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 .
- Low ten year growth rates
- Somersoft Gossip
I've spent a lot of time studying share trading and these two factors effectively represent two basic share trading concepts
- 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 )
- 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
Cliff