Making the decision - First time investor

[Router]

Hi all,

I have been reading about property investment for a while now and believe I am finally read to purchase my first investment property.

The one thing that scares me about this venture though is the "where to buy" question. I live in Melbourne so would feel "safer" purchasing in Victoria, however, that's about all I know at this stage I have read all the suggestions about what makes a good investment (close to schools, public transport, safe neighbourhood, bigger land for CG, etc) but that doesn't make the decision any easier. My biggest fear is, what if I choose the wrong suburb? The reason for me looking in to investing is to take care of my family's future, however, I worry that I could end up ruining it if I were to choose the wrong suburb.

My question is, how did you choose your first suburb, or even your subsequent suburbs? As there are many suburbs which meet the suggested cirteria (close to schools, public transport, safe neighbourhood, etc) how do you decide which one to choose? What if there are several which are all similar, then what?

I have read a few peoples' suggestions to "just buy your first property and learn as you go", but stating the obvious, this is a very big investment and I'd like to try start on a good foot.

Any suggestions/advice would be greatly appreciated. I feel I am on the verge of starting but just need a hand taking that step.

Thank you.

 

[Peter 14.7]

Hold there for moment.

Peter

 

[Peter 14.7]

Welcome and Read this thread
http://somersoft.com/forums/showthread.php?t=81049

Peter 14.7

 

[jweg]

Local or Not?

The one thing I have learnt - is that its good to be somewhere close by. I live over 15 hours drive from some of my IPs, which makes it hard to keep tabs on maintenance. Also expensive. Also means a $20 repair, that I'd do myself ends up costing $100+ because the RE agent hires someone to do the work.

That said.. some people deliberately get an IP in areas they like to holiday - if its somehwere you visit regularly you'll be fine.

Personally I always vote for a 'safe' bet close to home. Better to make a modest profit than to lose in the long term.

 

[Corey Batt]

The other potential benefit in buying local is that you will most likely be more aware of the facilities available, development of the area, infrastructure and possibly plans for what is happening to the area in the future. Through this, you may be able to work out how the suburbs will be travelling in the future.

The downside to buying local is if you're in a dog of an area which may not make for a good investment.

 

[Router]

Thanks for the replies guys, much appreciated.

I live in Dandenong South, and although a lot of the locals and people in surrounding areas feel Dandenong has a bad name, it isn't a bad spot at all.

In terms of investment, it is not too far from the city, is a main transport hub in terms of buses and trains, no more than 2km from the shops, a few schools in the area, etc.

In terms of prices, looking at RP Data - http://www.myrp.com.au/n/dandenong-...6?address=Dandenong South VIC 3175&category=3 and http://www.homepriceguide.com.au/Re...&LocationType=Suburb&State=VIC&SuburbId=11207 - it has experienced quite a lot of growth over the years (if I'm understanding the graphs correctly?).

In terms of buying another house locally, a few of the books I have read suggest not doing so because your putting all of your eggs in one basket - though to be honest, it does "feel" like the safer option because as mentioned above, I do know the area quite well.

If I understand the above comments correctly, is the general advice just to look in areas you know about and purchase? Or, is it better to look around at other suburbs which may provide better returns?

One other question - Some of the books I have read suggest finding out what infrastructure projects the Government has planned for the state. Could someone please suggest where I find this information? I have done countless Google searches but haven't found much valuable information.

 

[Aaron_C]

Router,

Buy in areas that you feel comfortable in. I have 3 properties in the same suburb, but that's cause the area is a good one and I wouldn't have it any other way. As long as the numbers stack up, it should not matter. Perhaps what you should do, even before you start looking, is sit down with your bank/broker to work out what your budget is going to be. That can help you dictate your purchasing decisions and narrow it down for you (hopefully!).

 

[starter]

Agree with Aaron here. I have both my properties in the same suburb and I have no issue with that at all, as long as it's a good property and the research stacks up then you should have no issue.

Definitely give a broker like Aaron a call too, having an idea of budget is essential.

 

[Router]

Thanks again for the replies guys.

Good advice about speaking with a broker. The reason why I haven't approached one yet is because I wanted to understand the theory first. I thought if I spoke with the broker first and it took me a few months to get my head around the theory, I'd probably have to waste the broker's time with another meeting

Once I do find out how much I can borrow, what do you suggest I do next? Do I speak with a BA and ask them what they suggest then research that area? Or, do I do my research first and ask them what they can find in the area that I specify?

From what I have read, I believe the latter will be the suggestion - however, as they are the professional, I thought I should take their advice instead of giving them mine?

 

[Brady]

I try to have some diversity, but i've got my emails that come through everyday/week for realestate.com.au and would happily buy in the same area I already own in.

