Growth - What do you look for when investing for CG?

Curious to see what others focus on when buying for growth... Established patterns? Economic activity? Waterfronts?

Discuss.
 
Hi Jake

One strategy I use for capital growth and cashflow is identifying State Housing areas that Government is upgrading/rezoning to higher density. Typically I like this to be close to capital city with excellent infrastructure where surrounding areas are much cheaper. In Perth for example we have Hamilton Hill, Craigie Girrawheen, Koondoola just to mention a few, all going through massive changes/rezoning.

IMO when CG strategy is mentioned most automatically think (me included) of something unique such as beachfront, inner city period homes etc. Unfortunately the entry level for these types of properties are too high making it difficult to hold long term. Also, when there is a downturn these types of properties are not immuned.

I also chase cycles for growth, I invest in any State in Australia that is moving. I started doing this about 5 years ago. I believe this also reduces your exposure.

Cheers, MTR
 
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Curious to see what others focus on when buying for growth... Established patterns? Economic activity? Waterfronts?

Discuss.
In no order of importance

Gentrification - generally by the govt and council. I'm always happy to let them spend money on an area and reap rewards :)

Proposed Rezoning - a risk but good for holding.

Amenities - parks, public transport, shopping, schools (including popular schools with zone boundaries)

Distance to City - I think suburbs which are 1-2 from the city are prime and often better than the actual city suburb.

Rarity - tightly held suburbs sometimes have little data to rely on but can generate good returns. I've just bought in a suburb which had 12 sales in the past year so data is sketchy but it ticks Amenities, Distance to City and Rarity.
 
Economic activity for towns under 100,000

Unless we are talking major activity like seen in WA the past 10 years which has obviously benefited Perth.

I think waterfront is a flow on gain. So if a particular large city was to move because of economic activity then you could go for waterfront property and potentially make quick and large capital gains.

As for established patterns? Well the problem I see with this is that the variables are constantly changing. Zoning, development restrictions, income of people in the area, infrastructure/ transport.

Jake do you believe that inner city suburbs can continue their established patterns? I just don't see how it is possible due to income not keeping up with property values.
 
Hi MTR - What do you believe the pros and cons are with investing in lower-socio areas?
What time frames are you working toward, and are you focusing on buying and holding, renovating or developing?

Hi Jake

One strategy I use for capital growth and cashflow is identifying State Housing areas that Government is upgrading/rezoning to higher density. Typically I like this to be close to capital city with excellent infrastructure where surrounding areas are much cheaper. In Perth for example we have Hamilton Hill, Craigie Girrawheen, Koondoola just to mention a few, all going through massive changes/rezoning.

IMO when CG strategy is mentioned most automatically think (me included) of something unique such as beachfront, inner city period homes etc. Unfortunately the entry level for these types of properties are too high making it difficult to hold long term. Also, when there is a downturn these types of properties are not immuned.

I also chase cycles for growth, I invest in any State in Australia that is moving. I started doing this about 5 years ago. I believe this also reduces your exposure.

Cheers, MTR
 
I agree with some of your points here westminster. When you say gentrification what kind of changes do you look for?

In no order of importance

Gentrification - generally by the govt and council. I'm always happy to let them spend money on an area and reap rewards :)

Proposed Rezoning - a risk but good for holding.

Amenities - parks, public transport, shopping, schools (including popular schools with zone boundaries)

Distance to City - I think suburbs which are 1-2 from the city are prime and often better than the actual city suburb.

Rarity - tightly held suburbs sometimes have little data to rely on but can generate good returns. I've just bought in a suburb which had 12 sales in the past year so data is sketchy but it ticks Amenities, Distance to City and Rarity.
 
I really like how you've looked at income and affordability issues. It's something I consider and to some extent believe that the invention of easy credit over the last 20 years is what has helped prices grow in many areas.

With this considered however I believe in Established areas such as Toorak. Melbourne or Vaucluse. Sydney prices will continue to push up because people who own the upper end properties aren't subject to wage restrictions but rather how their businesses/investments perform. People 10 years ago were saying how could prices in Toorak go any higher and then they shot up more than 90% in a short period. Whether these patterns will repeat remains unseen but I personally feel more comfortable investing in areas where growth has happened year in year out than not at all or just a spurt in recent years.

I agree with your waterfront opinions.

What type of economic activity do you look for and what resources do you find are the best?



Economic activity for towns under 100,000

Unless we are talking major activity like seen in WA the past 10 years which has obviously benefited Perth.

I think waterfront is a flow on gain. So if a particular large city was to move because of economic activity then you could go for waterfront property and potentially make quick and large capital gains.

As for established patterns? Well the problem I see with this is that the variables are constantly changing. Zoning, development restrictions, income of people in the area, infrastructure/ transport.

Jake do you believe that inner city suburbs can continue their established patterns? I just don't see how it is possible due to income not keeping up with property values.
 
Here are my tips I have found that work very well if you are looking for short to medium term capital growth so as to leverage against and build your portfolio faster.

Look to invest in areas that are planned for and/or are about to go under gentrification.

Typically look to where all the following 3 sectors are injecting money -

1/ State/Federal Government. ie Major arterial roads, New Public Transport, Hospitals, Suburb Redevelopment Authorities being formed. etc

2/ Big Multi National Retail & Commercial type companies. ie Major Shopping Centres, McDonalds Hungry Jacks, KFC, Bunnings, Harvey Normans, Good Guys, etc. These companies spend $Millions on market research before going into and setting up shop in an area. If there was no current or immediate future demand for their products and services they would not be moving in, so leverage off the back of their research.

3/ Private People/Investors. ie Owner occupiers and Investors bowling over old houses then rebuilding new modern homes and redeveloping town houses / villas.

