% Property ownership

Hi All,

I met with a property adviser today and he said along the lines that I should be looking for areas with a roughly even owner occupied vs renting. His logic was that these areas tend to be betters supported in times or recession of bad economic times. In the good times, owner buyers will be looking to buy properties to live in, in not so good times, investors will come in to purchase hence supporting the price etc.

I was just wondering how accurate this statement is?
 
I think it's more pertinent to ensure that the particular property that you wish to buy would potentially appeal to both owner-occupiers and investors.

With regard to the wider area, I would agree that it's preferable not to invest in areas where the vast majority of properties are owned by investors. Owner-occupiers tend to not want to buy in areas that have a large proportion of tenants. And areas that have nearly all owner-occupiers tend to be very high-end areas which aren't as suitable for investors.

I don't think it's as specific as going for a 50-50 mix, though; that would be a relatively investment-dominated area, given that owner-occupiers are about 70% overall. I'd say you want an area where tenants are no fewer than about 20%, and no more than about 40-50%, and the majority of areas in the country probably fall into this bracket anyway.
 
I don't think it's as specific as going for a 50-50 mix, though; that would be a relatively investment-dominated area, given that owner-occupiers are about 70% overall. I'd say you want an area where tenants are no fewer than about 20%, and no more than about 40-50%, and the majority of areas in the country probably fall into this bracket anyway.

Yep, agree 100%
 
Hi Sub, are you paying this "property adviser" for this advice?

Hi prop,

Nope, I did not pay for the property advisor. It was a kick off meeting and he was giving me some insights into the drivers of the market. They are a fairly well known advisory company, and most of what they say made a lot of sense. I thought the price for consultation was fairly steep though.

They also mentioned one of the key factors were land to asset ratio (LAR). basically the more land to asset the better, so general advice was steering away from apartments.

I spoke about some up and coming areas like Frankston, Seaford and Footscray which I am quite interested in. However, I had a feeling if I did use their services, they would steer away from those areas. They were leaning toward inner city, high demand areas which according to them should outstrip the growth of the outer areas.
 
Apologies. The kick off meeting was complimentary. But should I choose to engage in their services there is obviously a charge. That charge was what I was referring to.
Oh, I see.

Are they a buyers' agent, acting solely for you? Do they sell only new stock (alarm bells!) or do they also recommend existing properties? Do they receive any commissions from the vendor or the vendor's agent? Do you use your own solicitor and lender/mortgage broker?

Your alarm bells should go off if they only sell new stock, if they receive commissions from the other side, and/or if they recommend that you use affiliated professionals.

If, on the other hand, they work totally on your behalf, look at new and existing stock, and are only paid by you, then you at least can ensure that their advice is unbiased. In order for them to provide you with such unbiased advice, though, you have to pay them enough to cover all the "kickbacks" they potentially forgo. That may well be worthwhile. :)
 
Oh, I see.

Are they a buyers' agent, acting solely for you? Do they sell only new stock (alarm bells!) or do they also recommend existing properties? Do they receive any commissions from the vendor or the vendor's agent? Do you use your own solicitor and lender/mortgage broker?

Your alarm bells should go off if they only sell new stock, if they receive commissions from the other side, and/or if they recommend that you use affiliated professionals.

If, on the other hand, they work totally on your behalf, look at new and existing stock, and are only paid by you, then you at least can ensure that their advice is unbiased. In order for them to provide you with such unbiased advice, though, you have to pay them enough to cover all the "kickbacks" they potentially forgo. That may well be worthwhile. :)

Nope. Nothing of that sort. They were transparent and only charged a fixed fee for any deal. In that sense, I was happy with how they carried out their work. I was tossing between using them or just going independently. There are pros and cons to both sides.

The biggest con in using them apart from the price, would prolly be that I am relying on them to do research and so forth etc. In doing so, I am not going to learn as much as if I did so by myself.

Having said that, their cost could be offset by their experience and advice, and prevent me from going down the wrong path.

So quite a dilemma. But I am leaning to doing it myself, and potentially go to them for independent advice whenever required.
 
Hi All,

I met with a property adviser today and he said along the lines that I should be looking for areas with a roughly even owner occupied vs renting. /QUOTE]
Hi Sub

Why is he suggesting that you would be better off with such a high level of renters?

Given that Australian home ownership is consistently around 70%, a 50/50 mix would put you in a very unusual area indeed!

To my way of thinking, this would either be a high level of government or industry housing, or a very low socio economic area where the public housing has previously been sold off with a take up rate of owner occupiers and investors

Where we live, I reckon the owner occupier rate would be well in excess of 95%

A 50/50 area would be rather strange and I think you will be looking a long time to find such an area


But then again, a 'property adviser' who charges a fee probably knows more than I do ....

Cheers
Kristine
 
Nope. Nothing of that sort. They were transparent and only charged a fixed fee for any deal. In that sense, I was happy with how they carried out their work. I was tossing between using them or just going independently. There are pros and cons to both sides.

