Property Location Rules - Myth or Fact?

Just a few things I'd appreciate people's opinions and thoughts on. I see many times repeated on this forum about what not to buy, no grey areas, it always seems to be an absolute no. I'm not disputing these opinions nor am I thinking about it in relation to any particular property, I'm just curious as to whether sometimes it may be a yes and looking for some discussion on the items below:

1. Never buy on a main road - If a property ticks all the boxes but is on a main road. If you buy at a discount due to the main road, then you sell at a discount due to the main road, you could potentially receive the same capital growth % over the period?

2. Never buy a ground floor apartment - Mainly due to security is my understanding. What if it's in a nice suburb where crime is less of an issue, and the apartment has good security? What if there is a nice courtyard and the building has stairs. I'd have thought this would be a benefit, and I can say from experience at work that people sometimes are specificially looking for ground floor.

3. Land content is highly important - Obviously this is true if it can be redeveloped or subdivided, however for just a buy and hold strategy, is land content really that important? I guess I'm thinking along the lines of a similiar topic being discussed at the moment in another thread of unit/apartment vs. house.

4. Buy close to a train station - Important if you're buying in an area where many residents perhaps work in the CBD, but is it really that important for outer suburbs where many probably don't work in the city and drive to work? I'm thinking areas like Frankston where I'd be terrified to live near the train station, or Lilydale, where the area around the station isn't that desireable.

Like I said, not here to argue any of the points, I'm just interested in what people think. Are there times you should consider outside of these, what appear to be 'rules' for property investing?
 
1. Never buy on a main road - If a property ticks all the boxes but is on a main road. If you buy at a discount due to the main road, then you sell at a discount due to the main road, you could potentially receive the same capital growth % over the period?

Yeah I really don't see much of an issue CG wise, indeed there is potential for rezoning in some areas. Living in a property on a main road is another matter and from what I can see of it they take longer to sell because it is a more limited market.

2. Never buy a ground floor apartment - Mainly due to security is my understanding. What if it's in a nice suburb where crime is less of an issue, and the apartment has good security? What if there is a nice courtyard and the building has stairs. I'd have thought this would be a benefit, and I can say from experience at work that people sometimes are specificially looking for ground floor.

I think older people often do like ground floor, agree with the above.

3. Land content is highly important - Obviously this is true if it can be redeveloped or subdivided, however for just a buy and hold strategy, is land content really that important? I guess I'm thinking along the lines of a similiar topic being discussed at the moment in another thread of unit/apartment vs. house.

What else is going to appreciate other than the land, the building?

4. Buy close to a train station - Important if you're buying in an area where many residents perhaps work in the CBD, but is it really that important for outer suburbs where many probably don't work in the city and drive to work? I'm thinking areas like Frankston where I'd be terrified to live near the train station, or Lilydale, where the area around the station isn't that desireable.

In my view this is becoming more and more important due to traffic congestion and fuel costs. I get you that some areas near station can be not so good though. For buyers in Lilydale and Franston do they really think the time it takes to get to the city is not important. What sort of opportunites will they miss without easy transport to the city?
 
1. Never buy on a main road - If a property ticks all the boxes but is on a main road. If you buy at a discount due to the main road, then you sell at a discount due to the main road, you could potentially receive the same capital growth % over the period?

Yes you get same % CG. Yes you buy at a discount & sell at a discount, but there are other considerations:
1. If the market tanks at some point in the future and you HAVE to sell because of personal circumstances, a main road property will be the last one to sell.
2. Higher rental vacancy. As soon as a tenant hears a main road address, it is often mentally crossed off the list of potential inspections.

Your other points are valid. But you restrict your market by engaging in nudging the envelope on these 'rules'. ;)

Close to a train means 800m away BTW, not 'near' it. :)
 
but with respect to your rules , people do live away from stations, they do live on the ground floors , and they do live on main roads, land content is a good rule but many don't ask whats the land content to this unit, they just estimate it against the others and last similiar sales,
SOOOOOO,
folks live in these places, and many others , i think that the importance is the price should reflect your purchase price , and then the rent return should shadow that value, so the unit on the bottom and the ones away from stations , might be the ones that always rent , because the cheaper purchase price would give you the first tennent that wants to save a doller or two, ;)
 
Close to a train means 800m away BTW, not 'near' it. :)

Depends on the particular railway station as to the ideal distance an IP should be from it.

