G’day, my name’s Ben Everingham and I’m the director here at Pumped On Property and today we’re going to talk about how to find an investment property under market value and in a great area.
Hey there, my name’s Ben Everingham and I’m the director here at Pumped On Property, a buyer’s agent who helps clients from all over Australia buy investment properties each month, and today we’re going to talk about how to find an investment property under market value in a great area. So this is something that I’m extremely passionate about because obviously, as a buyer’s agent, people come to us to talk about the market, to get educated on the market, and to ultimately buy a property cheaper than they could buy for on their own. I’m going to share some of my thoughts and feedback based on what we do each month with our clients today. It’s going to be a bit of a longer video because there is quite a bit to this stuff and quite a bit, especially in buying under market value. But I’ll share some of the things that we do, which you might be already doing or you might just slightly modify what you’re doing and make it easier for you to go out and buy that right property at the right price.
Before we jump into buying below market value, I suppose we’ve got to address this concept of what actually makes a great area. So to me, there’s some fundamentals that make a great area. Some of these you would’ve heard before and some of them might be a little bit different, but the first and foremost thing for me, in terms of what makes a great area or a great property, is that owner occupier appeal. So a huge amount of investors buy properties that they would never live in areas that they don’t, or could never see themselves, living personally. And that’s completely okay. Like I wouldn’t, to be honest with you, live in any of my investment properties myself. But they are great properties for the people that live in those areas.
What I’m trying to refer to there is, when I’m talking about owner occupier appeal, I’m talking about appealing to the person or the family unit that lives in that kind of area. For example, less than two weeks ago I bought a great little three bedroom, one bathroom, renovated Queenslander about 11 kilometres away from Brisbane CBD. And while I might personally not live in that property, just because I prefer brand new stuff for me and my family, it absolutely ticks the boxes of what people are looking for in that particular area. It’s got a beautiful, big, flat loft, nice views of the back deck, nice big open-plan living, decent size backyard, potential to add storage, a shed, a granny flat at the back of the block, potential to rise it up in the future and maybe put some extra bedroom and bathrooms and living space downstairs. So it ticks a lot of these owner occupier appeal boxes and that’s what i am ultimately looking for.
On top of that owner occupier appeal, it’s really finding a property that’s got some sort of scarcity factor. So again, even though I said I like to live in brand new property for myself, doesn’t necessarily mean I’m buying in Greenfield so that’s where there’s hundreds of thousands of blocks that can come on in the future. I’m talking about small little in field blocks with great opportunity. So scarcity factor is extremely important and that really means buying at the right time in the market in the right street, in the right suburb and all of those things that we’re going to talk about in a moment.
Obviously, buying at the right time is extremely, extremely important in terms of what makes a great investment. And for all of you that own properties in Sydney and Melbourne, that have owned them since 2012, would’ve seen the benefit of buying at the right stage at the right time. I like to follow infrastructure spending, so obviously trains are extremely important to me. Buses, public transport, infrastructure that’s going to create job growth in the future, the job growth, great schools, great employment opportunities.
So that generally means for me and my clients that we target areas with, in or around, the CBD, if not on the CBD. Driving distance to the CBD directly on the beach front, because from what I’ve seen from growing up in Sydney and observing Melbourne for a long time, is that there’s two types of property that really go up and that are high quality, owner occupier appeal houses close to the city within that, let’s say worst case scenario, 10 – 15 kilometre ring of the city or alternatively, property within one, one and a half kilometres max from the beach front. And time and time again, you’ll see that property out preform everything else in Australia based on the lifestyle and employment drivers that really end up driving population and in turn, capital growth.
So there’s some of the things that maybe grow an investment property for me. But in terms of addressing this how to find a great investment property under market value in a good area, the first thing I wanted to talk about is selection. So I find most people jump straight on realestate.com or domain. They start inspecting properties before they’ve really got a strategy in place or before they’ve narrowed it down to a specific state, market region, suburb, and street that they’re going to target. And so, that means that anything looks like an opportunity, when in reality, a great opportunity, especially below market value, isn’t so much found from randomly scrolling on some suburbs that you think might preform in the future, but form doing that analysis first and arriving at a point where things look really, really good from a fundamentals perspective.
