Yardney's 'How & Where To Invest in Property in 2008'

[ffc1883_1996]

So rather than explaining my reasons over and over again – I referred people to my book, where I have explained my thoughts succinctly.

Hi Michael,

I read your book recently. It’s a good read and credit to you.

Your book does a very good job of explaining why capital growth is so important and states strongly that investors should be researching and purchasing properties that will bring above average growth. Good Point – well made. However, I do not think that your book clearly explains why high growth investments can’t be found outside of the so-called “blue chip” suburbs.

You have achieved much more than I probably ever will from property investing, and I wish to understand why you are so dismissive of the outer suburbs when, to me, development and capital growth opportunities seem abundant.

I’m confused and I suspect some of your other readers could be too because you’re such a strong advocate for timing investments wisely: Being sure not to buy at the top of the cycle. Once a market reaches the top of it’s cycle, look for another market. So, if one was to form the opinion that, say, Melbourne’s inner suburbs have peaked, wouldn’t it make sense to consider markets like Croydon (and surrounds) which may still be on the move?

Your contributions are appreciated.

Ben

 

[Harris]

Hi Michael,


I’m confused and I suspect some of your other readers could be too because you’re such a strong advocate for timing investments wisely: Being sure not to buy at the top of the cycle. Once a market reaches the top of it’s cycle, look for another market. So, if one was to form the opinion that, say, Melbourne’s inner suburbs have peaked, wouldn’t it make sense to consider markets like Croydon (and surrounds) which may still be on the move?

Hi Ben,

I have stated before that I met his head of BA and of Development and was quite disappointed at their attitudes towards anything which is outside the bluechip belt.

I mentioned the "f" word to both and ask them about the investment potential for the area ,and got the most awkward expressions from them ("f" being frankston ). I was told that "that part of melbourne" has a reason for being so under-valued and that they would simply stay away and it just doesnt make sense to invest there besides all my attempts to demonstrtate that it offers great value.

His business is geared towards buying "high value properties", hence generating higher revenue from the fees which are normally a %age of the project cost or buying fee. That business model can never support outlying suburbs with high volume and lower fees and lower revenue for Metropole

This is as simple as it gets... No amount of convincing will change that.

I am sure Michael is smart enough to understand the statistics over medium or long term that show that "inner/ bluechip suburbs" have NEVER out-performed outer suburbs in growth.. infact a comparison was drawn in the cover story of API last year where through actual growth in median value, it was proved that Frankston North out-performed Toorak over the last 2 decades in the % growth.

Combine that with the fact that one can have close to 6% or higher yields in outer burbs (when buying well) and also have the ability to add value via sub-division etc and if you are a long term buy n hold, you cant go wrong.

I am getting close to 7% yield across a dozen prop (in outer suburbs) excluding development blocks and the yield is still growing. Those are the prop that I purchased over the last 18 months so rents should keep on going up. Add 25% + growth in the last 12 months and you have a winning formula.

Compare those with my inner portfolio that I have held for 6 years and the rents are approaching 6% mark now (after 6 years of severe cf bleeding). The growth in values has been lower on a yearly basis than my outer and interstate portfolio as well.

I agree with your sentiment and if I were to start all over again in my investing journey, I know now very clearly what I would be doing in order to gain the maximum growth with the biggest portfolio ($$ wise) and the best CF situation.
Harris

 

[ffc1883_1996]

His business is geared towards buying "high value properties", hence generating higher revenue from the fees which are normally a %age of the project cost or buying fee. That business model can never support outlying suburbs with high volume and lower fees and lower revenue for Metropole

Oh no – not the “f” word!

But seriously, I still can’t see the logic. Surely Michael’s property development business would benefit from attracting new clients, like mikey_investor (or myself for that matter), who may need assistance with building on their land in Melbourne’s burbs.

 

[Rockstar]

Good arguments from all.

I read Michael's book about 18mths ago and I have also listened to some of his Q & A telephone conferences. The book inspired me to take action and begin developing duplexes. I never felt that he restricted his philosophy solely to inner city ring suburbs. There was so much wisdom in the book that I implemented for developing my own strategy and planning. I never had the intention to use Metropole to find houses/development opportunities for me. I wanted hands on action and experience. His book helped me greatly and, due to the implementation of strategies found in the book, I have successfully completed my first duplex (net equity gain of 180k) am 1 week away from beginning construction of the 2nd duplex (expected net equity gain of 150k), and am settling on the 3rd duplex block in 4wks. Also have under contract a house with duplex potential down the track. And, yes, I have been VERY busy.

So for a $30 investment I have done well. Actually make that a $90 investment since I also purchased Jan Somers book and Melvin & Chan's.(also great reads) So I shouldn't give all the kudos to Micheal though I feel his book was the real trigger for me.

Mikey investor, Well done on your project. I live in coastal Northern NSW and have put into action many strategies from Michael's book and yet done so in my own area which is a long way from any city - let alone an inner suburb. I think you would benefit from the read. Keep growing mate and don't let one negative incident block the potential benefits.

Regards, Ian

 

[Michael Yardney]

Hi Ben,

His business is geared towards buying "high value properties", hence generating higher revenue from the fees which are normally a %age of the project cost or buying fee. That business model can never support outlying suburbs with high volume and lower fees and lower revenue for Metropole

This is as simple as it gets... No amount of convincing will change that.