Saying that I don't believe that you have to buy property close to you, I think you have to buy where you are comfortable and if that mean buying 5km away so be it...

Me im looking to buy 1200KM away because I think its a good investment, so im comfortable

 

[starter]

Once you get an idea of a budget I would suggest coming up with a strategy/plan of what you want to get out of this first purchase in particular, and properties long term.

That will also shape the type of properties to target, a BA would also be able to help with this.

 

[Aaron_C]

Good advice about speaking with a broker. The reason why I haven't approached one yet is because I wanted to understand the theory first. I thought if I spoke with the broker first and it took me a few months to get my head around the theory, I'd probably have to waste the broker's time with another meeting

Oh don't worry most brokers have a few minutes to chat to you about budget - it doesn't take that long

It's just good so you know roughly where you stand - otherwise you are just flying blind for the most part. As for engaging a BA, if you are buying locally and you have some time then you should go to auctions/inspections yourself first and suss the process out.

 

[saiman]

to be honest I have bought locally and interstate and initially with the local properties I have bought I found it hard to not get personal about my own perceptions on little details with different suburbs and streets which in the overall scheme of things probably won't matter as an investment.
This resulted in a lot of potential deals slipping by me and it took much longer for me to finally make purchases

Buying interstate (often sight unseen) was a much more easier process for me as I did the due diligence I had to from purely an investment perspective, focused more on the numbers, and the deals that came out as a result were arguably better than the local purchases!

Yes buying local is more 'comfortable'....but is it easier/better? I'm not so sure.....

 

[Router]

Me im looking to buy 1200KM away because I think its a good investment, so im comfortable

wow! Good luck with it, I hope it turns out really well for you

That actually gives me another question. Why would one want to buy so far from home? Do you feel that there is no better deal closer to your home?

I worry that I'll purchase an "OK" property when there are "great" properties out there. How do convince yourself to make the purchase knowing that there could be better deals out there? At the end of the day, I guess it is better "settling" with an "OK" property rather than trying to live off the pension when that time comes.

Perhaps it is like trying to pick the top of the cycle when your planning to sell? You simply can't know what is the best suburb just as you can't pick the top of the cycle, you've just go to do your research and do what you feel comfortable with. Does that sound right?

 

[dog]

I'm going to start by congratulating you with taking the initiative to want 'something better' for your family. I think this is probably the most common driver initially, that is untill you do it for the addiction and buzz you get from crunching an awesome deal etc...

First and foremost, you must see a broker who is reputable to determine what you can afford and determine your plan of attack.

You mention that you are unsure as to where to buy and are unsure why someone would buy in another state or far from their PPOR...
In a simplistic approach I would suggest looking at the 'market indicators' (as an example only) in the back pages of API magazine. It will give you a ROUGH feel for the general market sentiment and direction of a state or territory in Aus. This should give you an idea of the reasons for diversification or interstate investing. Often another state is booming (such as WA or QLD due to the mining activity atm) as opposed to Vic atm.
I NEVER use one piece of information as my benchmark to base my decisions on though and it is important to find as much information about an area as possible.
You can also use API for vacancy rates, stock on the market, median values etc (on a suburb by suburb level). I find these helpful.

Dandenong is going through gentrification through 'beautification' of its town centre by council, along with heaps of developments of town houses and apartment blocks atm. You may have missed the boat - or on the other hand you may be able to pick up a bargain given the currently soft market.
Some say that it will be the 'new' Oakleigh in 10 years due to infrastructure and employment. Hard to predict the future at the best of times let alone now...

Returns are not great there atm but if you look at enough properties (like with any area), you will know what represents a good deal and you should research what the market rents are for that type of property. Unfortunately, plenty of agents can lead you astray regarding rental values etc - and if you find an honest one, make them your friend. They are invaluable long term.

I'm sending a PM with more info so as not to preach to everyone here, but just to be clear, NO-ONE knows where is guaranteed to out perform other areas and I'm catering to your 'close to home' comments you referred to.

cheers.

 

[Router]

Oh don't worry most brokers have a few minutes to chat to you about budget - it doesn't take that long

hehe, fair enough, I'll keep that in mind

to be honest I have bought locally and interstate and initially with the local properties I have bought I found it hard to not get personal about my own perceptions on little details with different suburbs and streets which in the overall scheme of things probably won't matter as an investment.

Very good advice, thank you for that.

I'm going to start by congratulating you with taking the initiative to want 'something better' for your family. I think this is probably the most common driver initially, that is untill you do it for the addiction and buzz you get from crunching an awesome deal etc...

Thank you Dog Yes, I feel like I've been bitten by the property bug. Since first sparking my interest a couple of weeks ago, I'm seven books in and have been all over Google, the ATO website and of course, Somersoft.

