It Doesnt matter where you buy! in a warm/hot market

[TMNT]

had an interesting conversation with a good friend who already has a few Ips under his belt,

he is currrently looking at basically long term holds, possibly to buy under market value, or one that needs a bit of cosmetic work,

his view is that basically in NSW/QLD/VIC, ignoring mining towns, ignoring inner city apartments, ignoring OTP, that since all prices are all moving, obviously some areas have moved up further then others,

just basically buy anything for what you think is a little below market value, and bang, you are set and forget

I kind of agree with him, in most areas the market is warm to hot, you snooze you lose, you try and look for the bargain of the lifetime, you will simply miss out and be disappointed and yoru opportunity cost will be astronomical, best to buy in any of the areas, and look for that good deal (not the screaming bargain) and just get it before anyone else overpays for it

whats everyone else's opinion,

and how has everyone modified their strategy since the market has heated up or has hotted??? im finding that even vendors are expecting higher prices (rightly or wrongly),agents are gettting a bit cocky, and you basiaclly have to either offer unconditional. or a higher price or get in early

 

[perthguy]

whats everyone else's opinion,

Option 2 for me: develop one of my devlopment sites. In my case it will be Melbourne later this year. For me that is a good option in a market that seems to be coming off a peak (development blocks in the City of Belmont).

 

[see_change]

We Did a development during the last boom and made some good money

However I wouldn't ( personally ) do it again . Because it meant that we didn't go and in other areas where we would have made as much money if not more with less stress.

While Karina was buying in geraldton for 60 k we didn't . We looked and saw what was going on , but because of the development we didn't .

We also sold some properties in Rocky ( for a Profit ) to fund the development.

Sure there were other ways we could have financed things , but we were already geared , and for us , to do otherwise would have over taxed the Sleep at night Factor.

Just another thing to think about.

For me , when the market is moving , I'd be gearing up to the maximal point you can ( physically and emotionally ) because that is the easiest money you make in property investing . Buy and forget . The reason we're not buying at the moment is that we've reached that point.

Cliff

 

[Brady]

We Did a development during the last boom and made some good money

However I wouldn't ( personally ) do it again . Because it meant that we didn't go and in other areas where we would have made as much money if not more with less stress.

While Karina was buying in geraldton for 60 k we didn't . We looked and saw what was going on , but because of the development we didn't .

We also sold some properties in Rocky ( for a Profit ) to fund the development.

Sure there were other ways we could have financed things , but we were already geared , and for us , to do otherwise would have over taxed the Sleep at night Factor.

Just another thing to think about.

For me , when the market is moving , I'd be gearing up to the maximal point you can ( physically and emotionally ) because that is the easiest money you make in property investing . Buy and forget . The reason we're not buying at the moment is that we've reached that point.

Cliff

How big a development are you talking?

I've recently purchase a property that plan to knock down and build two on in 18months. A large chunk went on the deposit so now getting funds back up to a good level. But not sure if will be moving straight away, I'm also of the thought that if another good site comes up that I can bank (tenant) and continue to buy that I might do that as I would own the site and can develop at anytime, but could mean missing out on purchases.

Only thing that will likely see me do it straight away is the urge to make one of them my PPOR.

 

[Brady]

his view is that basically in NSW/QLD/VIC, ignoring mining towns, ignoring inner city apartments, ignoring OTP, that since all prices are all moving, obviously some areas have moved up further then others.

just basically buy anything for what you think is a little below market value, and bang, you are set and forget

I agree with him in a sense that I plan to continue to purchase/develop whenever I can. Just purchased recently that took ~$50k for the deposit so its another 12months before I save another ~$50k which I'll either use to develop or buy again.

Once I have the deposit to be able to purchase it's looking just about everyday at what I could buy that's going to perform the best.

I don't think it's just a case of buying whatever where ever, but yes buy when you can afford to buy.

 

[ok180]

just basically buy anything for what you think is a little below market value, and bang, you are set and forget

 

[impala67]

...just basically buy anything for what you think is a little below market value, and bang, you are set and forget...whats everyone else's opinion...
...and how has everyone modified their strategy since the market has heated up or has hotted??? im finding that even vendors are expecting higher prices (rightly or wrongly),agents are gettting a bit cocky, and you basiaclly have to either offer unconditional. or a higher price or get in early

I just make sure I am confident I know what numbers I want and the reason I am buying it, which as you said starts with buying under market value.