I am sure Michael is smart enough to understand the statistics over medium or long term that show that "inner/ bluechip suburbs" have NEVER out-performed outer suburbs in growth.. infact a comparison was drawn in the cover story of API last year where through actual growth in median value, it was proved that Frankston North out-performed Toorak over the last 2 decades in the % growth.

Harris

Just a few points of clarification Harris.

Our project management fees are the same for a 2 townhouse development whether it is in Frankston or whether it is in Bentleigh; so that is not the reason we do not do developments in Frankston at present.

It has nothing to do with fees - it has to do with the profitability of the project.

If we could help our clients make money in Frankston or Croydon, why wouldn't we be developing there also?

I'm not sure why I need to justify our business model but let me try and explain it again....

We have found a system that works for me (I'm currently completing 2 developments this month) and works for our clients.

It helps investors who are not experienced in property development make developer type profits by purchasing an old home, getting development approval for a medium density development and then having 2 , 3 or 4 townhouses built for them using Metropole's project management services.

This system works - we are involved in over 110 projects currently. We have been doing it for many years now and almost half our clients are repaet or refferal clients. Interestingly very few are from this forum - most likley the demographics of this forum.

Our experience shows much better profits are available in areas where the end values of the units are higher - generally the inner suburbs. The end values are not capped in these suburbs - you add a bit more value and you get your money back.

We regularly get people coming to us wanting to get started in property development with little money or experience - we can help them with the second issue but not the first.

We are not prepared to change our system for them.

We're always happy to assist clients who want to work with our system, but please don't get cross with us - please don't get cross with "me" if we don't want to change our system for you or get involved in doing things your way.

And don't look for a hidden agenda - we're not against you.

If someone has a different opinion on where or how to invest please respect that, as we respect your right to have a different opinion.

The trouble is people come in and ask our opinion so we tell them and if it doesn't fit in with their preconceived ideas they write about it on this forum.

We've bought properties for clients in Frankston and in the past we've done quite a few developments in the Frankston area. Currently we can't make projects stack up there. So we don't recommend it. Will it work again - of course it will - but are there are better opportunities elsewhere currently?

Yes there are- in my opinion and that's what people ask me - my opinion.

Do we always get things right, do we always ring clients back the same day, do we make mistakes/ Metropole has grown form a small familty business to a large company with close to 70 in our team in 3 states . Of course we are human and don't always do things perfectly - but we try hard and our hearts are in the right place .

As for the cover story in API - I also read it. I don't believe everything i read - do you??

We tend to want to believe things that we read that justify our preconceived ideas.

Over the years many inner suburbs have outperformed the outer suburbs - I like investing in those suburbs - in fact I do invest in those suburbs. I go with those suburbs that outperform which means I don't look for the next big growth spot - I invest not speculate.

 

[Sailesh Channan]

Growth is an important factor when you are investing in property. Inner city suburbs generally show solid long term growth. This is largely due to the shortage of land in the area. You will also notice that once a new town house or unit development comes up nearby the value of surrounding houses will increase largely because of the high prices paid for these shiny new developments.

On the other hand the outer suburbs generally have an abundance of land and very little gentrification to increase values. The outer suburbs will see large swings in property values and sometimes growth will kick in and move up with amazing pace...a bit like the penny dreadfuls in the share market. Most if this growth is brought on by investors and struggling young families eager to get in before they miss out. For most of the time there is no problem with this mix of buyers however, when the economy turns with high interest rates and unemployment rises this is when people are forces to sell. Areas that have a high proportion of investors and first home buyers will be the first to feel the pinch. The flood of properties hitting the market causes over supply and values fall.

All areas are effected however, the booming outer suburbs will feel most of the pain.

There will always be opportunities in certain pockets in the outer suburbs where the property is close to major public transport corridors and other infrastructure.

The key thing to be careful of is over development in the area of interest.

An example of areas under mortgage stress is Sydney's outer west.

 

[ManyManeuvers]

Michael,
Still not read your book, but looking forward to the read from the way this thread is turning out.

Sadly I'm a little cheap, (is that in line to your hint at demographics of SSers vs the majority of your clients? or is it age/ race/ income/ disabilities/ employment/ locations ) so i have turned to borrow from my local library.

Good to see you have built a business system that allows you to focus on marketing (including taking the time to defend your views).

All FYI,
So far have picked up 17 property related books, and slowly getting through them. Have Mike's book on reserve so it will be no. 18.

Don't have the list in my memory bank, but so far i have have read from:
Margaret Lomas
Rolf De Roos
Author i have forgotten (yes that one was not very memorable for my demographic)

It is already interesting to see the contrasting views, and it is clear to me why some stick to what they know and what works for them (and only that), and that others prefer to take a balanced/ generic view (once again a lot of reasons comes into play here).

My credibility in the property game is virtually non-existent, however i will still loop back with my summary list with title, author & my attempt at a balanced review (of good/ bad/ contrasting/ contradictory points). Hope you can all get something from my view.

Harris, you should write a book (and maybe become a property spruiker for profit/ start a selection + development mgt company ).

Cheers,
MM