You mention that you are unsure as to where to buy and are unsure why someone would buy in another state or far from their PPOR...
In a simplistic approach I would suggest looking at the 'market indicators' (as an example only) in the back pages of API magazine. It will give you a ROUGH feel for the general market sentiment and direction of a state or territory in Aus. This should give you an idea of the reasons for diversification or interstate investing. Often another state is booming (such as WA or QLD due to the mining activity atm) as opposed to Vic atm.
I NEVER use one piece of information as my benchmark to base my decisions on though and it is important to find as much information about an area as possible.
You can also use API for vacancy rates, stock on the market, median values etc (on a suburb by suburb level). I find these helpful.

Great advice, thank you.

Dandenong is going through gentrification through 'beautification' of its town centre by council, along with heaps of developments of town houses and apartment blocks atm. You may have missed the boat - or on the other hand you may be able to pick up a bargain given the currently soft market.
Some say that it will be the 'new' Oakleigh in 10 years due to infrastructure and employment. Hard to predict the future at the best of times let alone now...

It fascinates me how much you seem to know about Dandenong. Have you read about it before or are there websites with this sort of information available? Or was it just some intelligent Googling?

I'm sending a PM with more info so as not to preach to everyone here, but just to be clear, NO-ONE knows where is guaranteed to out perform other areas and I'm catering to your 'close to home' comments you referred to.

Thanks a lot. I just had a read of it and am going to send you a reply now.

 

[Rolf Latham]

The one thing I have learnt - is that its good to be somewhere close by. I live over 15 hours drive from some of my IPs, which makes it hard to keep tabs on maintenance. Also expensive. Also means a $20 repair, that I'd do myself ends up costing $100+ because the RE agent hires someone to do the work.

That said.. some people deliberately get an IP in areas they like to holiday - if its somehwere you visit regularly you'll be fine.

Personally I always vote for a 'safe' bet close to home. Better to make a modest profit than to lose in the long term.

I have a bunch of clienst with IPS some 14 hrs flight time away..............

90 % of this stuff is personal comfort factor, and is important to consider, bit wont worry many.

Im a DIY person too,just did a $ 200+ split system air con repair for 59 bucks courtesy of ebay.............

ta
rolf

 

[Rolf Latham]

I worry that I'll purchase an "OK" property when there are "great" properties out there. How do convince yourself to make the purchase knowing that there could be better deals out there? At the end of the day, I guess it is better "settling" with an "OK" property rather than trying to live off the pension when that time comes.

perfection doesnt exist


You will always lament that next better deal that you could have got which hurts a lot less than the ok deal you should have got while waiting for that mythical GREATone.

Tony Robbins says be careful that we dont should have all over ourselves........ie good is not great, but good is also magnitudes better than none

ta
rolf

 

[Router]

perfection doesnt exist


You will always lament that next better deal that you could have got which hurts a lot less than the ok deal you should have got while waiting for that mythical GREATone.

Tony Robbins says be careful that we dont should have all over ourselves........ie good is not great, but good is also magnitudes better than none

ta
rolf

Very good input, thanks Rolf.

As you can see by my posts, I think I need to spend some time in the "Investor Psychology" forum so that I can gain more confidence. I can't remember the exact quote, but I recently read that 90% of success is due to a positive mind while 10% is due to technical skills. I don't doubt that for a minute seeing as though if you don't have confidence, you'll never get started therefore you'll never get to use your technical skills.

 

[Brady]

wow! Good luck with it, I hope it turns out really well for you

That actually gives me another question. Why would one want to buy so far from home? Do you feel that there is no better deal closer to your home?

I worry that I'll purchase an "OK" property when there are "great" properties out there. How do convince yourself to make the purchase knowing that there could be better deals out there? At the end of the day, I guess it is better "settling" with an "OK" property rather than trying to live off the pension when that time comes.

Perhaps it is like trying to pick the top of the cycle when your planning to sell? You simply can't know what is the best suburb just as you can't pick the top of the cycle, you've just go to do your research and do what you feel comfortable with. Does that sound right?

Why so far from home, because I think its a good investment there.
I'm looking to buy a 3 bedroom 2 bathroom home for $265k that rents for $330 currently and potential to be $350p/w. I believe its going to have good growth in the next 5 years.

I live in Adelaide, ive already purchased in Adelaide 6months ago. I still would look to buy in Adelaide in certain areas if the price is right.

What makes a good property, to me it has to be a good investment for it to be a good property, no good it looking nice and performing poorly.

You want to purchas a great invsetment yes, say you only get ok... isnt that better then not at all?

If you do the correct research you should usually be able to purchase at least an ok property, and if you dont commit to heavily you should be able to purchase many ok properties, hopefully over the time you hold these properties a few become great