The wHeregroup is a Buyer’s Agency group like no other in Australia, wHy? Because we research investment property locations for our own benefit, and then offer these secret locations to our clients.
So as a client of the wHeregroup you can feel safe knowing that we also own multiple properties in the same locations we recommend.
With this in mind, how then do we predict locations for capital growth before it starts? The answer is research!
No matter what type of investing you undertake, research is the most important aspect in generating good a return. Whether buying shares or property, the research undertaken by you as the investor should be detailed with supporting evidence to back up your reasons to buy. That’s where the team @ wHeregroup are your helping hand, we do all this for you.
The first feature we look for are areas that have a median house price under $350,000. The reasons behind this are;
• Properties under $350,000 have a better yield percentage, meaning the rent will almost, if not completely, cover the interest on a loan, even if borrowing then entire purchase price;
• It allows investors to have multiple properties due to affordability thus grow their portfolio at a faster rate;
•If the property is vacant for anytime the interest repayments are still required to be paid by you. Having a smaller loan amount gives you the comfort that at the absolute worst case, you should still have enough to cover this repayment with sacrificing too much of your own lifestyle;
• Diversification for those investors with multiple properties, i.e. taking advantage of property cycles at different stages and growing a portfolio that fits with your Game Plan;
• This is the largest target market for potential purchasers when you decide to sell which gives you greater potential for capital growth in the future;
•By researching income stats on an area we can determine the best price to buy properties in. By doing this we will have the most potential buyers again when we sell. This, also combined with the income statistics on how much the potential tenants can aford to pay for rent then eliminates the risk of an empty investment property.
An Undervalued Location by comparison to areas close or nearby
Population Growth now and into the future
Locations that have decreased significantly since the height of the last cycle
When describing a location as being undervalued we refer to the value of property in a particular price range and compare it to the surrounding suburbs, regions or towns.
To give you an actual example, we have purchased property for ourselves and clients in Ambarvale Macarthur (South West Sydney). One side of Ambarvale is adjacent to the popular suburb of Glen Alpine which has a median house price of $515,000 in comparison to Ambarvale at $275,000.
Given the significant price difference, yet close proximity, Ambarvale was seen to be a great suburb to purchase investments. Of course there is a difference in the quality of the homes and their finishings between the two suburbs, however, those that cannot afford the higher price of Glen Alpine choose to buy in Ambarvale and renovate. This brings a fresh appearance to the suburb with many renovations and uplifts looking much like the homes in Glen Alpine.
A significant difference in property values does not always need to be in the next suburb, the same can also occur in the next town or region. This was the case with Collie WA, this being the next town east of Bunbury WA. Those looking to buy and rent in the town of Bunbury, found it to have become almost unaffordable. Many began moving to the town of Collie only 50 minutes away and yet almost half the cost of living in Bunbury. Collie house prices soon gained great momentum and it’s median house price rose over 40% two years in a row.
Locations can reduce significantly in value for one or many of the following reasons;
• Limited number of buyers verses properties for sale – or too much supply and not enough demand situation
• People’s perception of value
• Mortgage hardship or Mortgagee sales where vendors or the banks sell for less than its value
• High interest rates leading to forced sales and/or mortgagee sales placing again an oversupply on the market
• World events, terrorism, share market crash, company foreclosures etc
In the above circumstances as properties are sold for less than their real value, they are setting precedence for bank valuers’. When valuing properties an area the bank will always base it’s valuation off a comparison of minimum 3 sales in the past 3-6 months.
Long term decreases on the other hand can lead to areas becoming undervalued compared to their neighbours or next price range. An example;
• Expensive properties in high net worth areas of Sydney have decreased up to 35% in value. There are waterfront properties now selling for less than properties with water views only.
• Lower priced blue collar areas in Sydney that have the same price for property today as in 2001. The wHeregroup team are currently purchasing property in some of these locations.
Combine a property price slump with an area experiencing a population boom and you end up with a housing crisis emerging.
A housing crisis is caused by the basic math of supply and demand. There are more people than houses this then flows onto an increase both house prices and rents.
So we have a better understanding of this we need to study it from a few different view points and identify;
- • Who and why people are moving to an area?
