How do you research??

I am trying to decide where to buy an IP. In my price range, there are several different suburbs I could go to, in very different areas, with different characteristics/histories etc. I don't know which one is best!

The advice I often get is that I have to 'research the suburb/s'. And then vague instructions, like read up about it, talk to local agents etc.

Can anyone share their exact steps when researching the suburbs/markets?

Read up - read up where? what exactly?

Reports - Residex has a number of reports for sale, including ones that predict future, or give a postcode lowdown - are these useful? Would you believe/trust what in them?

As for talking to local agents, well, they are not really going to tell you, 'yeah, my suburb sucks, you'd be wasting your money here', are they? They'll say whatever is necessary to get you to buy from them, so I don't see how talking to them is useful - unless I am missing something?

What other steps do you take to research areas? Thanks for sharing!
 
I have been active in several countries over a 40 year period.

I only buy the cheapest decile of property that is for sale in whatever area I choose. Other things I look for:

- land content, size of land does matter.
- future development opportunities (can it be rezoned or redeveloped?)

My recipe is not complex and can be replicated by anybody.

It's worked very well for me - that's all I can say.
 
I have been active in several countries over a 40 year period.

I only buy the cheapest decile of property that is for sale in whatever area I choose. Other things I look for:

- land content, size of land does matter.
- future development opportunities (can it be rezoned or redeveloped?)

My recipe is not complex and can be replicated by anybody.

It's worked very well for me - that's all I can say.

land is ALWAYS KING! ive said this to so many people on here
land appreciates, buildings depreciate
 
Are they generally run down properties? Do you generally do reno after buying?

A coat of paint and minor landscaping works wonders. Once its tenanted, hold for 5-10 years and then either sell or redevelop.

I have never gone wrong by buying cheap. Over the years, my worst performing IPs were all lovely houses that were above the median price of whatever local area I was interested in. My best % performers were the cheap ugly ducklings that nobody wanted because, for example, "oh the kitchen and bathroom are old."

Recently, I have taken what people would say is a massive gamble by putting most of my eggs in a cheap, run-down suburb in bayside Melbourne. Everything I bought is made of solid brick and on a development site. Virtually all were acquired below $300,000. Hard to go wrong when one gets in so cheaply.
 
A coat of paint and minor landscaping works wonders. Once its tenanted, hold for 5-10 years and then either sell or redevelop.

I have never gone wrong by buying cheap. Over the years, my worst performing IPs were all lovely houses that were above the median price of whatever local area I was interested in. My best % performers were the cheap ugly ducklings that nobody wanted because, for example, "oh the kitchen and bathroom are old."

Recently, I have taken what people would say is a massive gamble by putting most of my eggs in a cheap, run-down suburb in bayside Melbourne. Everything I bought is made of solid brick and on a development site. Virtually all were acquired below $300,000. Hard to go wrong when one gets in so cheaply.

well said 1W. I couldn't agree more, ive put my money into frankston and im happy to make an excellent return. I had a house in Somerville and should have never sold it, when I bought it in 08 it was 285k then a year later I sold for 325k. but your def on the money 1W. :D
 
Thanks guys.
I've read 1world's previous posts with much interest.

But this doesn't really answer my original questions, any ideas on that?
 
Read up - read up where? what exactly? !

Forget what the gurus say. Find an area that you like and chase the cheapest decile of property in that area. Become an expert on "sold" prices so that you never over-pay for an IP.

talk to local agents etc.

In my experience, most of them have no idea and own little property themselves. All they want is a fast sale, with a minimum of fuss.

This is one of the better sites for research into things like sold-prices, crime, schools etc. Take the time to do the work - its not rocket science and it does pay off: http://house.ksou.cn/suburb.php

Good luck!
 
you need to find out whats in demand for the particular area and whats driving demand now and in the future. because thats what will create your growth.
also you should be looking into

- supply
- population growth
- yields
- employment
- infrastructure and transport
- plans to improve the area
- demographics
- history

just to name a few.

chees
 
I am trying to decide where to buy an IP. In my price range, there are several different suburbs I could go to, in very different areas, with different characteristics/histories etc. I don't know which one is best!

The problem is with you. It's not what level of research other people are satisfied with, it's what YOU would be satisfied with.

