In her new book – Mind Body Sold! – New Road Property’s Elaine Davies has written the definitive guide on how to buy a property whether as an investment or to live in or as a family home. Drawing on years of experience as one of the country’s top buyer’s agents as well as her knowledge as a celebrated ‘mindset’ expert*, she provides both the practical skills as well as the mental strategies to ensure you get your property every time! Below – she advises exactly WHERE to buy your property and WHY!
“If you’re ever going to make money on a property, one of the most important things you must decide on is where it’s going to be. It’s always, location, location, location!” says Elaine. “Even if it’s going to be your family home, you must use your head as well as your heart. Buy in the wrong place and when it comes time to sell, your retirement could be seriously compromised “she says. Below are some good insights into where, why and even when to buy.”
Picking the Right Area:
Research, Research, Research
To be a smart buyer it’s important to really understand, not just areas, but the suburbs, streets, houses and blocks (for strata properties). That way, not only will you have a massive edge over 99% of your competitors, you’ll be able to recognise a good property when it pops up in front of you. To do this well, laser your attention on no more than two or three suburbs and become the expert on them.
Hit the Streets
Walk away from your online search to actually inspect properties and attend auctions. If you don’t see first-hand what properties are selling for, you’ll put yourself in a very vulnerable position and could overpay or buy the wrong property. Sadly, I’ve often heard real estate agents say, “They had no idea they were the only serious buyers I had on it; no other buyer would come near it! So I nailed their feet to the ground and got the deal done!”. Don’t be one of the naive. Always do your homework. Get knowledgeable on sale prices and what people are looking for. Know which properties are “hot commodities” that will make you money and how much you should and shouldn’t pay for them.
Buying a Home – What to Look for in a Suburb
A good suburb for buying a home is usually dependent on things like personal preference, easy access to work, and close proximity to friends and family. People usually find this quite easy
—if they can’t get the exact suburb they want, they’ll buy as close to it as possible. Still there are things to consider.
A good suburb for a home should:
ïhave public transport
ïbe close to restaurants, cafes, bars, shops, parks, oceans, rivers and other amenities
ïhave easy access to the CBD where the majority of people work
ïbe in the catchment area of good schools whether you have children or not. You might soon!
ïbe in a street or area where the vibe suits your current lifestyle needs
ïbe populated with like-minded people for support and a social life
ïhave a scarcity of stock and competitive property sales, i.e. more buyer (or tenant) demand than properties for sale or rent (be careful of areas that are being flooded with new developments).
And should not:
ïhave planned developments or infrastructure that will devalue your property’s yield or capital growth or impede on your lifestyle
ï feel too unsafe for reliable tenants to live there or for other buyers to see the appeal
ïbe so far off the beaten track that it’ll take you, or potential tenants, hours to get anywhere, especially work
A good suburb for an investment property should have the points listed above, plus…
ïa lifestyle that would appeal to most people
ïfuture potential – avoid areas that are so rundown that gentrification is a long way off
ïa future – avoid areas that are dependent on one industry, such as a mine or large corporation. If they close down, it’ll be bye- bye investment! Historically, the rule of thumb when buying an investment property was “buy where and what you know”. But what if “where and what you know” is a low -yielding area or has minimal capital growth? Or you’ve been living overseas for a number of years and don’t know what’s happening back at home?
In that case, it may be wise to dig a little deeper and look outside your comfort zones. Work with the points above and you won’t go too far wrong. Ideally, you would employ a local buyer’s agent to be your eyes and ears on the ground as well as your negotiator.
A closer Look at the Best Suburbs
As well as hitting the pavements and doing your own homework, you can purchase property research reports from companies such as CoreLogic and Residex. These will outline, in their professional opinion and based only on computer algorithms of past sale prices, the best suburbs for your needs as well as an area’s growth rates, demographics, past sales prices and much more.
1) Blue-Chip Suburbs — the Inner City
Blue-chip suburbs are the most desirable places to buy a property. They are usually close to the city with little room for new developments. With high rental and sale demand, competition is steep, as are the prices. The right property in a blue-chip suburb will almost certainly bring long-term capital growth for wealth creation. However, because the purchase prices are so strong, the rents (your incomings) will rarely be high enough to cover your mortgage and strata payments (your outgoings) leaving you out of pocket. This is what’s known as a low-yield property or negatively geared. How much you will have to dig into your cash flow, to “top up” the rent will depend on your loan repayments versus the rent you receive.
You may want to buy in a blue-chip suburb, but be realistic about what you can afford. Wasting time looking for the impossible is soul destroying. Instead, work within your budget not against it. Having said that, I believe that buying a smaller property in a hotter, more desirable suburb is a safer bet than buying a larger property in a slow market.
How to Get to Blue-Chip Suburbs
Taking the above into account, like most property experts, I agree that the best long-term strategy for wealth is buying blue-chip—good properties in areas that have historically held their value. However, if you can’t afford to do that, here are some other ways to get into the blue-chip market:
ïBuy with friends and/or family
ïFind a property you can add value to
ïBuy as close to the city as you can afford (but not where there are too many skyscrapers and general oversupply)
ïBe flexible on your brief and buy smaller than you had initially expected to
2) Blue-Sky Areas — The Outer Suburbs and Regional/Rural Areas
The outer suburbs and the countryside, or “blue-sky” suburbs, often don’t bring good capital growth and, therefore, wealth creation. Still, as blue-sky areas have cheaper property prices, their rental return is better and, therefore, often offer cash in your hand. As long as there’s not much maintenance to do, with the rent covering the mortgage, you could end up with a stream of income. Depending on what you’re looking for and at what stage of life you’re at, this strategy could suit you.
A suburb becomes a “hotspot” when it’s tipped to be the next big thing. This can be because of new infrastructure or because it’s next to an area where every other house is being renovated, and the baristas have set up shop! Buying in a hotspot suburb can work. Areas like Sydney’s inner-west and Melbourne’s Brunswick and Brunswick West have boomed in the last 10-15 years and people have made good money. However, it can also be a gamble that can go very wrong. A predicted hotspot can fail to take off.
Without historical proof of growth, a hotspot could do any one of five things:
1.Have a mini peak, for some transient reason, and then remain flat for decades
2.Grow at a steady pace for a few years then remain flat for decades
3.Not move at all
5.Boom and, in time, become a blue-chip area
Options 1-4 could, at best, slow down your wealth-creation strategy and, at worst, put you in a forced-sale position. You can see why property conservatives think “hotspotting” is a high-risk gamble. If your strategy was to add value for a speedy “flip”, you may make some quick cash. Just don’t necessarily depend on these areas for that coveted, long-term capital gain. And again, when doing your sums, always put together an exit strategy by factoring in your selling cost like the real estate agent’s fee and taxes.
Get Nosey and Ask Questions
Whether you choose “blue-chip” or “blue-sky” suburbs, each area will have its nuances. To find the best spots you’ll need inside information, so be a nosy parker and talk to:
1. the locals (who will generally be biased towards their street/block)
2. good real estate agents, but be careful. If they happen to have a property or sale in the dodgy part of town, it’ll be their job to sell it to you. Don’t assume they’ll pass on their knowledge as their business/client loyalty may be compromised
3. the local council, especially for planned developments
4. shop owners and other local business owners
5. schools and other institutions
Remember to do internet searches on the history of the property and the street. Look for clues of gentrification and anything else you can think of.
To find out more about Mind Body Sold!, Elaine Davies and how New Road Property can help you: http://newroadproperty.com/ Mind Body Sold! available to download or purchase as a hard copy on Amazon.com amazon.com/author/elainedavies