• How big the transient population is. Those who move to work there for a small amount of time then move away again, similar to Cairns with tourism jobs or those who work in mines or snow field regions;
• Immigration and where they are moving to?
• University students and areas located near-by
Aside from the above four major requirements, there are a multitude of other factors that we also consider when making the final decision on an area, for example -
• Demographics – this allows you to know type of property to buy, i.e; singles, families with two children, retirees etc, all require different types of housing.
• Incomes – its important to know how much the mass of the population of an area earn and whether or not they can afford the rent in your price bracket. Using the same income data we can then determine when to sell the property, see researching for resale and gaining the maximum capital gain.
• The ratio of owner occupied properties verse investment properties, this should be around three to one (3:1)
• What are the state government plans for the area in the short to medium term
• What are the council’s plans for in the area in the short to medium term
• What big industries are in the area? There should be a minimum of two really large industries but preferably three if the town is regional. This is not as important if the area is a capital city, as commercial, retail, tourism, industrial and business sectors easily replace this.
• Where the area is regional or a town, what do the large companies have plans for in the short to medium term
• Volume of blocks of land currently for sale
• What land subdivisions are coming up for sale
• Rental vacancy rates
With all the information above, we can then see the big picture for a location and very pragmatically and practically see what type of property and price is best suited to an area now and into the future.
So to summarise how we identify locations to invest in - the answer is research along four key lines:
- Median house price of $350,000 or less - buy in the price bracket that the majority of people are buying in. By doing so when it's time to sell again, you have the mass of the population targeted along with rental affordability;
- Look for an Undervalued Location by comparison to areas close or nearby;
- Identify Population Growth now and into the future;
- Identify Locations that have decreased significantly since the height of the last cycle.
- Real Estate Licensees
- Property Managers
- Building Inspectors
- Pest Inspectors
- Conveyancers (state bound)
1. By researching the income/s of the mass of the population of an area and what they could feasibly afford to pay for a property or how much the banks will lend them. This can be worked out on any mortgage calculator. For example if a couple was earning $40k each they could afford a mortgage up to around $400,000. If they had a child this figure would be less, so if you were to sell your property, it would be around the $380,000
2. By the amount that the area decreased in value from the height of the last property cycle. So if the area was selling for $380,000 in the peak of the last boom and now selling for $280,000 then it is feasible to say that it would be safe to sell again when they reach $380,000 as they will only increase slowly from that figure upwards.
The next stage of our research requires an on the ground approach, and spending time on the ground in the location. We spend several weeks initially researching and visitin a location prior to purchasing in order to;
• Learn local knowledge – there is a lot to be learned from the locals, information that no internet research can give you.
• Get a “gut feel” for a location
• Interview all the professionals in the areas that we require to do business with to complete a property transaction. Once we have a team behind us knowing what we are trying to achieve we buy a property there ourselves to test the team.
Local professionals we interview include;
Once our first property transaction has taken place and we are happy with our team of professionals on the ground, we can then offer excellent property services and opportunities to our clients.
A hot tip for you!! By using a buyer’s agent as opposed to buying property yourself, there is the ability to view and purchase the best investment properties before they come onto the market.
By having good relationships with the people in the know, we are able to leap-frog the general property hunters before the properties are advertised for sale. Once a prospective vendor lists their property with an agent, there is a lag between having the photos of the property taken and for the “For Sale” sign and photos uploaded on the net. The lag time can be from 3 to 5 days. During this time, clients of the wHeregroup are offered these properties and if acceptable, the deal is done before the property hits a real estate website or local paper. You may have seen brand new listings come up on www.realestate.com.au that are listed as “Under Offer”, this is the reason why.
So by using this system we offer our clients the best available properties first.
Our research does not stop at the completing of the purchase; we care continually doing homework on these locations and keeping our clients up to date with any new information at hand including periodic values of properties in the same area as their investment. Once we believe an area to have hit its boom peak value, we let our clients know. Any who wish to sell, we are able to arrange for them to be put into the hands of our selected licensee who can then sell their property at a discounted sales fee.
Our research is obtained from many websites and local knowledge, some websites include;
Local government and council websites
Large area industry websites
Like to know more?
Contact us to arrange an obligation free consultation.
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