There are two ways to go about it. Decide what level of research you would be happy with, then get that research. This is not the same as continuing to research until you're satisfied.

Otherwise, decrease your choices. Make decisions on type of property, number of bedrooms, land size, age, yield. That should limit your choices, and make it easier to pick one.
 
If it is as easy as you guys say, then all it takes is:

0. Determine the maximum price you would be looking to pay for a property. (Optional would be to decide what type of property you would be looking for)

1. Browse sold prices on the http://house.ksou.cn/suburb.php website to establish a price range on each type of property in an area and never deviate from this range.

2. Look for the presence of current and potential future decent infrastructure and demographics. Easiest to do this is look for big business - Bunnings, Westfields, Stocklands, train station (quality of station), hospitals, schools, renter proportion, income. Cancel out suburbs which don't have these things.

3. Ring up and visit all the real estate agents in the selected area, network with them, tell them you are in the market.

4. Make lowball offers and work your way up if needed.

5. Profit?!!!

All in all this should take no more than 1-2 hours of work per day and about 2-3 weeks of search per property, in theory of course. Exceptions apply for out of state properties of course.
 
The great thing about a question like this is that it makes me write down and formalize what I tend to do instinctively.

Every body will have a different approach so for someone to say This is what I do and it's worked for me , so you should do that is wrong . Listen to what everyone says and then work out what you feel comfortable about doing . Think about what you like doing. Do you want to spend your time travelling interstate or spend spare time doing or organizing reno's . Some people do , some don't . It might sound obvious but I've found out what I like doing by trying different things.

This is how I approach it .

First choice for me is which market ? ie Sydney , Brisbane , Rocky , Tamworth etc .

I've narrowed by Decision making process of which market down to two factors .
  1. Low ten year growth rates
  2. Somersoft Gossip

I've spent a lot of time studying share trading and these two factors effectively represent two basic share trading concepts
  1. Revision to Normal - ( if something is historically under valued it tends to revert to normal , ie catch up and if it's overvalued it does the opposite )
  2. Following the trend - For me the trend is somersoft gossip - this will get me into areas at the beginning of a trend

Over the last 2-3 years Sydney has had the lowest ten year growth rate so I've been buying there in the anticipation that over the next ten years it will catch up. I won't be surprised if the next set of figures show this is happening at the moment .

Because Sydney is a Big place I'll tend to stick to areas I know , which is North Shore, Northern Beaches and outer West . This gives me a diversity of markets to look at and if I can't find somewhere within those areas that looks as though it's good value I'll look at areas near to Sydney . Living on the north Shore , I'll check out Central Coast / Newcastle because they're close to where I live.

Sometimes other factors will come into play . At the moment we've maxed out our Land tax in NSW so we've decided that , given there are opportunities in other states , we'll look there.

Some people they will use a Buyers Agent when they are buying interstate and there are several good one's on the forum . We nearly used one recently but ,even though it's time consuming , I actually enjoy the process of finding a property . I also don't know what opportunities are out there and sometimes we end up buying something we didn't anticipate because we came across a good deal.

eg We haven't bought off the plan before however we came across a deal where the numbers and the time frame stacked up so we went with it . In the past, any OTP I've looked as has come with optimistic or market value sale prices and rental returns , however on this one the sale price and rents quotes seemed under market . We spent about two hours talking to the developer and he has a very simple and effective concept . The under quoting is deliberate . He wants the owners to have a profit on day one . As a result he is selling out his developments before turning a spade. He is still making a very nice profit , but in an uncertain market , he has certainty and will be able to keep on doing what he is doing on an ongoing basis . A classic WIN WIN situation . Apparently Mirvac worked on the same principle when they started.

If we're looking at another Market , Do I already know it ? I've lived in Melbourne and invested in Brisbane , Rocky , Hobart and Townsville so I am familiar with some areas in these markets .

If I want to find out about a market that I'm not familiar with I spend a few hours reading this forum . You will find out which areas people are looking at to buy potential development sites. You need to keep in mind the personal preferences and biases of the individual posters .

eg It's a great place to pick up cheapies with good rental returns

really means

It's a lower socio-ecomomic area with lots of people on welfare. The properties are old , run down and need ongoing maintenance . You'll have tenants who punch holes in the walls when they break up with their partner and if they don't pay the rent and the pm can't find them , it may be because their in jail ......

