Real Estate Notes (courtesy a friend of mine):
John McGrath seminar to private employee group
23 March 2005
John McGrath Started in Real Estate in 1982 when he was 20
His company is now worth over 2 billion
NSW Customer Service CEO of the year 2004
John McGrath has written 4 books (the last one came out in November 2004)
23 years in Real Estate- the Market changes all the time
He got into real estate because he was passionate about it
He also has a real estate management company that looks after 3000 rental pro
When John first started his boss told him, “You have to buy Real Estate if you’re going to sell it.”
So he saved all his commissions and was able to buy a house in Paddington – a terrace – for $105,000. It was in really bad shape. It had an out door toilet that didn’t work and lots of other problems. Paddington wasn’t the trendy neighbourhood it is today at that time.
He got some mates together and they fixed it up.
John saved more money and bought another house four $100,000
Then he bought Good hope Reality – in Paddington and sold the properties to buy the business.
The properties had gone up in value.
For his $200,000 investments he got $500,000. So in 5 years he thought he’d made 150% profit.
But he’d only put in a deposit of $20,000 while his renters paid down the mortgages so in reality he’d made 1500% return on investment (ROI)
John recommends using leverage and gearing (ie barrowing money) but is the first to say,
“Don’t over barrow don’t over stretch”
What ever you do get in the Market. Property goes up in value (on average) faster then you can save money. So the sooner you get in the more you make.
“One good real estate investment is worth a lifetime of talk” Henry Ford.
Current Market Factors
Prices are down 5% to 10% after October 2003
The reasons the prices are down are.
-There have been two interest rate increases
-Prices had been going up (in the double digits) for years
-NSW Vendor Exit tax
The Market is now stabilised
A good indicator of this is auction clearance rates.
At the low auction clearance rates were 50%
Dec 04 to march 05 Auction Clearance rates are up to 73%
Auction clearance rates were at 80-85% during the real estate boom
Factors that indicate Real estate is a good investment.
- Interest rates still low after recent rise & potential future increase (.25%)
- Share market is performing well
- Economy remains stable
- Unemployment is low & stable
- Sydney population is growing about 50,000 people a year
-
Factors Typically Present During Property Burst
1. Falling economy
2. 2 High interest rates
3. High Unemployment
Market Trends & Observations
1. Greater demand for Apartments
(49% Sydney sales in 2003 were apartments up from 28% in 1993)
2. Main investment groups- Empty Nesters (couples who’s children have left home)
& Young professional 35-45
3. Inner City & Beach side Lifestyle Precincts most Popular (Bondi is one of the hottest selling places in Sydney – where as 15 years ago no one wanted to buy there and were offended when asked to consider a property their.
4. Expatriate purchaser continue buying but slowing due to strong $AUD. When the $AUD was down people for overseas started buying property.
5. Internet provides easy market access for global audience. People buy off the Internet site unseen.
Tracking the Price of an average inner city property over the last 38 years.
The property is a 3 Bedroom Cottage
Years $
1967 10,000
1972 18,810
1977 31,270
1782 62,302
1987 73,095
1992 139,683
1997 196,825
2002 381,563
2005 460,000
Property doubles every 5 to 7 years most of the time. You can see in the list above that there was a slow down in the mid 1980’s. Inner city properties went up faster then outer west properties.
The Average apartment is 90 square meters. Do invest in anything less then 50 square meters.
Key Factors to look for in a Suburb.
- Coffee Culture & Retail village
- Transportation hubs (with in one kilometre from a train station is good)
- Near Waterways & beaches
- Proximity to CBD (15 kilometres)
- Heritage Precincts.
Tips to Buying Apartments
- Focus on capital growth not yield (focus on how much the unit will go up in value not in how much you will make in rent – the rent should be used to pay the mortgage.
- Only buy from quality developers or builders (Multi-Plex, I didn’t write the others down)
- Key Factors – Location, Position & Aspect (Location= Which suburb, Position= Facing north is good, facing south is bad. Aspect= does it look nice)
- Get expert advice if buying off the plan- Size of rooms ceiling heights, finishes etc. noise transference.
- Buy upper median price for the best growth – better to buy just above average (best units are priced up)
Growth Areas
Coogee
Maruobra
Glebe
Dulwich Hill
Stanmore
Leichhardt
Annandale
Lane cove
Epping
West Ryde
Manly
Dee Why
Erskinville
Sydney CBD North (Darling Harbour area is better then Sydney SBD south Redfern area
Avoid if Possible
- Rental Guarantees
- Serviced Apartments
- Refurbished Commercial Property (McGrath has had more infistruture problems with these places then any other)
- Company titled apartments (I’m not sure what this means)
- Avoid buying with friends
Avoid buying where they are building a lot of new houses. You don’t get much capital growth if there is a lot of new product being developed in the same area.
