Buyer's Agent for Seaford/Frankston/Ballarat
- Thread starter justmad
- Start date
Purpose of Buying Below Median
A few people have mentioned buying below the median, and seem to be making the conclusion that because it is below the median it represents good value.
Could someone please explain the reasoning behind this? Does the median price have any relevance?
Thanks,
Tristan
A few people have mentioned buying below the median, and seem to be making the conclusion that because it is below the median it represents good value.
Could someone please explain the reasoning behind this? Does the median price have any relevance?
Thanks,
Tristan
It's hard to get something below the median in a market where people are buying. You don't want to end up with something under par unless all it needs is a scrub, polish and paint - or you have the ability to fix whatever makes it under par.
Looks like the market is finally starting to simmer in this area.
The only way to get below the median when there's competition is to choose a house with less land, or fewer bedrooms or on a main road, etc.
The outcome you want to achieve is that the rent is not much lower than the norm (if lower at all) but the purchase price was not as high. Then your yield is a bit better and it makes it easier to hang on.
Looks like the market is finally starting to simmer in this area.
The only way to get below the median when there's competition is to choose a house with less land, or fewer bedrooms or on a main road, etc.
The outcome you want to achieve is that the rent is not much lower than the norm (if lower at all) but the purchase price was not as high. Then your yield is a bit better and it makes it easier to hang on.
REBAA BA list for Victoria- I'm sure one of these BAs would cover your area and be able to assist. Best of luck with it all. http://rebaa.com.au/members/vic/
No. Particularly if you are referring to the 'Melbourne median'. The Melbourne property market is made up of a lot of sectors - there are new housing estates, bayside holiday homes, established middle ring suburbs and prestige residential inner city locales. The 'median' is ok for a macro outlook on the market and is a very 'general' figure that I believe is over-emphasised in the media.
If a property is below "median" there is probably a reason why. I have seen many cheap properties that have experienced little capital growth over the past four years as well as those that have experienced high capital growth.
The theory you put forward is fundamentally flawed. I mean, if the block you are purchasing is half the size of the 'median' block and the house is 20 years older than the 'median' house then sure values may increase in line with market but will always be below median.
Firstly, let it not be said that I am spruiking Frankston. I want to make it abundantly clear that anyone who over-pays for property anywhere will definitely under-perform the greater market. Also, be aware that Frankston buyers won't win bragging rights among their friends by buying into this underpriced, unfashionable beachside suburb.
However, if they choose their Frankston IPs intelligently, investors will make decent capital gain that IMHO should more than exceed the broader market. Again, lest I be deemed a spruiker, that's just my opinion.
IMHO paying well below the median is a useful rule of thumb which will ensure that buyers do not pay too much for a property. It is more common sense than rocket science: buying cheap stuff usually leads to greater eventual capital gain than buying newish pretty stuff. Personally I concentrate on the lowest decile of any property market. Namely the cheapest 10% of all property. I refuse to look at anything else. Again, that's just my opinion and how I personally do things.
Consider the link at the end of this post. It is a textbook example of what a savvy investor should be doing. In this instance, the buyer bought a rentable house on a massive redevelopable block which was priced well below the median and yielding circ 5%. I am told that the buyer waited patiently and negotiated hard. He did not use a buyers agent.
(Not that there is anything wrong with using a buyers agent, BTW. If you are time-poor and cannot find exceptional value, maybe it would pay to fork out ten grand for a bit of help. Just be aware that most BAs have little interest in Frankston and would prefer to sell more fashionable stuff that may not necessarily outperform).
http://house.ksou.cn/p.php?q=Frankston&sta=vic&id=1059
However, if they choose their Frankston IPs intelligently, investors will make decent capital gain that IMHO should more than exceed the broader market. Again, lest I be deemed a spruiker, that's just my opinion.
IMHO paying well below the median is a useful rule of thumb which will ensure that buyers do not pay too much for a property. It is more common sense than rocket science: buying cheap stuff usually leads to greater eventual capital gain than buying newish pretty stuff. Personally I concentrate on the lowest decile of any property market. Namely the cheapest 10% of all property. I refuse to look at anything else. Again, that's just my opinion and how I personally do things.