We've bought properties like in areas like this and have made good money . Mt Druitt , Logan , Depot Hill, Elizabeth and Parts of Frankston spring to mind .

There are various free property updates produces by various groups . Matusik do them as do a couple of the banks . When ever they come out someone will post a link on the forum so I don't specifically follow them . I just follow the links when they get posted and read them. Some people eg Terry Ryder's Hotspotting , provide reports that you can pay for , but I find I can get all the info I want from the forum and from free sources.

Once I've worked out which areas I want to look at , I'll start looking at specific properties to get an idea of what is available in that area I ring up selling agents to ask about specific properties and the area in general . I'll talk to property managers about what tenants want in an area , what they don't want and any no go areas etc.

Before we go interstate we'll have narrowed our area of interest to 2-3 different areas . Eg in 2002 when we went to buy in Brisbane we looked at Logan and Strathpine ( that 8 pack for 400 k would have been a good buy ... but that recent post about a boarding house made me remember it .... ) . We spent a couple of days looking in both areas at different properties so we became familiar with what the properties and area looked like. In the end we decided on logan as the gross rents were better . If we were revisiting it again with our current knowledge I'd probably go with Strathpine.

Before we go , we'll look at every property for sale on the net and save all the properties of interest . Then we both go through the list and we'll bring the list down to a manageable number to look at during the day.

When we're looking at properties with an agent I prefer to go in their car so we can pick their brains about what is going on in the area in terms of developments and it also give a change to build up a rapport with them . I think this is critical . The agent can be your best friend.

Once we've decided on a specific area we'll get a three month subscription for myrp . The suburb sales map subscription .

It says on the blurb that it gives access to sales Data from the last three years , but in reality the interactive map has given us access to prices going back for many years , so on all of the properties we've been making offers on , we know what the owner paid for it , and what the place next door actually sold for . ( it reassuring that the agents have been truthful :cool:

Cliff
 
Nice post there see_change!

The 10 year growth rates method I've also seen in John Lindemann's book, but a couple of issues I have with this are:

1) That you can't get up to date data (all the data in the magazines are at least 3 months old) and whilst yes there probably won't be massive changes in the long or longer term growth rates, there may be big shifts in short term rates which may mean that it is still easy to overpay short term right and forgo short term gains?

2) That the 10 year data may be actually part of a 20 year cycle where even if the numbers look favourable for the last 10 years, they overgrown already when compared to the last 20 years? Or am I just completely wrong on this one?

3) Some REAs who are investors say that this method is too bookish.

I'm still thinking this may be one very useful as part of the arsenal of tools including analysing demographics, infrastructure, population growth, locations of Westfields etc, that if you take all the suburbs in the state and create a list that satisfies both the numbers analysis and the qualitative analysis that you'll at the least risk.

What do you guys think?
 
Nice post there see_change!

The 10 year growth rates method I've also seen in John Lindemann's book, but a couple of issues I have with this are:

1) That you can't get up to date data (all the data in the magazines are at least 3 months old) and whilst yes there probably won't be massive changes in the long or longer term growth rates, there may be big shifts in short term rates which may mean that it is still easy to overpay short term right and forgo short term gains?

You'd only be over paying if there was a sharp drop in the market , and that the sort of think you can find out if you start talking to agents .

I'm only interested in buying in two situations.

1) when there has been a sharp drop in the market and I'm buying bargains . basically bottom feeding . In this situation you need to know the market and aim to buy absolute bargains . When I buy in his situation I'm not going to commit all of my available equity as I don't know how long till the market is going to move . We've done this once , just after the GFC hit . We had a LOC ready to go . Two units for sale in Mosman , one house between the block and the waterfront with panoramic views from both units . 1 Bedder around 90 m2 and a two bedder around 105 m2 so both big units with high ceilings . Asking price for both 1.275 . We offered 850 . I had a discussion with my wife who said it was too low and we'd never get them below 1 mil . They came back and said they wouldn't sell for below 900... Happy to pay 900. Latest valuation around 1.4 . We're looking at reconfiguring the units so the one becomes a two bedder and the two bedder becomes a three bedder . There's even a possibility of enclosing a secondary stairs so the two bedder might become a four bedder. Know we know everyone in the block we're going to raise the issue of converting some of the space around the block into parking spaces . We might even be able to squeeze a tandem space in front of the two bedder so it goes from a two bed with no parking to a four bedder with two spots..... This is the project for when we stop our current buying spree which brings us to the second time we buy .

