am deciding between the cheaper cities of Hobart and Adelaide, or a regional centre such as Ballarat or Bendigo. Bendigo seems to have performed very well over the last five ten years.

I think I'd prefer the capital cities for long term growth, but do people think that 300k would get a decent investment in one of those places? Or would i be better off going somewhere regional where 300k is closer to the median?

Any help would be greatly appreciated
 
Thanks for the article propertunity. I just read it then and it was quite positive for Hobart and Adelaide, I thought. For Adelaide, "modest growth" over the long term is fine by me and it was saying Hobart might be finally coming up from a low cycle.

Also it only mentioned regional areas under lifestyle (positive) and mining (negative). Bendigo I believed was quite a balanced economy, with a new hospital being built over the next few years. However it's had strong capital growth over the last five or so years, so perhaps it's topping out.

What is it about Adelaide and Hobart that you think will make them a bad long term investment?

And if not any places I've mentioned, whereabouts do you suggest I look for the 300K mark?
 
Hi OP:

Just thought I'd bring up a few points for you to think about:

1. BA fee would be at minimum $5k to typically ~$10k, take that into consideration with your limited capital.

You can consider driving to Ballarat/Bendigo and go to as many opens as you can over a day and get a feel of the market there.

If interstate, do your DD online first, target 2-3 suburbs, arrange as many inspections with REA as you can, fly over for 1-2 days and check out the areas.

2. PM fees.
http://advice.realestateview.com.au/buying-investing/beginner-guide-to-investing/6/

- Hobart is ~13%
- Adelaide 7.7-9.9%
- Melb is ~5.5% BUT maybe higher in Ballarat/Bendigo (can anyone else shed some light on this?)

3. Have you had a chance to talk to a mortgage broker and work out how much you can borrow?
 
Hi

Hi,
Great questions from the above post :)

When speaking to many clients at the start allot don't relies what their actually borrowing capacity is.

Also from my own experiences there is a difference between getting properties at a great price vs buying a cheap property.

Also from an investment point of view, is it really effective using all of your cash vs using a mix of borrowed funds and own cash.

Talk to a broker and see what options best suit you :).
 
...
What is it about Adelaide and Hobart that you think will make them a bad long term investment?

...

Its not that Adelaide and Hobart are bad per se; its more that there are better prospects for CG. example, see the developments that's slated for Brisbane and Sydney with new casinos, new apartments, new hotels, new corporate offices etc...

Adelaide nor Hobart just does not have anything near these examples. Its not even close. Developers are doing the above because they think there will be growth in those markets. Certainly, they would not invest like that if they thought there would be no growth/demand meeting supply.
 
Oh ok so the highway, rail and corporate office projects in adelaide dont count then :(

ofcourse they do but the size and scale is not the same as whats elsewhere.
e.g. do I see a barangaroo or queens wharf or a skytower or anything near that in Adelaide/Hobart? ...no.
 
Hi OP:

Just thought I'd bring up a few points for you to think about:

1. BA fee would be at minimum $5k to typically ~$10k, take that into consideration with your limited capital.

You can consider driving to Ballarat/Bendigo and go to as many opens as you can over a day and get a feel of the market there.

If interstate, do your DD online first, target 2-3 suburbs, arrange as many inspections with REA as you can, fly over for 1-2 days and check out the areas.

2. PM fees.
http://advice.realestateview.com.au/buying-investing/beginner-guide-to-investing/6/

- Hobart is ~13%
- Adelaide 7.7-9.9%
- Melb is ~5.5% BUT maybe higher in Ballarat/Bendigo (can anyone else shed some light on this?)

3. Have you had a chance to talk to a mortgage broker and work out how much you can borrow?

Thanks for the post, some great points.
1. That is true, a BA of 5k-10k is a fair amount, but as I am inexperienced and have this "chunk" of money to use (described in my link if anyone wants more info), I really want to make a good decision on a property and not get screwed over. I really can't afford to use the money badly.

2. Your point on PM fees was something I had no idea of until you mentioned it! Great point to consider

3. I haven't asked formal advice, but I posted an outline of my situation (the link in my first post) and was told that I probably wouldn't be able to borrow any money. I have no income figures to go on, only projections, as I am starting a new business. Apparently the bank requires two years of business sales history. I don't want to wait 2 years to invest. I might check with a broker to make sure, but am not counting on being able to borrow much / any
 
Microsoft is going there,I think they're only top 5 :(

They already have an office there, as they do in a lot of other aust cities. Maybe they are expanding, but id doubt its by much. i.e. I don't think they are hiring 200-300 extra people...

