Until then, not much else for me to do but sit and wait and ask more questions!
Anyway, I see property selection and property valuation as two core skills for a property investor (residential or commercial).
I get where you're coming from but I think other things are more important. Valuation gives price today, and you can reasonably estimate that through yield and price/rent per sqm of comparable properties in the same reason. No biggie.
The valuer cares about giving a fair and reasonable estimate of market value that can be quantifiably backed up if need be. The bank cares about managing it's book of thousands of loans and making sure too many don't go under. An investor cares about what a property is going to be worth in 20 - 50 years. Neither the valuer nor the bank are that interested in that because their job is to worry about today.
Which property is less important than which area. What makes a good area is a function of supply & demand and the long term economic prospects of that area. I.e. does the type of property suit what people are looking for in the area, and how likely is it that the given area will be economically strong in 20 years? What are the underlying drivers of that growth? That is where the investor will get their edge, coupled with a very long term timeframe, and neither the valuer nor the bank are in the business of speculation about such factors. A 5 year lease with crappy terms is less of a worry to an investor who plans to hold for 50 years. You need to be able to look past all that and see the longer term value, what the valuer thinks its worth today is a hoop the bank has to cover its ***. It's a technical skill that most people can pick up with a bit of effort, Kaplan has a course on it I'm sure and there are others.
If you go back to very basics, property investing is really about buying land, because the land is what rises in value, buildings etc depreciate like we all know. Developing is different but I don't think we're talking about that here. The building on it generates cashflow which you use fund your holding costs on the land and get tax breaks while the passage of time will hopefully see the land values rise.
What its worth this year or that year is largely irrelevant to a long term investor. Detailed analysis of price today is less important than the long term value prospects of a given area/property. For sure you don't want to overpay, but some simple back of the envelope calculations can help you with that.
There is a lot of information out there that you can use in forming a view on a given area. If we look at the ABS we see
here that Perth, Brisbane and Darwin are all forecast to have large population growth over the next 20-40 years. OK there are the people, where are the jobs? No jobs, no money, no cashflow for our holding costs. Lets have a look
here. I don't like the slope of that manufacturing line, but construction, professional services and healthcare all look OK. Doing a bit of research we see that services contribute 69% to Australia's GDP. So I wonder if buying some decent office space in Brissy would be a bad idea. Those miners must need someone sitting in air conditioned comfort to order their pickaxes. If you're a vulture maybe look for a manufacturing concern that could be repurposed. You don't have to be a rocket scientist to work out whats driving the growth in those areas. Is it sustainable? Will it still be there in 20 years? What's it been doing for the last 20 years? More research maybe.
This is a fairly contrived example but I think it is really important. I do believe it's very hard to have an edge at our level and there are oceans of information, research reports blah blah many of which are funded by your tax dollars so why not make the most of them. Most parts of the country have long term growth plans that can make for some interesting reading if you're looking for good regions to invest in. If you're involved in a particular industry you can use that knowledge of whats growing and whats not.
I also think it's very important from a risk management point of view in that if you invest based on assertions about the future, you can use that initial context to evaluate future developments and how they impact your underlying assertions. Say you buy a warehouse somewhere, and 10 years down the line the government decides it's building a highway that will miss your warehouse by 50k's? Or they decide to build out the freight terminal that's 200ks away rather than the one you're near. Maybe its time to up stumps? Without a good understanding of the drivers you take an unnecessary risk, it's a long term proposition after all.
Now if you've done all that the best thing to do is price up some deals yourself. Get the IM, go through the lease, work out what you would be willing to pay, the follow up and see what it goes for. Pay money for market research from reputable organisations, you can learn a lot just by looking at the things they focus on and the words they use.
This got a bit longer than I was thinking it would but I think discussions about assessing value from a long term investor perspective and looking at drivers of growth is way more interesting than "what if its vacant" type stuff or the minutiae of professional valuation.
