Where to for Number 2 IP?

From: Apprentice Millionaire


I haven't yet settled on my first IP (settling mid May), but I know I must keep my momentum up, and look for the next.

My first IP is in Melbourne, and I am wondering whether I should continue researching Melbourne, or whether I should start looking elsewhere?

I was told to diversify. If my first IP is west of Melbourne, and I look east, am I diversifying? Or should I diversify further afield? Brisbane was mentioned to me because of where it is in the cycle. What about Canberra, Perth, Darwin, Adelaide? Robert's last post on the Sydney rental market might be a signal to look there too?

Personally, I feel quite happy researching my area (Eastern Suburbs) where I can find heaps of info easily. But should I wait till the Melbourne market slumps a little? Or is it again just a question of being in the market and buying well?

Thanks for any advice, information, recommendation, suggestion, hint, anything, really!

Cheers
Apprentice Millionaire
(aka Jacques in the old forum)
 
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Reply: 1
From: Michael Yardney


Apprentice Millionaire
There are so many opportunities in Melbourne, I think it would be foolish to look further afield.
I think you are correct in suggesting that the Melbourne market is a little hot at present and it could be worth waiting a little while as property prices are likely to drop about 5%.
But there are still bargains around, even in this mini boom. I found 2 that we bought in the last 2 weeks, both from highly motivated vendors that allowed us to buy below "market price."
But to recognise a bargain I had to know my market well.
And so do you! That's why I would recommend sticking to Melbourne- get to know your market like the back of your hand... get to develop a "geographic comfort zone."
Melbourne is big enough to allow you to diversify and not have all your eggs in one basket so to speak, because there are mini markets within the greater Melbourne market.
I've seen too many would be investors get burned when they purchase interstate trying to follow the "hottest" markets and buying properties in areas they don't understand. All the posts about failed investments in Queens land are testimony to this.
Keep doing your homework in the Melbourne market.

Michael Yardney Metropole Properties
 
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Reply: 1.1
From: Pierre .


These are very wise words for everyone in all cities I think. No matter where your city is in the property cycle, no matter how hot the market may be, there are always opportunities. As Michael says, you need to know your area very well so you can spot a bargain and act very swiftly to secure it.

I think too many people think that to buy a property under FMV, they have to negotiate the vendor down 20-30% from the asking price. This is not always the case. Sometimes deals present themselves where the discount is already built in for some reason or another. I've seen properties that were very undervalued by the seller or the seller's agent that, even at full asking price represent a significant discount from FMV. Of course, to secure such a property, you need to act very quickly, or someone else who knows the market well and can recognise that bargain will get in before you.

Always be prepared to act swiftly to secure a great deal, and don't get too caught up about bashing the vendor down if the asking price is the right price.

Good luck with your first deal.
 
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Reply: 1.1.1
From: GoAnna !


I think it is important to think about the difference between a "bargain" and "cheap".

In my world a bargain is when you buy something of value below its true worth. Often this is because few other people have recognised the potential or are not in a position to do anything about it.

This should not be confused with "cheap". In my view this just means selling for very little money. But in relation to its true value it might actually be expensive.

In terms of capital gains (I am not talking rental return here) I would much prefer to pick up a "bargain" for 300K in a growth area than a "cheap" property for 150K in an area with a doubtful future.

How do you recognise the difference? Research! Research! Research!

GoAnna !
(aka Anna before she got real)
 
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Reply: 1.2
From: Cathy Baxter


We have investment property (2 houses on one block) in a NSW regional city which has a uni, but also relies on rural investment and returns. We also have a large commercial property and business in this city. Are nearly ready for next IP, but we are really concerned about too many eggs in one basket. The cap growth is not so great here and there are some doomsayers about - like anywhere.

How do we get to research and know the market somewhere else? We are most interested in Mid North Coast of NSW, but doing the research from here is difficult (hard to travel as our business is 7 day a week).

Anyone with info on mid north coast - would love to be in contact.

Cathy
 
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Reply: 2
From: Peter Hirons


AM,

Research and purchase where you feel comfortable. If that's Melbourne then that's fine . As a location its certainly large enough to spread your risk.

In regard to the momentum you may feel that you need to advance quickly, however, my own experience when i started last year was that i was thankful for a breather when one of my purchases did not complete on time (construction was delayed some months). Depending on your mental starting point there are many significant changes to be made in one's approach to finance etc. I think its an advantage to settle in and develop a feeling for the rhythm associated with each of your properties before jumping to the next.


HiRO
 
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