Buying Quality Property

[John M]

Warren Buffet has been quoted saying:

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

Do you agree that this applies to property?

Would you rather buy a property with great prospects at a fair price, or an average property at a great price?


For me, a 'wonderful' property will, over time, pay dividends far exceeding the savings made on the 'fair' property.

 

[Aaron_C]

Yes I do..

 

[John M]

It's funny; I see a lot of people who blindly chase high yields, regardless of the potential of the property.

I bet if they look back in 10 years time they would be shocked at how well their portfolio could have performed if they had made the right choice.

 

[see_change]

I've done both.

Good result with both .

Best option is a great property at a great price . Done that once , just after GFC .

Cliff

 

[Aaron_C]

My motto is I don't buy crap stuff

 

[Ace in the Hole]

Quality over quantity.

 

[Richard Feynman]

On first glance this Q may seem off topic.

How much have you folks spent on your chef's knife? And what did you vote in the poll?

 

[AlmostBob]

On first glance this Q may seem off topic.

How much have you folks spent on your chef's knife? And what did you vote in the poll?

$180, 20+ years ago,
bringing it through customs when we relocated to Canada,
and that was with it in the Hold, not as cabin luggage.
But probably would not have moved without it.
Hand made by the techi mechi I bought it from, from MKiv centurion armour plate, it sharpens well, and holds an edge

but Quality, has nothing to do with price, ROI, consistent ROI is the only sign of quality

 

[spludgey]

It really depends on your definitions. I've got a house that's slowly falling apart and doesn't have an internal toilet. Together with the unapproved granny flat, it's returning 7.5%. But it's also on a block that will allow for townhouses or units once the house can't be rented out any longer.

Is this a quality property? I guess the answer is very subjective.

 

[AlmostBob]

It really depends on your definitions. I've got a house that's slowly falling apart and doesn't have an internal toilet. Together with the unapproved granny flat, it's returning 7.5%. But it's also on a block that will allow for townhouses or units once the house can't be rented out any longer.

Is this a quality property? I guess the answer is very subjective.

quality ummmm
Well, good returns now, and great potential for its death,
crap, with overtones of quality?
quality with a hint of crap?

I say quality, you know the limitations potentials and returns

 

[Deltaberry]

Quality location is important. You can build the nicest thing but if it's next to a freeway, it's next to a freeway.

 

[alexlee]

You're assuming that there are properties that will have consistently higher growth rates than other properties, and that you're able to identify them.

Buffett's comment makes more sense when talking about companies where some can consistently perform better in terms of earnings growth.

 

[AlmostBob]

You're assuming that there are properties that will have consistently higher growth rates than other properties, and that you're able to identify them.

Isnt that what we all hope for, the ability to guess right, every time

 

[Ace in the Hole]

Depends on your situation too, and the stage you are at in your investment career.
When starting out, it's more often a fair property at a wonderful price, as options are limited due to budget.

 

[alexlee]

Isnt that what we all hope for, the ability to guess right, every time

Hoping doesn't mean you're actually able to do it. The question is whether you end up buying fewer properties you 'think' will do well, as opposed to just buying consistently with more 'normal' criteria.

Stockpicking v dollar cost averaging, in a sense.

 

[MarkB]

You're assuming that there are properties that will have consistently higher growth rates than other properties....

If that wasn't the case, then wouldn't a 1000m2 lot in [pick an ordinary burb in Sydney] cost the same as one that is right behind Bondi Beach?

 

[Peter_Tersteeg]

The statement is working of two different types of thinking. Long term and short term.

If you buy a fair property at a wonderful price, you're building in some instant profit. I've seen this strategy employed many times with success as you can take that profit and use it almost straight away for the next deal. The problem is that after that initial profit, there may not be much further profit in the future. It could be argued that this is the common strategy employed by the lower end cash flow positive properties people have been chasing for the last few years.

Buying a wonderful property at a fair price would probably mean you don't get much profit immediately, but it becomes a waiting game. Good quality property consistently increases in value over a long enough time frame so this is more likely to be the property that keeps on giving. A well located property in a capital city might fit this criteria. The down side is it's likely to be negatively geared.

If I think of going shopping (not for property), personally I prefer to pay a fair price for quality rather than a bargain price for something I don't really need.

 

[alexlee]

If that wasn't the case, then wouldn't a 1000m2 lot in [pick an ordinary burb in Sydney] cost the same as one that is right behind Bondi Beach?

No, you're talking about relative value. The Buffett comment is more about growth RATES.

If the Bondi block had inherently better growth, the % difference between the Bondi place and a lesser block would get bigger and bigger.

 

[MarkB]

@ Alexlee

Well the Bondi Block is worth a lot more.

And it was only a couple of hundred years ago when it was all worth diddly squat....

 

[alexlee]

@ Alexlee

Well the Bondi Block is worth a lot more.

And it was only a couple of hundred years ago when it was all worth diddly squat....

The Bondi block will always be worth more than a similar sized block 20km from the water.

But will the Bondi block be worth higher and higher multiples of that similar sized block 20km from the water?