Its not transformative/take it to the next level stuff that the other examples are. Not sure, but maybe adealide and Hobart suffer from a lack of political will and ambition. Look at Campbell newman- if nothing else, he has ambition and is hell bent on growth [ whether its LNG/CSG, infrastructure, events like the G20 etc]- he wants to take the place to the next level.
 
1. I've used BA myself for interstate purchase so I'm certainly not against it. One advice is to make sure you know your goal and search criteria yourself first - BA will help you get it but you need to know what you're looking for too.

2. Have a proper discussion with 1 of the MBs. Plenty of great ones on this forum. If you're new to property (myself included) and you prefer face-to-face then consider Peter Tersteeg, 1 of the MBs who responded in your original thread anyway. He's based in Nunawading (currently overseas though so won't be back till 6/1/15).

Otherwise if you don't mind email/phone communications, MB based anywhere can assist.

3. If it so happens that you have to use cash and can't borrow, then with the budget of $300k (don't forget all the associated costs), maybe:

- Brisbane: Logan, Beenleigh, Kippa Ring (Brissy people feel free to correct me if prices have already shot up)

- Adelaide: 1BR unit surrounding CBD (??); houses in Elizabeth (north), Christies Beach (south) for <$200k (you can search and read up on a thread about Elizabeth; will also let the ADL gurus add in their 2 cents)

- Melb: Units in suburbs around Geelong? Probably 1 of the higher yields in Melb and somewhere you can visit more readily (not that you really need to visit an IP if your PM is doing his/her job, but if it's your 1st property you might want to see this 'real house' that you own :))
 
Thanks for the link Alan.

An interesting article. I normally find material from MY to be full of fluff but this one was well done. Must be Tim Lawless's influence :D

Personally I don't like many of the options you are considering.:(
.....especially Hobart and to a lesser extent SA. :eek:

Tim Lawless heads up the RP Data research and analytics team and wrote an article here that might be worth your consideration.

http://propertyupdate.com.au/2015-property-outlook
 
Cheers once again for the great suggestions. I'll do some research on the places you mentioned J_aco

Here was where I had heard about the Hobart market perhaps having a good year in 2015. I have read Pete Wargent's blog in the past and think his info is generally pretty good:

On the other hand we have the Hobart housing market. Yes, I understand that it has historically been a weak economy, has experienced weak to negative population growth and subsequently, a weak housing market.

Taking all this into account, we think prices are well under valued by historical standards and are prime to move upwards from here.

I think a lower Australian dollar helps the Tasmanian economy on many levels. Right now the market indicators suggest there is movement. Once again, take a look at the vacancy rate chart we have on Hobart. Things are getting tight once again for renters. It is increasingly turning into a landlord?s market.

http://petewargent.blogspot.com.au/2014/12/sqm-2015-sneak-peak.html
 
I guess my main question then is this - is it better to decide on an area first, then engage a BA from that area? Or better to get advice in general / talk to BA Australia wide, then make an area decision?
 
I guess my main question then is this - is it better to decide on an area first, then engage a BA from that area? Or better to get advice in general / talk to BA Australia wide, then make an area decision?

I think you will find there are several opinions on this. Plenty of investors would suggest you should take the time, do your research, and choose an area based on a range of fundamental and technical analysis, then once you have your area chosen, if you do want a BA find a reputable one within that area. This option is likely to give you a good outcome but requires the investment of time reading on SS, other locations, to develop your investment "radar" to the point that you are confident in the reasons why your chosen location will perform.

If you don't have/can't/won't spend the time doing this then you can certainly get help with the location choosing part by speaking with BA's who operate in a range of locations. Just make sure they are independent and licenced. You don't want to end up being sold some overdone development stock by some "investment advisor" who is really working for developers. They are out there too.

The more reading a research you do here on SS the better the quality of questions you will be able to ask, and the better answers you will get. When clients are unsure of location I always spend some time on what specific goals a client has. (lifestyle, cashflow, big picture stuff) We work backwards from there. What I define as a good investment location may or may not be the same as you, or someone else.

Begin with the end in mind. Then you are more likely to like the destination.
 
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