All these ultimately beautify and uplift an area. People are attracted to the new look/feel so start moving in creating demand.

These were the foundation I used in my early days of building the multi $million portfolio we hold today.

I hope this helps others starting out down the same track.
 
Seems that we have some similar tastes in information in this thread. What are your most preferred sources / resources to find this info Rixter?
 
in terms of resi property

I look at areas where gentirificaion is about to occur, or is already occuring where teh prices have either been flat, gone down or risen averagely, so that when the boom/good growth comes about,I will be on the wave.

I never buy in areas that have already gone up a heap in the short term
 
Seems that we have some similar tastes in information in this thread. What are your most preferred sources / resources to find this info Rixter?


Jake I edited my post above for more details on how I go about conducting my DD for CG.

I research online & offline.

Check out all the federal/state/local government planning & development websites at this one convenient link (http://www.oultwood.com/localgov/countries/australia.php).

Other sources I use to gather info are local newspapers, community news, local businesses, and people in the area.....general networking etc.

I hope this helps.
 
Land size. When things are ticking along slowly there is no great difference. During/after a boom the bigger land size properties snowball.
 
Hi MTR - What do you believe the pros and cons are with investing in lower-socio areas?
What time frames are you working toward, and are you focusing on buying and holding, renovating or developing?

Hi Jake

The Pros
Low entry level
Less risk
Less competition, but this seems to be changing
Easier to hold property
Consistant growth
Good amenities


Cons
Need to carefully screen clients
Schools possibly not up to standard?



As you can see there are more pros than cons for me.

I was purchasing in State housing areas 11 years ago and I can honestly say when I started I was concerned, but this went out the window years ago.

I also noticed when the market crashed in Perth, State housing areas sitting on development sites did not get as badly hammered as the outer suburbs.

I really think it is a no brainer if you are purchasing State housing properties earmarked for rezoning, close to city and considerly cheaper than surrounding areas/suburbs its got to be a winner.

I don't really have a timeframe, I expect rezoning to be in place in 18 month - 2 years, the properties are pretty much looking after themselves so I will just see what I have in the pipeline at that time. If I did start developing I would commence on building at the rear of the first property I purchased and then access the equity and move on from here.

Cheers, MTR
 
Your thoughts Jake??

Hi Jake

You post a good question, what is your criteria for investing in CG when looking for properties as a buyers advocate??
 
Land size. When things are ticking along slowly there is no great difference. During/after a boom the bigger land size properties snowball.

X2, not that I carry anywhere near the experience you guys have under your belts... Very good buying of larger land holdings atm I've found.
 
Jake....don't mean to be rude, but shouldn't you, as buyers advocate, know exactly what to look when buying for growth ? I'm looking for my first IP and am considering using a buyers agent as I'm time poor, and the number one question i would expect them to answer is the very question you post...I gotta tell you, you scared the **** out of me and now am seriously thinking it twice before paying over 10k to someone who is supposed to know the market inside out but is asking fundamental questions in a users forum.
 
Jake....don't mean to be rude, but shouldn't you, as buyers advocate, know exactly what to look when buying for growth ? I'm looking for my first IP and am considering using a buyers agent as I'm time poor, and the number one question i would expect them to answer is the very question you post...I gotta tell you, you scared the **** out of me and now am seriously thinking it twice before paying over 10k to someone who is supposed to know the market inside out but is asking fundamental questions in a users forum.

Jake is just asking other people’s opinions, I’m sure he has his own strategy sorted out. Don’t be scared of buyers agents etc.

My main rule is scarcity or rarity, if you can’t easy replace it its got to be good.
 
Jake....don't mean to be rude, but shouldn't you, as buyers advocate, know exactly what to look when buying for growth ? I'm looking for my first IP and am considering using a buyers agent as I'm time poor, and the number one question i would expect them to answer is the very question you post...I gotta tell you, you scared the **** out of me and now am seriously thinking it twice before paying over 10k to someone who is supposed to know the market inside out but is asking fundamental questions in a users forum.

A good BA is never too full of himself to learn BUT I took his post to be what it was, which was to find out what others look for. This generates good discussion and can give other members ideas to look for themselves.

When you choose to use a BA you will also need to know what you want - i.e. something safe, something for redevelopment, something for renovation, something for CG etc etc. Based on your profile they can then show you matching properties and give you advice.
But there job is not work out your strategy nor your risk profile.
Jake is good at his job - he is who I would choose to use in Melbourne.
 
Jake is just asking other people’s opinions, I’m sure he has his own strategy sorted out. Don’t be scared of buyers agents etc.

My main rule is scarcity or rarity, if you can’t easy replace it its got to be good.

+1 on the scarcity - providing it's nice and tasteful :)
 
Multi-nationals

2/ Big Multi National Retail & Commercial type companies. ie Major Shopping Centres, McDonalds Hungry Jacks, KFC, Bunnings, Harvey Normans, Good Guys, etc. These companies spend $Millions on market research before going into and setting up shop in an area. If there was no current or immediate future demand for their products and services they would not be moving in, so leverage off the back of their research.

Hi Rixter

Some great points here, many thanks for sharing your knowledge.

I am interested in how you investigate the big multi-nationals and their next moves etc. Do you regularly review their websites for new openings or are there other ways you research them?

Looking at the Bunnings website for new stores - http://www.bunnings.com.au/discover-our-stores_new-store-openings.aspx , Goulburn has been open for 6 months or so (I am not sure about the other stores) - would you not be looking for where the multi-nationals are investigating rather than where they have opened, or if you see that one of the multi-nationals have opened a store in an area, would you further investigate that area??
 
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