My strategy went from buy and hold with potential for manufactured growth; to buy and hold and diversifying markets/demographics in the same city. Which led to diversifying interstate this year and hopefully one day commercial.

Strategy-wise, if what the agent wants and what I'm offering is too far apart, I don't bother and ask if they have other stock available. I did buy the first IP in a hot market, and the rest were more targeted distressed sales and I found no big change in my method. I would never offer unconditional.

 

[perthguy]

My strategy went from buy and hold with potential for manufactured growth; to buy and hold and diversifying markets/demographics in the same city. Which led to diversifying interstate this year and hopefully one day commercial.

I agree with diversifying markets/demographics in the same city and interstate. I have already diversified interstate and am now looking at different markets in Perth. I don't want all my investments tied up in the same market.

 

[Truly Exotic]

If your friend is buying in similar sort of metro areas without much holding the economy together, then I'd say he has a point,

Like buying a high rise apartment in the middle of the Sydney and melb CBS for example,

Both are at relatively similar parts of the cycle, and they aren't going to shoot up or shoot down

 

[MTR]

.whats everyone else's opinion,

and how has everyone modified their strategy since the market has heated up or has hotted??? im finding that even vendors are expecting higher prices (rightly or wrongly),agents are gettting a bit cocky, and you basiaclly have to either offer unconditional. or a higher price or get in early

I have tweaked my strategy a little, besides buying up in a rising market I also now sell some properties and reinvest this money in other markets so I can capture further growth, as you mentioned many markets moving at the moment. Also when the market turns I do not want to be holding negatively geared properties and perhaps looking at 7 years for further growth. There is an opportunity cost associated with what else you could be doing with the cash/equity tied up in a property if that property is going nowhere or even going backwards in value.


I also now buy development sites where I can build 3-4 units, sell 2 keep 2 primarily for cash flow.

You mentioned buying below market value, this is difficult when the market is rising/hot and in many cases one could miss out on some great opportunities. Personally when I see an area moving/hot I jump in, pay what they want as I know I will make money at the end and I would rather beat my competition, pay an extra $2000 and in 12 months a real possibility of making $100,000 in a hot market.

 

[TMNT]

I have tweaked my strategy a little, besides buying up in a rising market I also now sell some properties and reinvest this money in other markets so I can capture further growth, as you mentioned many markets moving at the moment. Also when the market turns I do not want to be holding negatively geared properties and perhaps looking at 7 years for further growth. There is an opportunity cost associated with what else you could be doing with the cash/equity tied up in a property if that property is going nowhere or even going backwards in value.


I also now buy development sites where I can build 3-4 units, sell 2 keep 2 primarily for cash flow.

You mentioned buying below market value, this is difficult when the market is rising/hot and in many cases one could miss out on some great opportunities. Personally when I see an area moving/hot I jump in, pay what they want as I know I will make money at the end and I would rather beat my competition, pay an extra $2000 and in 12 months a real possibility of making $100,000 in a hot market.

I'm also faced with a similar situation, have a swag of IPs some I've done renos, big spand small, only a few that are mining influenced, ie nothing that is a one horse show

Basically all are cash flow positive or neutral, based on 100% lvr

If I sell, it will cost me agency fees,

If I don't sell then there may be an opportunity cost,

The only thing is my cash flows aren't exhausted yet cos I have refinanced most of them,

So I guess I will keep mine since they aren't costing me anything and there is no guarantee it will fall or be flat, they actually may just chug along nicely

I'd have to be a darn good investor for me to it to be worth selling up and paying all those fees and reinvesting somewhere else to make better gains then say average capital growth

 

[MTR]

I'm also faced with a similar situation, have a swag of IPs some I've done renos, big spand small, only a few that are mining influenced, ie nothing that is a one horse show

Basically all are cash flow positive or neutral, based on 100% lvr

If I sell, it will cost me agency fees,

If I don't sell then there may be an opportunity cost,

The only thing is my cash flows aren't exhausted yet cos I have refinanced most of them,

So I guess I will keep mine since they aren't costing me anything and there is no guarantee it will fall or be flat, they actually may just chug along nicely

I'd have to be a darn good investor for me to it to be worth selling up and paying all those fees and reinvesting somewhere else to make better gains then say average capital growth

Its dependent on where your properties are etc? I also expect the mining town properties will be very difficult to sell or you will be making a loss when selling??