John McGrath seminar to private employee group
23 March 2005
John McGrath Started in Real Estate in 1982 when he was 20
His company is now worth over 2 billion
NSW Customer Service CEO of the year 2004
John McGrath has written 4 books (the last one came out in November 2004)
23 years in Real Estate- the Market changes all the time
He got into real estate because he was passionate about it
He also has a real estate management company that looks after 3000 rental pro
When John first started his boss told him, “You have to buy Real Estate if you’re going to sell it.”
So he saved all his commissions and was able to buy a house in Paddington – a terrace – for $105,000. It was in really bad shape. It had an out door toilet that didn’t work and lots of other problems. Paddington wasn’t the trendy neighbourhood it is today at that time.
He got some mates together and they fixed it up.
John saved more money and bought another house four $100,000
Then he bought Good hope Reality – in Paddington and sold the properties to buy the business.
The properties had gone up in value.
For his $200,000 investments he got $500,000. So in 5 years he thought he’d made 150% profit.
But he’d only put in a deposit of $20,000 while his renters paid down the mortgages so in reality he’d made 1500% return on investment (ROI)
John recommends using leverage and gearing (ie barrowing money) but is the first to say,
“Don’t over barrow don’t over stretch”
What ever you do get in the Market. Property goes up in value (on average) faster then you can save money. So the sooner you get in the more you make.
“One good real estate investment is worth a lifetime of talk” Henry Ford.
Current Market Factors
Prices are down 5% to 10% after October 2003
The reasons the prices are down are.
-There have been two interest rate increases
-Prices had been going up (in the double digits) for years
-NSW Vendor Exit tax
The Market is now stabilised
A good indicator of this is auction clearance rates.
At the low auction clearance rates were 50%
Dec 04 to march 05 Auction Clearance rates are up to 73%
Auction clearance rates were at 80-85% during the real estate boom
Factors that indicate Real estate is a good investment.
- Interest rates still low after recent rise & potential future increase (.25%)
- Share market is performing well
- Economy remains stable
- Unemployment is low & stable
- Sydney population is growing about 50,000 people a year
-
Factors Typically Present During Property Burst
1. Falling economy
2. 2 High interest rates
3. High Unemployment
Market Trends & Observations
1. Greater demand for Apartments
(49% Sydney sales in 2003 were apartments up from 28% in 1993)
2. Main investment groups- Empty Nesters (couples who’s children have left home)
& Young professional 35-45
3. Inner City & Beach side Lifestyle Precincts most Popular (Bondi is one of the hottest selling places in Sydney – where as 15 years ago no one wanted to buy there and were offended when asked to consider a property their.
4. Expatriate purchaser continue buying but slowing due to strong $AUD. When the $AUD was down people for overseas started buying property.
5. Internet provides easy market access for global audience. People buy off the Internet site unseen.
Tracking the Price of an average inner city property over the last 38 years.
The property is a 3 Bedroom Cottage
Years $
1967 10,000
1972 18,810
1977 31,270
1782 62,302
1987 73,095
1992 139,683
1997 196,825
2002 381,563
2005 460,000
Property doubles every 5 to 7 years most of the time. You can see in the list above that there was a slow down in the mid 1980’s. Inner city properties went up faster then outer west properties.
The Average apartment is 90 square meters. Do invest in anything less then 50 square meters.
Key Factors to look for in a Suburb.
- Coffee Culture & Retail village
- Transportation hubs (with in one kilometre from a train station is good)
- Near Waterways & beaches
- Proximity to CBD (15 kilometres)
- Heritage Precincts.
Tips to Buying Apartments
- Focus on capital growth not yield (focus on how much the unit will go up in value not in how much you will make in rent – the rent should be used to pay the mortgage.
- Only buy from quality developers or builders (Multi-Plex, I didn’t write the others down)
- Key Factors – Location, Position & Aspect (Location= Which suburb, Position= Facing north is good, facing south is bad. Aspect= does it look nice)
- Get expert advice if buying off the plan- Size of rooms ceiling heights, finishes etc. noise transference.
- Buy upper median price for the best growth – better to buy just above average (best units are priced up)
Growth Areas
Coogee
Maruobra
Glebe
Dulwich Hill
Stanmore
Leichhardt
Annandale
Lane cove
Epping
West Ryde
Manly
Dee Why
Erskinville
Sydney CBD North (Darling Harbour area is better then Sydney SBD south Redfern area
Avoid if Possible
- Rental Guarantees
- Serviced Apartments
- Refurbished Commercial Property (McGrath has had more infistruture problems with these places then any other)
- Company titled apartments (I’m not sure what this means)
- Avoid buying with friends
Avoid buying where they are building a lot of new houses. You don’t get much capital growth if there is a lot of new product being developed in the same area.