Consider the link at the end of this post. It is a textbook example of what a savvy investor should be doing. In this instance, the buyer bought a rentable house on a massive redevelopable block which was priced well below the median and yielding circ 5%. I am told that the buyer waited patiently and negotiated hard. He did not use a buyers agent.
(Not that there is anything wrong with using a buyers agent, BTW. If you are time-poor and cannot find exceptional value, maybe it would pay to fork out ten grand for a bit of help. Just be aware that most BAs have little interest in Frankston and would prefer to sell more fashionable stuff that may not necessarily outperform).
http://house.ksou.cn/p.php?q=Frankston&sta=vic&id=1059
If we draw a circle right around Frankston North (The Pines), Frankston propper and Frankston South there is a wide variety of estates and property investment opportunities. In my opinion it is hard to generalise about buying below medians.
The Pines for example is arguably the worst housing estate in Melbourne and the tenant risk is that high that most 'large developable' blocks have not yet been developed, and can be snapped up with a 3 bed house for ~$240,000. A valuer from our firm walked into a house once and almost fell through the floor because the tenant pulled up the timber floorboards for a fire they had the weekend before.
Having said this, getting closer to Frankston there are certainly opportunities but still make sure you do your due diligence (many can do it on their own I agree but many do not have the property expertise or database of comparable sales evidence). And obviously Frankston South/ Olivers Hill is a different market altogether where you can pay over $1 million for a quality property.
It is not uncommon for high yields around the Frankston / Frankston North area particularly near that example property you posted. But the high yield is reflective of the risk associated with owning properties in this area and the limited development potential in the short term.
Some good points above. Without overcomplicating what should be a simple matter, I have found the following website to be eminently useful when deciding what is expensive and what is cheap: http://house.ksou.cn/p.php?q=Frankston,+VIC Most of the data on this site is accurate. Occasionally there is an anomaly which can easily be cleared up by calling a local agent for confirmation. I have only seen one error in the past 3 years. Thanks to TMNT for spotting that one for us.
As an aside, Frankston South is great for PPORs. That said, although it is a great place to live, it is not as good if you plan to invest there. Why? Because there are fewer bargains. Also, demolishing and redeveloping in FS is a bit harder than elsewhere in Frankston, Frankston North or Seaford. There are almost no ultra cheap, redevelopable gems to be found in FS. If anyone spots exceptional value there, can they please post the links here?
Definitely 'arguably'. Agreed that Doveton doesn't have the highest socio economic profile either. The only place where rusted out car shells could be marketed as a built-in playground for the kids.
I am skeptical about the 'bargains' you are referring to - a 'bargain' now could still be a 'bargain' in 20 years time. Just because it is cheap does not mean it will perform better than the "median" trend.
Hi
Well it does seem you have done your due diligence and know the areas well!
Regards,
alicudi
To me a bargain is finding something that going to release instant equity for another purchase and get me to my end goal quicker. Really guess its how you define the word bargain for property specifically. Not exactly sure where the Frankston market is at the moment, but the the yields look pretty dismal for an area with such stigma attached.
Hi granddad.
http://house.ksou.cn/p.php?q=Frankston&sta=vic&id=1059
This link says the property sold in 2010 for $2000 less than what it sold for recently.
Doesn't seem like purchasing at the bottom end of the market worked out well for the previous owner.
http://house.ksou.cn/p.php?q=Frankston&sta=vic&id=1059
This link says the property sold in 2010 for $2000 less than what it sold for recently.
Doesn't seem like purchasing at the bottom end of the market worked out well for the previous owner.
My understanding is that the seller used the house as a PPOR, not an IP. I am told the owner worked offshore in the oil industry and was posted to another state. He wanted a quick no-nonsense cash sale. Not sure what he earns but I expect that $315,000 will be around a years earnings for many oil workers.....in these circumstances, some people don't bother holding out for a better price. So yes - if you look hard enough, there is value to be found.
You are (presumably) a buyers agent with an agenda of your own and that's fine by me. I have the highest regard for property-owning BAs who can deliver the goods, so to speak. A challenge for you Sir: how about you show us some Melbourne beachside value? Using the $315,000 textbook example I presented earlier in this thread as a yardstick, kindly show me a Melbourne beachside suburb with infrastructure where you can buy a rentable old house on a 800sqm+ redevelopment site for around $315,000. Make sure its driving distance from a major Univrsity, TAFE and shopping centre! There you go - this will keep you busy for awhile!