If you can access equity and your properties are all cash flow positive then you may be in a good position to continue purchasing. If you locate an area that is moving/rising then there is no reason why you wont do better than the average buyer/investor, who buys and hopes for the best

 

[TMNT]

Its dependent on where your properties are etc? I also expect the mining town properties will be very difficult to sell or you will be making a loss when selling??

If you can access equity and your properties are all cash flow positive then you may be in a good position to continue purchasing. If you locate an area that is moving/rising then there is no reason why you wont do better than the average buyer/investor, who buys and hopes for the best

Yes agree, when it say mining, I don't have anything in gracemere or Gladstone or the likes,

The most volatile one I have is maitland in the hunter, which isn't a one industry town

The majority of my properties if I refinance at the higher price, then all positivity will be gone, obviously, and they wil be neutral which will reduce/eliminate cash floe which doesn't bother me since I will use these funds to keep buying

As mentioned on another thread, the majority of the major cities and areas are in between six and 12 o'clock so buying under market is tough and even if you can, if growth stops in 12 months, then you are pretty much stuffed unless you are going to flip it

 

[MTR]

Yes agree, when it say mining, I don't have anything in gracemere or Gladstone or the likes,

The most volatile one I have is maitland in the hunter, which isn't a one industry town

The majority of my properties if I refinance at the higher price, then all positivity will be gone, obviously, and they wil be neutral which will reduce/eliminate cash floe which doesn't bother me since I will use these funds to keep buying

As mentioned on another thread, the majority of the major cities and areas are in between six and 12 o'clock so buying under market is tough and even if you can, if growth stops in 12 months, then you are pretty much stuffed unless you are going to flip it

Buy to flip and make money, is this such a problem, think about it??? you are reducing debt and you get to move on and look at other deals because you have cash. Making money is a good problem. It does not mean you never accumulate, you do both.

 

[Mick C]

Aggree with your friend- no such thing as a "good or bad market" - i only believe in good or bad deals. There's deals to be made everyday! and i just buy anything that's just a touch below the market ( im not to greedy) + it's positive yield and BANG! it's done. Set and forget.

 

[Brady]

Aggree with your friend- no such thing as a "good or bad market" - i only believe in good or bad deals. There's deals to be made everyday! and i just buy anything that's just a touch below the market ( im not to greedy) + it's positive yield and BANG! it's done. Set and forget.

Surely has to be more than that, sounds simple but I'm sure there is more.

Would you buy a apartment in Gold Coast or Melb that has oversupply, but you can get discount on market value and yield is good....sure you still have some fundamentals that you look at.

 

[Mick C]

Surely has to be more than that, sounds simple but I'm sure there is more.

Would you buy a apartment in Gold Coast or Melb that has oversupply, but you can get discount on market value and yield is good....sure you still have some fundamentals that you look at.

Yep def a few fundamental....without typing a whole essay.
- No OTP and no units with more than 20 units in the complex
- If it's an apartment - Older style apartments preferred
- Low strata ( comes back to point 2)
- If it's a house or townhouse and it's not that close to where i live i look for full brick only
- If it's a house, should be over 550 sq meters with granny flat potential unless it produces a good yield
- Within 50km from a main CBD/region
- Positive yield by min $x per year ( i look at the X figure over %)
- No mining or single industry towns
- Postcode listed as cat 1,2 or 3 only within genworth location guild
- Fringe suburbs preferred.


As mentioned, im ok paying market price- if the Rental yield is there.
if it's for renovations/flipping or granny flats i will target just a touch below market.

 

[Brady]

Yep def a few fundamental....without typing a whole essay.
- No OTP and no units with more than 20 units in the complex
- If it's an apartment - Older style apartments preferred
- Low strata ( comes back to point 2)
- If it's a house or townhouse and it's not that close to where i live i look for full brick only
- If it's a house, should be over 550 sq meters with granny flat potential unless it produces a good yield
- Within 50km from a main CBD/region
- Positive yield by min $x per year ( i look at the X figure over %)
- No mining or single industry towns
- Postcode listed as cat 1,2 or 3 only within genworth location guild
- Fringe suburbs preferred.


As mentioned, im ok paying market price- if the Rental yield is there.
if it's for renovations/flipping or granny flats i will target just a touch below market.

Haha yes that sounds more like it

Sounds solid.