where is the bargains in Perth

Hi
I've heard some suburbs in perth has drop 20-30% from the peak. where are the bargains now? where is the best place to invest 350-400K in perth
thanks for all inputs
cheers
 
Pssst, here's the heads up.........

Success, on the new Mandurah rail line.

10 mins to City & Fremantle.

Major Satelite Cbd.

Close to all the must tick infrastructures - major arterial roads, public transport, major retail & commercial hub, high employment, excellent educational, medical & recreational facilities.

Hope this helps.

P.S..dont tell everyone ;)
 
Pssst, here's the heads up.........

Success, on the new Mandurah rail line.

10 mins to City & Fremantle.

Major Satelite Cbd.

Close to all the must tick infrastructures - roads, public transport, major retail hub, high employment, educational, medical & recreational facilities.

Hope this helps.

P.S..dont tell everyone ;)

thanks Rixter, that certainly helps
I am very new to Perth ,is mandurah around 70km from Perth CBD
 
After todays trawl around the home opens for Perth city-fringe units, I can confirm that this is not where the bargains currently are.

If you find the bargains, let me know ;)
 
Looks interesting actually.

$350 odd gets an pretty damn good looking house.

Rixter has mentioned must tick infrastructures already.. wonder what's in the pipeline for this suburb

Unless I find a real reason not to, I am pretty much in buying mode now :)
 
What's your definition of a bargain Sam?

Anything that doesnt have a Net Rental Yield of under 4% and look/smell like Changi prison ;)



No seriously, just searching (like everyone i guess) for the best value buys around the $300 mark. This is our first IP and we are looking for an easily-rentable, good cashflow place in a strong area.

I started my search on fringe city units and am not majorly impressed. There seems to be some activity in this market at the mo but not much of quality that we can see. Some nice little units - the best one in Mount Lawley but small and pricey (and studio). South Perth has some good quality units also...

In terms of making the financials stack up, i'm amazed at some of the strata fees alone (up to $2K/yr) so maybe I should be looking at small villas or even houses further out... but know these will be harder to rent, which does not appeal.

Have you got any suggestions you could offer?

Cheers, Sam
 
Anything that doesnt have a Net Rental Yield of under 4% and look/smell like Changi prison ;)....Have you got any suggestions you could offer?

Yes Sam,

Look outside of WA. RE cycles are different around the country. WA is probably in for low/no or slightly neg growth IMO for a little while yet. Experienced investors (of which you are not one - yet) will still be able to sus out good deals. But they've had years of experience.

There are many properties in and within 1 hour of Sydney that have good long term CG prospects and yields of 5, 6, 7 & sometimes 8%. But 5+% is dead easy to find here at present.
 
Have you got any suggestions you could offer?

Sam, This is a post that describes my chosen Investment Strategy that involves Villas & Townhouses. It maybe of interest to you also.

The capital growth averaging (CGA) strategy I employ utilises a regular purchasing cycle similar to what Dollar Cost Averaging is to the sharemarket. The major underlying principle to its success is it relies on your "time in" the market, NOT "timing" the market, and never never sell. So in other words it does not matter whether you buy at the top of a boom or at the bottom, just so long as you purchase good quality, well located property in high density areas ( metro area capital cities), at or below fair market value, on a regular basis. I've been purchasing IP per year and currently into year 9 of this 10 year plan.

I've been purchasing new or near new property over older style property for several reasons, the main ones being (in no particular order) -

1/ To maximise my Non-Cash deductions
2/ To minimise my maintenance & repair costs
3/ More modern & Attractive to tenants - thereby minimising potential vacancy rates
4/ Ask a higher rent - thereby Maximising yields

Without getting into the "which is better debate, houses or Units??", I preferr to purchase Townhouses & Villas with a 30% or greater land component thereby eliminating multi story units or high rise apartments, for several reasons. The mains ones being (in no particular order) -

1/ lower maintenance & upkeep for the tenant
2/ lower purchase or entry level into a Higher capital growth suburb area
3/ rapidly growing marketplace (starting both now & into the future) wanting these type properties. This is due the largest group of people to ever be born (being the Babyboomers and Empty nesters) starting to come into their retirement years. They will be wanting to downsize for the following main reasons - lifestyle & economic.
4/ greater tax advantages & effectiveness thus maximises cashflow.
5/ able to hold more individual properties spread across your portfolio - thereby minimising area over exposure risks by not holding all your eggs in only a few baskets, so to speak

I look to buy in areas with a historic Cap growth of 7%pa and/or are under gentrification. I look to where the Govt, Commercial, Retail, private sectors are injecting money. This ultimately beautifies the area and people like the looks so move in creating demand.

I have found this works well if you are looking for short to medium term capital growth so as to leverage against and build your portfolio faster.

Getting back to CGA, as the name suggests it averages out the capital growth achieved on individual properties with your portfolio throughout an entire property cycle, taking into account that property doubles in value every 7 - 10 years. Thats 7%pa compounding.

The easiest way to explain what Im meaning by this is to provide a basic example taking into account that all your portfolio cashflow will be serviced via Wages in the acquisition stage, Rental income, the Tax man, an LOC and/or Cashbond structure, and any other forms of income you have available.

