Losing Faith

[Merovingian]

I think I may be losing faith — I need some positive reinforcement.

I have been putting offers on what few properties that are popping up in my somewhat limited price range, but the low end of the market, especially units, is going crazy. Recent figures say that units in Adelaide have gone up 20% in the last six months. That is unprecedented.

The interest in Adelaide has exploded, which is echoed quite clearly, with recent posts on this forum. Adelaide seems to be mentioned in every property conversation. Perhaps I should focus my time and energy elsewhere?

I recently put an offer in a unit that had 18 other offers on it. At first I was skeptical, thinking the agent was trying to up my offer, but, a 20% rise in six months ... in units alone.

What hope have I got? Where is the market going in the next 12 months?

I have been a member of the forum since 2004, when I was in university, and started earning an income at the beginning of 2006. Starting from scratch is so slow, and it feels like the market is just passing me by. Saving rather well, I think, in the last 18 months, I have come a long way, but I am still restricted to the low-end of the market, in which hardly any new stock shows up, and what does is snapped up extremely quickly in the fierce competition.

Perhaps I am losing faith. Perhaps my mindset is all mixed up, seeing the success stories of others, and finding it a struggle for myself to simply get into the market with my first property.

Am I losing faith needlessly? Am I too impatient? Is anyone else finding it difficult?

...End rant.

 

[HiredGoon]

Do you currently rent? What do you think about your current place? How does it compare to how much you could get if you bought on an interest-free loan?

 

[quoll]

One for the Renovator / Handy man $69,000 15 MOPPETT ROAD PORT PIRIE WEST

What about this one ?

Why not post some criteria and see what the group can find?

cheers
quoll

 

[GoAnna!]

Getting into that first property can be the toughest step. After that you get carried along by the growth.

Can I ask how much you have saved and what level of property you hope to buy. It does sound very heated with 18 offers. There might be better or achievable deals elsewhere.

 

[jingo]

Hello Mervovingian,

Don't give up hope! Have you thought about looking in different areas, or even interstate? How about some parts of Sydney that are not doing so well at the moment? (I don't know anything about Sydney, so am just throwing some ideas around).

18 offers on the one property is an awful lot! It must be in a great location to attract this sort of interest.

If you don't mind me asking, what price range are you looking in? I know Melbourne well, and could possibly give you some suggestions. Although inner Melbourne has gone mad! But there are still affordable areas such as Frankston which are moving along steadily.

Anyway, just some random ideas. Don't give up. Keep searching, and keep putting in offers. Something will work out.

Regards Jason.

 

[quoll]

Merovingian, I've got a couple of units I'm looking at selling, should be posted on the net in the next week or so but I agree the prices are going up and I'm going to list these around $200k each for nice big 2br/1bth units with garage, only 2 units on the block, 800m to ocean built in the 80's, haven't had community title so selling the whole lot.

There is not much else on the market similar I'm getting $170 rent but that is low for the area.

I think you really need to look at "how can you get into the market" budget then look at where you can buy within that budget and then pick area's from that list.

cheers
quoll

 

[Dis]

I was in the same position as you a few months ago (... in Melbourne but was facing the same issues). After being outbid numerous times despite putting up reasonable offers, I sat down and asked myself the following questions:

1) Am I confident in long term growth in property in my chosen area
Yes

2)

Where is the market going in the next 12 months?

Very likely ongoing strong growth due to chronic undersupply, strong migration, very low vacancy rates, strong economy

3) Will I make more money by paying top dollar for an excellent property, or aquiring a so-so one at below market value.
I'm planning to buy and hold, so growth prospects are more important than saving a few thousand dollars early on.

Given the situation, I felt it was worthwhile paying a bit more that I thought the property was worth to secure a property that met all my criteria. The books make it sound very glamourous to negotiate a great deal and buy 10% undermarket, but is a rapidly moving market you can loose more money waiting for that bargin.

 

[stargazer]

Hi Merovingian

Keep the faith and persevere. I had been looking for nearly 6 months and kept getting knocked off.

Found a run down 2 bedder and was able to buy well below market value. I must admit it was becoming frustrating but you just got to keep forcused and keep doing the normal stuff.

Check every day for latest listings
name with agents (although this didn't work for me).

What i found was if a place is run down especially a unit you may have a chance to even be able to negotiate.

Cheers
BC

 

[stargazer]

Hi Quoll

Could you PM me address etc i may be interested in your units.

Cheers
BC

 

[jingo]

The books make it sound very glamourous to negotiate a great deal and buy 10% undermarket, but is a rapidly moving market you can loose more money waiting for that bargin.

I agree Dis,

Virtually impossible to buy below below market now in a location that is in great demand and in a rising market such as the one that Melbourne is currently in. If you put in lowball offers the agent will just move onto the next person, and then you will be out looking again, possibly paying more money for the same thing the next week! Where did you buy?

Regards Jason.

 

[jasperjue]

Tell us what your price range is EX and INC buying costs and that will help narrow the field.

I was in a similar position a number of years back with my first IP where i just couldn't believe the prices being paid for units but i bit the bullet and forked out for LMI so i could get borrow more. It felt at the time that i was getting ripped off but now it has more than paid for itself and the equity growth has been used to leverage into other properties.

 

[steveadl]

Merovingian, are you looking for a place to move into in Adelaide, or just an IP?

What's your price range?