The biggest con in using them apart from the price, would prolly be that I am relying on them to do research and so forth etc. In doing so, I am not going to learn as much as if I did so by myself.

Having said that, their cost could be offset by their experience and advice, and prevent me from going down the wrong path.

So quite a dilemma. But I am leaning to doing it myself, and potentially go to them for independent advice whenever required.

Stick around for a bit and ask plenty of questions right here. I have been and then after a while, you'll find that you'll be answering questions too, just like me. :)

You can't even buy some of the info on these boards...
 
These people who are advising you have an agenda of their own. Paying top dollar for overpriced innercity property with a high percentage of renters (=higher crime BTW) may not lead to a good long term return. If you want to go with what others say, buy whatever is on Terry Ryder's or Margaret Lomas' buy list for the major cities. These property gurus are well respected and are known to be honest in their claims. Your observations about underpriced beachside (eg. Frankston, Seaford etc) make a lot more sense than buying overpriced innercity junk.
 
I agree with Kristine and bobbiemenzies.

Maybe I am wrong, but by my way of thinking the more rentals there are in an area the more competition there is.
 
I spoke about some up and coming areas like Frankston, Seaford and Footscray which I am quite interested in. However, I had a feeling if I did use their services, they would steer away from those areas. They were leaning toward inner city, high demand areas which according to them should outstrip the growth of the outer areas.

This can be a problem with some advisers. They specialise in particular (usually expensive) areas and regard anything outside them as poor investments. And not all are named Monique!

While there is a good deal of sense in some of what advisers say, spruiking a limited selection of suburbs tends to have more to do with prejudice than facts. And their own limitations re research and area knowledge (which you don't have to share).

And even if favoured suburbs have been shown to grow faster in the past, buying a property there today does not necessarily translate into higher future returns for the investor.

A $1m portfolio comprising say 3 or 4 properties in cheaper suburbs can perform as well as a single unit in a dearer suburb.

When differences in yield, ability to grow the portofolio and lower holding costs are considered the larger portfolio of cheaper properties can easily produce a higher overall return (both in rental income and capital growth), despite it comprising properties the 'adviser' would shun.

Your conversation with the adviser wouldn't have gone something like this?

http://www.somersoft.com/forums/showthread.php?p=340045#post340045
 
Yup. It didnt exactly go like your skit. But I think the concepts were well highlighted in the skit. Basically buy close to the city and you will be ok. Distance from city is bad.
 
Yup. It didnt exactly go like your skit. But I think the concepts were well highlighted in the skit. Basically buy close to the city and you will be ok. Distance from city is bad.

Love Peter's skit. It's basically how my initial (free) consultation ran with Monique. Except I already held a few IP's and I watched her cringe when I mentioned the areas they were in!

Monique even asked me what the streetscape was like in one that I hold in an outer suburb. Nearly had her in a trance when I mentioned the lush green grass, couple of native gum trees, and blue skies with the sun light glowing off the windows. She was rather startled when I mentioned the rusting car parts on the neighbours lawn and she choked when I described the skid marks on the road which looked like they belonged to a 1978 Holden Commodore. She promptly told me to sell up immediately!! (I haven't).

Even so I think the Wakelin's advice on buying scarce property in desirable inner city suburbs has worked very well over the past decade in Melbourne. Terraces, Cottages, Art Deco, 1960 and 70 style flats/apartments and units are in great demand and have risen in value accordingly. The Wakelin's approach certainly has merit.

What I dislike though is The Wakelin's inability to recognize that money can be made in other markets as well as from property in leafy bluechip suburbs.
 
There are hundreds if not thousands of different ways to use property investing and make money from it; there are so many small niches you can look at (and a handful of experts who bleat about how good their property niche is - come and invest like me!).

Monique has made her $$$ investing in a particular style and class of property and has done it really well. Does that mean that anyone else will do well following the same advice?

Maybe.

Follow Jingo's signature. "Success is 1% inspiration and 99% perspiration." Meaning - find something in real estate that you are drawn to, then do it over and over again until you're so good at it, you achieve success.

What grates my nerves are lazy people who just want to pay someone to do their thinking for them - to find the best deal or to give them advice. Nothing wrong with paying for good advice, and also not suggesting anyone here in this thread is lazy, but you need to take action and be accountable and put in the other 99%.

Submarine - in answer to your question, the advisor may be right in certain circumstances. It's just his opinion. We have already had a couple of posts here that revute that opinion. But think about it - when times are tough, who's more likely to sell? Home owners or investors? Break this argument down a bit further - who's more likely to sell - home owners with mortgages or home owners without mortgages? (We all know investors generally have mortgages by leveraging. ;) ) I would suggest to buy where the majority are home owners (home owners push the price of property up), but don't buy in mortgage belt areas.

Just some of my opinions. :)
 
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