For ease of calculation lets say we buy a property for $250k, so in 10 years its now worth $500k. Now lets say we do that each year for the next 7-10 years. Now you can quit the rat race.

So in year 11 ( 10 years since your 1st Ip) you have 250K equity in IP1 you can draw out (up to 80%) Tax free to fund your lifestyle or invest with. In year 12 you do exactly the same but instead of drawing it from IP1 you draw it from IP2. In year 13 you do the same to IP3, in year 14 to IP4, etc etc etc. You systmatically go right through your portfolio year by year until you have redrawn from each property up to year 20.

So what do you do after you get year 20 I hear you say ?? hmmm..well thats where it all falls into a deep hole - You have to go get a JOB - nope only joking!

You simply go back to that first IP you purchased as its been 10 years since you drew upon it first time around and its now doubled in value ($1M) yet again - so you complete the entire cycle once again. Infact chances are you never drew each property up 80% lvr max , so not only have you got entire property cycle of growth to spend you still have what you left in it first time round that compounded big time. Now you wealth is compounding faster than you can spend it! What a problem to have

Getting back to what I said in my opening paragraph about it does not matter where you buy within a property cycle just so long as you do buy, This is because you will not be wanting to draw upon it until 10 years later after its achieved a complete cycle of growth.

Well thats the Basic Big Picture of CGA. Once its set up its a self perpetuating, TAX FREE Income Money Machine.

I hope this has answers your questions. If you require any clarifications just ask.
 
For our first IP we'll be staying in WA - we dont want to get our fingers burnt on something interstate as i'd like to build up some confidence here first before buying 2500 miles away. Plus i'd like to manage the IP(s) myself.

Appreciate the above might limit our (short-term) options, but so be it.

Rixter - Thats very very helpful, thanks ever so much for taking the time to explain your strategy, very interesting and thought provoking. There dont seem to be many WA posters on this board and, like many things with WA, I feel we face more obstacles than those over East because of our relative size and scarcity of local information. This could also be our opportunity, of course ;)

I can well see the attraction of villas and townhouses - we are a young professional couple and our PPoR is a townhouse in South Perth. So, naturally I guess we have been seeking units in the inner city areas which would appeal to people like us. Cheapies to get us going. The problem being is that the cheapies we have seen were waaay below our expectations and we are now re-thinking. 2 things we have learnt:

1. A lot of blocks of units are pre-1980's... I have not started researching depreciation yet but understand that newer (post -1987???) properties qualify and it would be nice to take advantage of this as you have outlined.

2. The ratio of strata fees to rental income is terrible (ie high) in 1/1/1 units, and this seems to be financially killing many potential IP's.

Have you got any suggestions for areas in which to invest? I know this is the million dollar question and some play their cards close to their chests, so here is our current thinking for opinion: Stick to inner-city/city fringe areas located close to shopping/cafes and transport... but preferably stick to small blocks of units and in areas that have a slightly higher ratio of owner-occupiers so that we avoid 'unit-land'. In no particular order, we are considering:

South Perth, Como, Vic Park, East Vic Park, Mount Lawley, Highgate, North Perth, Leederville, West Perth, Subi ($$).

My current favoured suburbs from the list above are Vic Park because i believe it is currently undergoing gentrification and offers good long term prospects, and Mount Lawley, again because of the closeness to the city, cafes, shopping and so on.

Happy to start researching townhouses and villas in these areas.

Thoughts very much appreciated

Cheers, Sam
 
I preferr to purchase Townhouses & Villas with a 30% or greater land component thereby eliminating multi story units or high rise apartments, for several reasons. The mains ones being (in no particular order)

1/ lower maintenance & upkeep for the tenant

Rixter, could you explain the above (sorry :rolleyes:) - you mean 30% of total titled area as garden etc.?

Also how does a townhouse/villa have lower maintenance for the tenant that a unit?

Cheers, Sam

p.s. whilst we're at it - can you recommend a financial advisor in Perth who is experienced in IP? I would like to have a consultation if possible. Cheers
 
Rixter, could you explain the above (sorry :rolleyes:) - you mean 30% of total titled area as garden etc.?

Hi Sam

There are a few WA people here. Rixter maybe referring to land value with that comment ie how much of what you are paying for is in the value of the land on which it sits and how much is just the building? This is relevant on the basis that buildings depreciate (generally, unless construction costs skyrocket, which they did for awhile lately thereby making "everything" go up in value in the boom) and land appreciates as it has the scarcity value. IMO things are now reverting to this general rule.

If you follow the new train line south of Perth you will come across some suburbs with older houses in the $300k price range with >80% land value, which you could get at a circa 6% gross yield with a bit of hunting around. The lack of depreciation on these houses is a problem (the trade-off for the higher land component) but the yields are very slowly improving. Otherwise you may want to consider Karratha / Port Hedland / CBD offices if you really want high yields...

Hope this helps.
 
Rixter, could you explain the above (sorry :rolleyes:) - you mean 30% of total titled area as garden etc.?