 

[softmonkey]

only 1 in 5 ppl gets interested in property investing and of those only 1 in 5 gets past the indecision of what where when how. congrats on first step, now take the second.

there's always a way.. esp if the market is going nuts as you say. LMI has helped many ppl get started, ride that cap gain and you wont care about the LMI in a years time. also the rest of oz is snapping up adel metro, so there'll be bargains wherever they are not looking yet....country regions, tassie, western victoria... loads of sub 200k props still out there.

 

[Dis]

I agree Dis,

Virtually impossible to buy below below market now in a location that is in great demand and in a rising market such as the one that Melbourne is currently in. If you put in lowball offers the agent will just move onto the next person, and then you will be out looking again, possibly paying more money for the same thing the next week! Where did you buy?

Regards Jason.

I bought in Heidelberg West 1 month ago. I think I paid about 5% over what I would regard as "market". On the other hand I think I bid perhaps 1-2% above my competition. So what is market? .... I dunno ....

The valuation from the bank was approved on sale price + inspection.

Based on sale prices from 4 months ago, the land value alone is 75% of the purchase price so probably 80% now. The house is newly renovated with nothing to do. Gross yield is 3.45% based on a purchase price inclusive of all purchase costs (Stamp duty, etc). I think the area has gone up 15-20% in the 6-12 months.

The median price stats can be so misleading:
http://realestateview.com.au/median/h.html

Heidelberg heights down 12%, Heidelberg West up 17% in the quater.....

 

[Lamingtons]

Dis: Correct me if i'm wrong. But when i was searching for property. Heidelberg west is popular with developers as the houses are generally in need or reno work and the block of land is usually really big. There was one that i was interested in and it was a huge block of land. The RE agent said it was on the market for really cheap ($250K) but it took ages to sell as the land could not be subdivided because of a sewage pipe.

I'm thinking Heidelberg west was a good area to buy for capital gains... provided it was the right street.

 

[Dis]

Dis: Correct me if i'm wrong. But when i was searching for property. Heidelberg west is popular with developers as the houses are generally in need or reno work and the block of land is usually really big. There was one that i was interested in and it was a huge block of land. The RE agent said it was on the market for really cheap ($250K) but it took ages to sell as the land could not be subdivided because of a sewage pipe.

Very much so. The blocks are usually just under or just over 600sqm. There are a few larger ones and a few odd 400sqm ones. The original housing stock was built in the late 50's / early 60's - typically 2bdrm very modest department of housing structures. The ones which are unrenovated / tired looking are generally snapped up by builders to build 2 townhouses. There isnt much stock (1-2 pages on RE.com.au) so there seem to be more builders than land. The renovated ones survive to be bought by owner occupies / investors.

I'm thinking Heidelberg west was a good area to buy for capital gains... provided it was the right street.

Because of the above, alot of the housing turnover leads to gentrification (reno pre sale or bulldoze after). I would hope this and the high land content will lead to above average CG. The property is in a nice street for the suburb. 2 townhouses are in the final stages of contruction next door and that block is exactly the same as mine.

 

[Lamingtons]

Dis you've done well then!

Regarding price range quoted. There was a private sale that quoted $270K+, my husband had gone to see it and said it was a huge block of land with a tiny house and would have been builders paradise. The RE agent said there was interest in the $330K region. So I think you've done pretty well.

 

[Dis]

Regarding price range quoted. There was a private sale that quoted $270K+, my husband had gone to see it and said it was a huge block of land with a tiny house and would have been builders paradise. The RE agent said there was interest in the $330K region. So I think you've done pretty well.

Not sure what you mean by a "huge block"? That sounds like the price numbers quoted for average blocks (at the present). The blocks look big because the houses are indeed tiny.

Mine was quoted at $290+. Didn't believe it

At open inspection REA said interest was above $320+ and vendor would take offers prior to auction. Didn't belive it to be reaslistic.

Ended up paying $360k to take it off the market. REA said that it was a close thing. LOL they always do .... but I think there was less than 10K in it, to be honest.

Good luck with house hunting. PM me if you want the name of a couple of agents who will make life easy for you (will take the time to show you what you want to see, and are honest in what they tell you).

~Dis

 

[Lamingtons]

Not sure what you mean by a "huge block"? That sounds like the price numbers quoted for average blocks (at the present). The blocks look big because the houses are indeed tiny.

Mine was quoted at $290+. Didn't believe it

At open inspection REA said interest was above $320+ and vendor would take offers prior to auction. Didn't belive it to be reaslistic.

Ended up paying $360k to take it off the market. REA said that it was a close thing. LOL they always do .... but I think there was less than 10K in it, to be honest.

Good luck with house hunting. PM me if you want the name of a couple of agents who will make life easy for you (will take the time to show you what you want to see, and are honest in what they tell you).

~Dis

HAHAH From memory the land was about 550-600 sq metres and in a pretty good street as well. Most of the properties in the street had been renovated or redeveloped.

Are you glad that you did not go to auction?

Thanks for that Dis, I just purchased in Rosanna. Was lucky it was a PS. Auctions are nerve wrecking.

To the opening poster: Don't lose heart and keep searching!

 

[quintets]

I've had a long day, and the posts have been just as invigorating for me too. Keep up the hunt. If you have to pay a bit extra to get into a rising market, then I PROMISE you, you won't regret it. Keep hunting and doing your research.