Specializing in Two Suburbs - Pros & Cons

[Alex P Keaton]

A strategy that I'm thinking of implementing is to become a specialist at investing in 2 suburbs. The 2 suburbs are 7 km from Perth's CBD. I already have some experience in these two suburbs having grown up around there and I just recently bought my first ip there.

Just off the top of my head

Some Pros and Cons


Pro's

1. I would become knowledgable through experience of what the good areas of the suburbs are and the not so good areas.

2. I would know where all the units and villas are located and what amenities are nearby. If for instance I put an offer in on a property in a unit complex but it falls through, if another property comes up some stage later I have information at hand in regards to the building, strata, finances, the history, sales figures etc.

3. I would become experienced at placing a value on a property and will know/realise when I see a real bargain. I would also have at my disposal up to date sales figures that I can refer to.

4. It would be easier to keep track of old listings (in that im only concentrating on 2 suburbs) How long the property has been on the market, how much they were asking etc how much other similar properties were asking, how long it took for them to be sold etc. I would begin to notice when a property is priced right, it usually just flies out the door and that is what im starting to learn.

5. Build relationships/networking with local real estate agents. This can help in many ways, one example being... a ra will have my number and ring me before the property officially comes onto the market. They know i am a serious buyer.

6. Both suburbs have a strong history of good capital growth being only 7km from the Perth CBD and are desirable areas to live in.

7. If I wanted to I could employ just the one local PM to manage all of my properties therefore I would get a discount.

8. Less stress, comfort level will be good, better SANF.


Cons

1. Limits the amount of offers I can make because there is less choice of properties to look at. I may have to wait a bit longer between purchases to find something for a good price. I might have to buy at asking price/valuation price.

2. All of my eggs will be in the one basket. However to offset this I may employ a buyers agent to buy a property for me in another state as a way of spreading my risk and timing the cycle.


I cant think of anymore cons right now.


Can anyone think of some pros and cons?


Anyone else here invest in just 2 or 3 suburbs.?How is it going for you? I think this could be a very real option for me and hey there is not right or wrong strategy. Its all about finding a strategy that works best for you. The more and more I think about it. The more it makes sense to me!! I think this topic will bring about an interesting discussion. I look forward to it! I am very open to hearing all sides and other people strategies. The more the better.

Can anyone direct me to any threads that would be of interest to me?


Thanks

 

[BlackSpider]

If you implement this strategy, would it mean you won't invest in other areas?
Or consider other investment or business opportunities which may pop up from time to time?

 

[Rixter]

I think #2 con is the main one.

 

[D.T.]

Your proposed way to address Con#2 would defeat the purpose of the strategy, no?

If you're dead sure about the performance of an area, buy as much of it up as you can. There's nothing wrong with that. Very few people are though, no?

 

[INVSTOR]

It could be limiting. My first property was a unit in a 6 pack. (Garages on bottom, 3 units on 2nd floor, 3 units on top). I purchased my unit for $95,000. A couple of weeks later the unit next door sold for $104,000. about a year after that one of the unit owners who had his unit as an investment got divorced and was after a quick sale. He sold to savy investor for $80,000. a few months later my neighbour next door (OO) died inside the unit - was in there for a week, very stinky etc. Had no family. State Auction, unit sold for $62,000. Bought value of everyone's unit down.

I would prefer now to know two capital cities really well.

 

[weg]

The pros are actually all cons too imo because they limit and prevent you from considering all other potential good buys outside of those areas.

Limiting your areas are a restriction usually placed on you when you are looking to purchase a PPOR.

 

[travelbug]

It could be limiting. My first property was a unit in a 6 pack. (Garages on bottom, 3 units on 2nd floor, 3 units on top). I purchased my unit for $95,000. A couple of weeks later the unit next door sold for $104,000. about a year after that one of the unit owners who had his unit as an investment got divorced and was after a quick sale. He sold to savy investor for $80,000. a few months later my neighbour next door (OO) died inside the unit - was in there for a week, very stinky etc. Had no family. State Auction, unit sold for $62,000. Bought value of everyone's unit down. .

Only in the short term. My strategy would have been to buy the one at auction at that price.

 

[Alex P Keaton]

hmmm, yeah i agree... its too limiting... there will be a lot of deals and opportunities i'd miss out on.

For the last couple of years I've been focussing on these areas

Dianella
Yokine
Tuart Hill
Joondanna
Osborne Park
Morley
Inglewood
Mount Lawley

 

[Jen_PFR]

This is the approach we've taken. The two suburbs we buy in are Osborne Park and Glendalough (WA).

The reasons why we've chosen to do this include:
1. We buy 'dogs' and renovate them (doing most of the work ourselves), and it's so much easier if the suburbs are located between where we work (Perth CBD) and our PPoR (Gwelup, near Karrinyup).
2. When we've finished renovating, we self-manage our properties - again, so much easier if the suburbs are conveniently located. Especially if tenants do things like lock themselves out of the apartment - I can't tell you how handy it is to be able to duck over and let them back in in your lunch break. (I always carry keys to every property with me, just in the event this happens.)
3. We identified these two suburbs as being well located and likely to experience strong capital growth. In particular OP will change over time as land close to the CBD becomes more prized, and will change from mixed commercial/residential to more residential, ie. gentrification will occur.
4. We have become very familiar with the property prices etc in the two suburbs, but more importantly they suit us and are very convenient on an ongoing basis.

As a matter of fact, we just went to look at another potential purchase yesterday and it was in one of the these two suburbs. We don't see any need to move away from them, this strategy has worked really well for us so far. However I can understand that if you're not the hands-on investors that we are, your needs could be very different and this may not be a suitable approach.

 

[Luv2Travel]

I agree with most of the others and wouldn't put all my eggs in one basket. Jen_PFR has a valid point, and I have a friend who does the same thing. Buys only in a few areas close to his home so he can attend to building sites, renovations and self management.

Alex, from what I gather from your other posts, you are in a similiar position to me. An average PAYG earner, building a portfolio slowly and steadily and after long term capital gains? I apologise if I am wrong in my assumptions. Unless you have reasons like Jen_PFR, then I would diversify your portfolio. That is what I'm doing. I just bought IP2, a bit over a year since IP1. I was pretty much able to achieve everything on your 'pro' list, even though I bought somewhere totally different to IP1 and where I live.

If you're a big time investor who can buy anything at any time when you see a good bargain, then I get what you're saying, but if you're only buying once every year or two then I feel that gives you plenty of time between properties to learn a suburb and still achieve the pros as per your list.