With regards Melbourne, for example, 800m from Kananook and Laverton Stations may be OK or even still too close. On the other hand an IP 500m from stations like Hawthorn, Glenferrie, Mont Albert, Surrey Hills, etc. is almost too far away and any further out would start to lose desirability if other similar properties closer were available.
 
1. Never buy on a main road - If a property ticks all the boxes but is on a main road. If you buy at a discount due to the main road, then you sell at a discount due to the main road, you could potentially receive the same capital growth % over the period?

If it ticks all the boxes and is sold at a discount then why not. While its not preferable to buy a property on the main road, I wouldn't eliminate a potential IP based on this factor alone.


2. Never buy a ground floor apartment - Mainly due to security is my understanding. What if it's in a nice suburb where crime is less of an issue, and the apartment has good security? What if there is a nice courtyard and the building has stairs. I'd have thought this would be a benefit, and I can say from experience at work that people sometimes are specificially looking for ground floor.

As above, I wouldn't write off a purchase based on this factor alone. Some elderly tenants prefer ground floor units - they struggle with the stairs.


3. Land content is highly important - Obviously this is true if it can be redeveloped or subdivided, however for just a buy and hold strategy, is land content really that important? I guess I'm thinking along the lines of a similiar topic being discussed at the moment in another thread of unit/apartment vs. house.

The house/unit issue can be discussed at length. I'm not going to open that can of worms!

4. Buy close to a train station - Important if you're buying in an area where many residents perhaps work in the CBD, but is it really that important for outer suburbs where many probably don't work in the city and drive to work? I'm thinking areas like Frankston where I'd be terrified to live near the train station, or Lilydale, where the area around the station isn't that desireable.

When I was looking at areas of Logan, it was often the properties near the train station that PM's would advise steering clear of. I think for the most part, a property located in close proximity to a train station would be in higher demand (but this is not always the case).

Like I said, not here to argue any of the points, I'm just interested in what people think. Are there times you should consider outside of these, what appear to be 'rules' for property investing?

Yep, I guess I would.
 
For investments it's all relative.

A fruit analogy:

If the apple you're looking at is cheaper than comparable apples, while the banana is more expensive than or similar to comparable bananas, then isn't the apple better value if both types of fruits yield the same return over the long term?

If they don't, then you have to assess the expected return of that particular apple with that particular banana.
 
Biggles,

I thing i noticed in the housing drop in Melbourne in 2008 is that property on Main roads or too close to petrol station etc could not be given away. I think Propertunity is on the ball there about not being able to sell if you had to in a down market.

It made me think if i was ever going to try and buy and sell for a profit they are a good opportunity as they seem to drop by more than properties in better locations so you can get a real bargain as any buyers in the market have choice and little competition. If you then sold in hot market (such as today) buyers get sick of losing at auction and accept properties with a "flaw" and pay closer to the price of the quality areas in suburb so profit margin could be higher.

Maybe next time the property drops in Melb I will secure some long term holds and maybe a couple of main roaders to be sold when market turns and funds then put into bluechip in another state ............ or maybe that is just to hard work and just stick to the easy stuff;)
 
At the end of the day its the relationship between:
(a) intrinsic value and purchase price;
(b) long term sustainable growth rate.

THERE IS NO DEFINATIVE RIGHT AND WRONG ANSWER.

In 2007 i ventured back into the property market by buying the absolute no nos of property investing.

I bought:
high rises
with swimming pools
with gyms
with lots of other apartment owners in the building
etc etc

However it was just because of the market's perceived 'no nos' that i got these at very good VALUE (price is what you pay, value is what you get).

Now back in 2007 RBA interest rates were about 6.75% roughly, but with a 20% deposit, these purchases were completely cash flow neutral (or about $20k negative a year if you want to include principle repayments, this was for 5 properties all bought in the same year).
No fancy accounting/tax issues, just plain cash flow, net rent against repayments.

These properties have now appreciated more than 50% in less than 3 years.
When you consider that they were cash flow neutral, and with 80% gearing, thats a 400% return on investment with very limited risk.

So just like any investment, its never a clear cut answer.
 
I'd add two things...

1. Don't confuse 'land content' with the physical size of the land, it's more to do with the dollar value of the land.

2. I'd agree with Gordon - if you lived in an outer suburb a 5 minute drive to the train station would be considered close (as those stations have free parking). In an inner suburb a 10 minute walk is close (those stations usually have NO parking).
 