2) when there appears to be an established up trend as now in Sydney and possibly in other markets . This is when I pay attention to the ten year trend so 'target the under performing markets in preference to the ones which have shown more recent strength. I'm really only looking at the capital cities and the major costal regional towns .


2) That the 10 year data may be actually part of a 20 year cycle where even if the numbers look favourable for the last 10 years, they overgrown already when compared to the last 20 years? Or am I just completely wrong on this one?

I don't know if you're wrong or not .I haven't specifically looked to see if there is a 20 years cycle , but what I've seen leads me to believe there is a cycle somewhere around 7-14 years and I've found the ten year rule works for me so I use it.

3) Some REAs who are investors say that this method is too bookish.

Sorry I have no faith in the ability of REA's to act as financial advisers .
I'm happy to talk to REAs when I'm checking out an area and looking at houses , but from my experience most are very insular in terms of the over all market . Some have no idea on what is happening in their market and very few a good overall . When we bought in logan , one agent was puzzled why we buying when prices hadn't gone up for ten years . we bought around 60-70 . about two years later ( when prices were in the early 200's ) he told us he'd bought a place because he saw there was going to be more growth ...

Same in Rocky .

I'm still thinking this may be one very useful as part of the arsenal of tools including analysing demographics, infrastructure, population growth, locations of Westfields etc, that if you take all the suburbs in the state and create a list that satisfies both the numbers analysis and the qualitative analysis that you'll at the least risk.

What do you guys think?

Dennis , are you friends with China ? If not , I think you'll get along .

For basic property investing I don't think it's necessary. If you're working as an analyst for Mirvac , working out where to build your next 500 mil complex go for it. If it gives you a feeling of added security in deciding where to invest fine. But don't get caught up in over analysing .

Cliff
 
I'm starting to see your point Cliff regarding the importance of the use of 10 year growth figures right now in Sydney as the market is hotting up and REAs are overpricing everything to determine underpriced areas. Just to make sure your idea of "bottom" feeding and mine are similar, let's take for example the following statistics. These are the numbers at the back of the API magaazine for June 2013 showing data representing February 2013 in the suburb of Griffith.

Griffith
Quarterly Growth: -6.8%
12 Month Growth: -11.8%
3 Year Growth: -2.3%
5 Year Growth: -0.5%
10 Year Growth: 1.7%
Number Sold: 21
DOM: 333

I'm think that this suburb's units would be an example of what you would call "bottom feeding" (ignoring this suburb's infrastructure, demographics, pop etc). That long term there is a positive growth, but in February 2013, it would have been a good time to pick up a bargain for short term gain (6-18 months) before the market corrected itself.
The next example is of Dubbo units, also in February 2013:

Dubbo
Quarterly Growth: -0.5%
12 Month Growth: -5.4%
3 Year Growth: -0.2%
5 Year Growth: 3.9%
10 Year Growth: 8.6%
Number Sold: 50
DOM: 126

Here I'm thinking that in February 2013, Dubbo would have been good for a longer term (5-10 year) investment considering that 5 year growth is less than half of 10 year growth, so in the next 5 years it would have to grow at 13-14% to compensate and make it back up to the long term average of 8.6%.

Is this what you are meaning?

Forgot to ask as well, do you use those API stats or is there another way to source more recent stats, e.g. Aug 2013.
Another point is that if there are low sales in an area for a long time, this may affect the 'growth' values because the median sale price may be lower for that particular quarter or year.
 
Is this what you are meaning?

Mmm . Dennis . Not sure .

I personally wouldn't be using those figures to analyse it like that ( but that doesn't stop you doing it ) and personally I wouldn't bottom feed in lesser areas . That's a personal preference . Hence the reason why I bought in Mosman post GFC rather than in Mt Druitt . When I bought those units I was picking up very nice units at a bargain price , which I intend to hold long term . That won't be repeated .... until the next major global crisis .... which will happen .

If I'm going to buy in lesser areas , I'll wait until I see the market moving and then buy then . That hasn't stopped several members of the forum doing very well out of buying in cheaper areas when the market was dead and holding for a while before the market started moving.

Cliff
 
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