'Grand Dad'
A quick search of the property shows the Vendor was a couple (the proprietors are a Mr and Mrs xxxxx - presumably joint proprietors), so I doubt they would have disposed of it cheaply because "he wanted a quick no-nonsense cash sale" - this is classic sales agent spin.
I do work for an advisory firm and am not worried about putting my name out there. Giving misleading information could hypothetically get me sued given my CPV status so I'm certainly not on here to mislead anyone.
Everything must be weighed up on its merits. There are opportunities everywhere. What I am disputing with you is that because something is cheap it does not mean it is a good buy. Have you been to 'The Pines' before and had a walk around the streets? It's a real eye opener and after doing so I could understand why the values were below 'median'.
In answer to your question I do not want to get too specific on here but when you say 'redevelopment site of 800 sqm +' this usually means the property has to have economical redevelopment potential.
That's my two bob worth - over and out.
A quick search of the property shows the Vendor was a couple (the proprietors are a Mr and Mrs xxxxx - presumably joint proprietors), so I doubt they would have disposed of it cheaply because "he wanted a quick no-nonsense cash sale" - this is classic sales agent spin.
I do work for an advisory firm and am not worried about putting my name out there. Giving misleading information could hypothetically get me sued given my CPV status so I'm certainly not on here to mislead anyone.
Everything must be weighed up on its merits. There are opportunities everywhere. What I am disputing with you is that because something is cheap it does not mean it is a good buy. Have you been to 'The Pines' before and had a walk around the streets? It's a real eye opener and after doing so I could understand why the values were below 'median'.
In answer to your question I do not want to get too specific on here but when you say 'redevelopment site of 800 sqm +' this usually means the property has to have economical redevelopment potential.
That's my two bob worth - over and out.
Seeing that you are on this forum to drum up business, would you be so kind as to tell us what sort of stuff you have bought/owned since joining the 'Advisory' industry? Just curious.
I note from your prominently displayed webpage that your firm only seem to deal in newish stuff. Great for depreciators, but not so great for value investors who like buying cheap stuff. And aw shucks, none of your offerings are in our beloved Frankston.....which begs the question: why are you posting on a Frankston thread if you do not deal in Frankston property?
The Pines is not a suburb. Yes I have been there and saw plenty of value. If one negotiates strongly enough, yields of 6% are easily realized on potential dual occ blocks. Not to be sneezed at. Personally, I prefer other areas of Frankston.
2.
As you may well have learned in high school math classes, half of everything for sale sells below the median. On my part, I am merely suggesting that value investors use the median as a rule of thumb. Buying into the lowest decile of the market is what I personally do. Not interested in pretty, trendy or newish stuff. I am only interested in land size (the cheaper the better) and rentability. The 5-6% yields that are attainable in Frankston/Seaford/North Frankston are just fine by me. These were the same sort of yields one could have gotten in St Kilda and Richmond of the late 80s - back then these two suburbs were much-derided, "full of druggies and refugees" . Just look at them now!
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pps that site has the wrong data recorded. It sold for $310,000 Sept '10.
buyers agents
I think it is worth using a buyers agent if you are looking interstate or overseas. However if you are looking at the same state it is a matter of understanding the markets.
The most important thing is to understand the market
So
Buy a scrape book and put in the type of properties you are interested in
Make sure that you go through any open for inspections for both sale and rent.
The properties for sale track them on a week to week basis.
Once a property has been on the market for around 6 weeks is often a great time to make an offer.
I could full the page with strategies but it all comes down to understanding the mindset of the seller
I think it is worth using a buyers agent if you are looking interstate or overseas. However if you are looking at the same state it is a matter of understanding the markets.
The most important thing is to understand the market
So
Buy a scrape book and put in the type of properties you are interested in
Make sure that you go through any open for inspections for both sale and rent.
The properties for sale track them on a week to week basis.
Once a property has been on the market for around 6 weeks is often a great time to make an offer.
I could full the page with strategies but it all comes down to understanding the mindset of the seller
hah, cool story shame it got shot down!
