Helpful House Hunting Hints

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From: Carlo Chiodo


Hi,

Great forum.

I just purchased another IP in Elwood at estimated price $95 per square foot, $45,000 under reserve. Who says you can't find a bargain these days!!!

Comparable sales, after discounting the value of the house (amount dependant on condition), shows an average per square ft price of $140-$160.

Earlier this year I snapped up a property in North Carlton for $280,000. Recently had an offer of $380,000 for it, which i declined.

Hope everyone here looking to find a house has as much luck as I've had.

Just some helpful hints I've learnt in purchasing the 3 properties I owned at bargain prices:


1/ Never purchase at an auction while the property market is booming. Auctions are only comparable to private sales in a stagnant/declining market. Yes 'NEIL JENMAN's' book says otherwise (ie vendors should never use auctions to sell because you dont get the highest bid...it would since he sells a system that relies on negative views of auctions. Unfortunately Jenman neglects one key stimulus of auctions...HUMAN EMOTION...this can make people go WELL above what they initially wanted to spend. Don't believe me, try going to a few auctions.

You may be thinking...AHHH but you got your property at an auction. Incorrect. I negotiated AFTER the auction, the highest bidder would no give 30 days settlement. (tough luck for him).


2/ Always buy in an area that has had STRONG capital growth for the following reasons:
- it is unlikely to end
- these areas have higher volume of sales, which means greater chance of picking up a bargain
- although rental yields are low initially, the growth rate in rent over the year is higher than other areas
- there is usually a reason for the growth, ie good schools, gardens, beaches, shops etc...these reasons don't disappear. People always ask me...when is footscray going to boom...my answer usually is...when the council starts planting trees.


3/ If you insist on buying at an auction, always throw a ridiculous bid in...ie fair value is $500,000, say $200,000...You may get lucky and the other potential bidders may all start thinking...hmm why is the first bid so low, whats wrong with it, did I read that S32 properly.


4/ ALWAYS ALWAYS ALWAYS disregard median house prices etc. The correct method (imparted on me by my brother-in-law, an ex managing director at York Capital) is:

- Get comparable sales...ie 2br house, 3 br house etc, same area
- Discount a value for the house dependant on condition...ie disaster, take of 50G, mediocre, take off 90G, do the same for all comparable houses.
- Obtain the land size of all comparable sales in Sq Feet (or SQM). To get SQ feet, multiply SQM by 11 for an approx measure
- Subtract the value given for the residence from the price the house sold for and divide this amount by the number of SQ feet (or SQ metres)
- This will give you the price paid per SQ foot for each property. You can also compare different areas within a suburb using this. Eg how much per sq foot has a house on a main road sold for compared to in a quiet street.
- If need be, get the home price guide, it costs $40 or about there, but who cares, come on, your buying a house which more than likely will cost OVER $100,000!!!!!!!!
If you want to discuss this, email me.


5/ Drive around to auctions and look at the amount of people attending and the number of people bidding. More people = more demand = increased likelihood of cap growth. Then try and get a house thru priv sale.


6/ Get in bed with a real estate agent. Tell them you are going to buy LOTSA houses in the area and then resell them thru them if they look after you. I reckon you'll be getting a lot of calls back. I can't stop the phone ringing.


7/ Go with your instinct. People said I was crazy when I bought my first house in Elwood for 210,000 in 96. Admittedly it wasn't a bargain, I bought it at an auction after all and i was a newbie back then. Its now worth $600,000. Needless to say most of those people never heckle me these days.


8/ Try to make offers on a day where there are LOTS of sales in an area on the same day. Potential purchasers cannot be at the same place at once. The house I purchased in Elwood last week was mainly a bargain because (a) it was hailing & (b) there was another auction down the road. That also got passed in.


9/ LAND LAND LAND LAND LAND: a bargain should be determined by how much you paid for the LAND SIZE. You may say, oh but I have to then pay heaps to fix the house. And I would say ur right. Make sure the house is immediately rentable, but base your price on land size.


10/ Be patient. Enuff Said.

If anyone wants to email me, my email is cdchi1@ihug.com.au or at my work, Carlo_Chiodo@norwich-union.com.au

Regards

Carlo Chiodo

Disclaimer: The above is my personal opinion and should not be taken as advice.
 
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From: Sergey Golovin


Hi Carlo,

Are you attending real estate course or something? You must be close to the completion date. Good on you son. Well said.

Damn good.

Serge.
 
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From: Carlo Chiodo


Hi Serge,

Do you think I'd make a good real estate agent???? I think I'd lose alot of money givent he way I think :)

I actually work in corporate superannuation and have a post graduate from the securities institute at which I did some valuation subjects. I'm also lucky enough to have a brother in law that is Ex manager from York Capital Property Group and who knows his property.

I was actually considering doing real estate...but there's WAY more money in buying it as an investment than selling it for a living.

Something I should have mentioned in my previous post...it is SKEWED towards high growth areas where the 'actual house' doesn't have a large impact on the price.

If you are buying out in an area where the land is cheap, then obviously the house is a serious consideration. Possibly better for buy, renovate, sell etc.

Regards

Carlo
 
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