Just a few things I'd appreciate people's opinions and thoughts on. I see many times repeated on this forum about what not to buy, no grey areas, it always seems to be an absolute no.

Biggles - this forum may be the best you can find on-line, but it has massive holes in it compared with the property market out there. You're touching on aspects that slip right through those gaping holes.

1. Never buy on a main road - If a property ticks all the boxes but is on a main road. If you buy at a discount due to the main road, then you sell at a discount due to the main road, you could potentially receive the same capital growth % over the period?

We pay a premium for main road when looking for properties. The bigger the frontage the better. The more main road the better. Freeway is best. Then big highway. Little, tight, quiet, out of the way cul-de-sacs are ignored. Our Tenants refuse to rent these.

Our "boxes" that we tick are probably different to the boxes you are ticking when looking for property.


3. Land content is highly important - Obviously this is true if it can be redeveloped or subdivided, however for just a buy and hold strategy, is land content really that important?

For just a buy and hold that cannot be sub-divided....Massively important. For some of our Tenants, elbow room is everything, sometimes so important that they are quite prepared to smash down the building to give them more elbow room, and then pay you a premium. Properties vary enormously.

Like I said, not here to argue any of the points, I'm just interested in what people think.

I hope I've given you a different perspective from the norm.
 
I knew of a guy that only bought on main roads. then one day (in what at the time seemed to be the distant future) he would get his 5 in a row rezoned and knock them don to build a small shopping centre.

if it will always be resi tho I agree that they are best bought in soft markets. I sold a house on leach highway in the boom for this very reason
 
We pay a premium for main road when looking for properties. The bigger the frontage the better. The more main road the better. Freeway is best. Then big highway. Little, tight, quiet, out of the way cul-de-sacs are ignored. Our Tenants refuse to rent these.

Our "boxes" that we tick are probably different to the boxes you are ticking when looking for property.

Yes exactly, I think the property I own on a main road is probably the best in my portfolio. It has great street frontage, on a dual lane carriageway, on a corner, has heaps of cars going passed it daily, and am getting about twice as much as other properties in the area are rented for. (and it is residential)

With the local council currently in the process of updating its zoning and density levels of the town plan, I am just waiting to either build maybe 10 townhouses or a small shopping complex.:)

Come on Town Plan!!!!

Cheers,

F
 
Thanks for all the comments, appreciated hearing people's thoughts on the points.

I guess with the land comment, I realise bigger land is better, but if you have a certain budget do you go for quantity or quality? But I guess, as with all the things there's really no black and white answer and they're all pretty much 'it depends'.
 
Location - same old question.

Walk into the house and ask, would I live in this location? If you wouldn't, what makes you think the next buyer would, rather than being an investor?
 
Before I bought my first house, I often heard:

"Buy the cheapest house in the most expensive street."

I haven't really heard it since, though.
 
Before I bought my first house, I often heard:

"Buy the cheapest house in the most expensive street."

I haven't really heard it since, though.

'buy the worst house in the best street (rather than the best house in the worst street)' is a fairly common adage.

Or to put it slightly differently:

Know what you can and can't change about every property you inspect.

Each disadvantage of a property has is either (a) can't change, (b) can change - expensively, (c) can change - cheaply.

Only buy good value properties with lots of 'can change cheaply' and few 'can't change'.
 
"Buy the cheapest house in the most expensive street."

It depends on the price vs comparable sales.

There is usually less competition for the more expensive properties, and sometimes they are overcapitalised, which means you get more property for your money. I have never found the cheapest properties to be overcapitalised.
 
'buy the worst house in the best street (rather than the best house in the worst street)' is a fairly common adage.

Or to put it slightly differently:

Know what you can and can't change about every property you inspect.

Each disadvantage of a property has is either (a) can't change, (b) can change - expensively, (c) can change - cheaply.

Only buy good value properties with lots of 'can change cheaply' and few 'can't change'.

My friend just bought the worst house in the worst street in one of the worst suburbs. So it probably makes it one of the worst houses in Melbourne.

Let's see....

It's in West Heidelberg. It's next to a commission flat. The place is built by asbestos everywhere and extremely ugly. It has easements surrounding the entire backyard so no extensions possible. It sits on a T-intersection so cars head straight for your house and people race up and down that street. It passed in with no bids during auction. No trams, trains, buses, shops. Worst part of West Heidelberg (completely detached from main part)
 
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