One of the most important aspects of successful property investment is to really understand what it is you’re buying and why. By doing so, you are almost certainly guaranteed to buy well and avoid any costly mistakes.
Quite often, the amount of research an investor is willing to undertake when it comes to the area they are interested in and the type of property that will attract strong tenant and buyer demand over the long term can make all the difference to their future success.
Basically, it is all about knowing your backyard.
Before making a move to secure what you think will be a strong property investment, you need to get a good feel for the location – what type of amenities are available and what type of demographic will be attracted to the neighbourhood? Are families or young professionals more likely to move in? Does the area’s housing market have a good history of above average value growth?
When you can answer these types of questions, you are on your way to making the best decision and buying right.
This is exactly what Alison and Scott were willing to do when they came to me looking to buy their second investment property, after the first hadn’t gone quite as well as they hoped.
As a builder, Scott was interested in something that needed a little bit of work without becoming a time consuming money pit, however they weren’t quite sure where to start looking or what they should be looking for.
Not long after our initial meeting, a sales agent I knew contacted me about an apartment only a stone’s throw from Sydney’s popular Coogee Beach.
The property had not even been officially advertised for sale, but was going to be put on the market for auction very soon as the vendor wanted to offload it quickly.
He had inherited the property from a distant relative and asked the agent to sell it within a week if possible. The agent promptly called us to see if we would have an interested client who was ready to move quickly.
Not only did the apartment boast close proximity to the beach (only 800 metres away), it was also in a quiet location within a boutique block of six apartments, with an easterly aspect, desirable lock up garage and on site visitor parking, internal laundry and balcony and an existing tenant who was paying $600 per week.
It was to be listed at offers over $650,000.
Additionally, the apartment had that all important value add potential that Scott was so eager to find. But the real beauty of the Coogee Beach apartment was that whilst it had refurbishment potential, the existing tenant was on a 10 month lease and the property was already very liveable.
This meant Alison and Scott didn’t have to undertake any work immediately and when they did eventually decide to spruce up the property, all that would be required is a lick of paint, new floor coverings and perhaps an updated kitchen and bathroom at some stage.
The apartment directly below the one in question sold around one year ago for $752,000, with the only real difference being that particular unit had a larger terrace rather than a small balcony.
Even though they weren’t too familiar with the location, Alison and Scott recognised that this could be an opportunity too good to pass up and took our advice to inspect the apartment and the area in general to get a feel for just how promising this investment would be.
After a day trip to Coogee Beach, a cup of coffee in one of the trendy local cafes and a visit to the property, Alison and Scott saw first hand just how popular this trendy precinct is, with bustling cafes, restaurants, shops and a large Mercure Hotel. They were sold on the location and the apartment.
The property was listed at a very reasonable price for the area based on recent comparable sales and we put in an offer of $662,000 which was accepted by the vendor.
Confirming that this was such a good deal, the apartment has recently been appraised by a local agent at around $800,000. In other words Alison and Scott had essentially made almost $150,000 in capital growth just by buying right and below market value.
This example of buying well illustrates how important it is for investors to really know their backyard. Being familiar with the area you intend to buy in is critical when it comes to securing the best possible investment for the best possible price.
Would you like to buy an investment property like this? Why not join us at a FREE boardroom property briefing at one of Metropole’s offices in Melbourne, Sydney or Brisbane? Please click here to express your interest and find out more, including how much you could borrow.
George Raptis is a director of Metropole Property Investment Strategists in Sydney. He shares his 22 years of experience in the property industry as a licensed estate agent and active property investor. Go to www.metropole.com.au
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