Where your garden/courtyard is around 30% of your total living area foot print. In other words not a high rise unit / apartment where there is just the inside walls & no land component attached.

Also how does a townhouse/villa have lower maintenance for the tenant that a unit?

A villa or townhouse is smaller and easier to clean /look after than a house.

p.s. whilst we're at it - can you recommend a financial advisor in Perth who is experienced in IP? I would like to have a consultation if possible.

None that Im aware of.. most financial advisors derive their income from trailing commissions and therefore sales men to managed funds. There is no financial advantage for them to recommend property because they dont get paid to do so.
 
Hi Sam

There are a few WA people here. Rixter maybe referring to land value with that comment ie how much of what you are paying for is in the value of the land on which it sits and how much is just the building?

Hey... thanks for your response... been reading your posts (especially the "how do i afford that exclusive beachside property" one) and appreciate the advice of those more experienced than I ;) How would you calculate the land value? Presumably there are $/sqm rates for suburbs that can be applied?

I think Rixter meant 30% garden/non-built area though.

I had been avoiding suburbs further out (initially, anyway) because I wanted something that would rent very easily and show solid growth when everything else went up. Are you referring to places like Bulls Creek, for example?

Rixter - OK, a villa/thouse is less maintenance than a house, not a unit, agreed. Must have been a typo :)

If I am to avoid financial advisors (you are the second person to say the same thing this morning!), who am I best to go to regarding recommending ownership structures and tax and so forth? Preferably someone who has knowledge of IP's?

Cheers
 
How would you calculate the land value? Presumably there are $/sqm rates for suburbs that can be applied?

There are a number of methods. You can look at the price of blocks of land / run down hovels (zero building value) in the area and make adjustments. You can estimate from the prices of new houses how much they would have cost to build, the likely development premium (profit for the builder) and work backwards. You can ask a valuer / REA for the likely breakdown in certain areas. You can look at what the cheapest houses in the area are going for and how old they are (the likely value of the house sitting on them) and work backwards.

I had been avoiding suburbs further out (initially, anyway) because I wanted something that would rent very easily and show solid growth when everything else went up. Are you referring to places like Bulls Creek, for example?

A note of caution here - Bull Creek is not a long way out! I was thinking more towards the Rockingham part of that line. I'm not sure what you mean by "renting easily"? Everything rents easily at the right price! Just factor in the right price for the area and away you go. IMO the yield is the most important factor to look for - good yields will enable you to buy a lot more property, which will provide a better base for growth. And the land component will ensure the solid growth comes... bidding against owner occupiers in established suburbs will just ensure the yields are low and the CGs may or may not be any better - that is just guesswork.

If I am to avoid financial advisors (you are the second person to say the same thing this morning!), who am I best to go to regarding recommending ownership structures and tax and so forth? Preferably someone who has knowledge of IP's?

A good accountant who deals a lot in IPs. Another vote here for avoiding financial advisors generally speaking although if you can find one who just provides a fee for service (no commissions from managed funds) and invests themselves it could be worthwhile...
 
I've noticed a bit of rejuvination around Maylands. Mind you, I may be a little biased as I own a couple of devy blocks side by side.
Council has just put out a proposal for public comment regarding a Subi Centro type revamp of the central shopping/business district. Looks interesting if it goes ahead.
Maylands has always had a bit of a "scuzzy" element about it, however it looks like this is changing. I've seen alot of development happening over the last few years and if/when they spruce up the main drag, it could be a real winner.
Ticks all the boxes as far as proximity to the city, transport, schools etc.
If you stay away from the big blocks of flats, and target the townhouse/villas as Rixter has suggested, you couldn't go too wrong with an entry level IP.
Bear in mind that this is FHOG territory so you will have buyers to compete with and there are pockets of Maylands that you don't want to be in.
Another option would be to buy a house with a larger land component that will allow you to subdivide later on.
There are plenty of houses on around 560sqm which are zoned R40.
Town planning at council are pro development, so they won't give you too much of a hard time if you've done all your homework.
So a couple of options there. Just depends on what strategy you want to adopt.
Again I maybe biased, as I do own a chunk of land there, however atleast I have put my money where my mouth is. Good luck with you search.
 
A good accountant who deals a lot in IPs. Another vote here for avoiding financial advisors generally speaking although if you can find one who just provides a fee for service (no commissions from managed funds) and invests themselves it could be worthwhile...

Agreed. Finding one may prove difficult - the specie is few & far between. The successful ones are self funded living off their own investments and have no need to advise for income purposes anymore.
 
Have you got any suggestions for areas in which to invest?

As mentioned in my earlier post......

I look to buy in areas with a historic Cap growth of 7%pa and/or are under gentrification.

I look to where the Govt, Commercial, Retail, & Private sectors are injecting money. This ultimately beautifies the area and people like the look of so move in creating demand.

These big multi national companies spend millions on market research before going into an area. If this research didnt show current / future market demand for their products and/or services they wouldnt be setting up shop.

I have found this works well if you are looking for short to medium term capital growth so as to leverage against and build your portfolio faster.

Hope this helps.
 
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