Selecting the state is the most important thing and you can do that from jumping on Hare and Todd Wyatt’s free monthly property market update report. Incredible report to help you refine it down to which state in Australia is preforming at the moment. Once you’ve got the state nailed, for me, for example, right now I’m personally looking at Queensland. I’ve then reduced it further to what’s the major metro market in that state. Obviously Brisbane and then from Brisbane, I start reducing it down to a suburb level. You can do that through looking online, reading the property investment magazines. You could also buy a residex report, which can help you refine or create a list of suburbs with good future potential for capital growth. But once you’ve narrowed it down to that suburb level, that’s really where the fun starts, I suppose, in terms of to buy under market value and really buy under market value.
You absolutely need to be only focusing on one suburb at a time or maybe two suburbs, absolute max. And you need to know every single thing there is to know about that suburb, because I hear people talk about all the time, “I bought this at this price and I believe it’s 20 grand cheaper than the market or 50 grand cheaper.” I jump online, I do a quick RP data search or real estate investor search of the property address and it looks like, to me, from my perspective and how we buy, it’s actually over market value. Because, most of the time, people that come in and just randomly buy a property in a random suburb buy it above, and if not above, definitely in line with market values for a property.
It really is important to spend that time if you’re going to do it yourself, getting the foundation right, really understand the market. When I talk about this concept of knowing the suburb absolutely inside out, what I’m referring to is yeah, at a high level understanding the key performance indicators and the potential for growth. That’s half the journey to select the suburb, but once you’ve identified the suburb, it’s then knowing where housing commission sits, knowing where owner occupiers versus renters sit, mapping the suburb from a sales history perspective and identifying where the premium pockets in the suburb sits and where the cheaper pockets sit. Understanding the good streets, understanding all of the over lays that are important to you as an investor to make sure you get it right. And then really understanding in detail the sales history data so that you know a three bedroom, one bathroom home is worth X, a four bedroom, two bathroom home is worth X. And if you were to buy this property and convert it into that and do some renovation it could be worth this. Really understanding the intricacies of that suburb data.
Once you’ve really narrowed the suburb, really feel extremely clear about what’s happened there in the past and what’s predicted to happen there in the future, and you know the sales history data, literally at only that time would be when I start to set up the alerts on realestate.com and domain. So that, for example, I’m talking at a three bedroom, one bathroom home in Chermside in Brisbane for example. I set up those alerts so that all of those properties come to me the day that they’re listed online by our email so that I’m seeing them before other people and can move on them if they’re the right properties.
The second thing I do is to go meet the three or four top preforming real estate agents in that suburb, because in every suburb in Australia there’s only normally three agents that will be selling 90%-95% of the property. Once you know exactly where you’re buying, what market value is, and what it is that you want to buy, go sit down with those agents. Tell them exactly how much you’ve got to spend, tell them exactly what you’re looking for, and maybe they’ll remember when the property comes up that you’re interested.
You could make their life easier and so they’ll bring that property to you before it goes to the market. Or at least they’ll bring it to you the day that it’s listed so that you’ve got the same opportunity that everybody else does to get the property before the first open home on the weekend, because the thing is, there’s generally a few people in the market at any one point in time, in almost any suburb, that know it well enough that when that property does come up that’s 20, 30, 50, 100 grand below the average, they’re ready to snap it up and jump on it, or they might be a buyer’s agent. Myself, following that suburb, as soon as that opportunity comes up, we’re on it buying it for a client. So it’s important to be ready, pre-approved for finance, and really understanding what the opportunity looks like so that when it comes up, you can grab it with both hands and hit the ground running and give yourself the best opportunity to do the due diligence you need to do after you’ve got an offer accepted.
Obviously, there’s something that I like to call the inspection side of this whole process. So once you have identified, online, what you think is a great property, you’ve got to inspect. And we can literally inspect hundreds and hundred of properties over a period of a couple of months so it’s really important to inspect absolutely everything, either physically, or to get somebody else to inspect it for you. Because it’s often times when we think it takes all the boxes and it looks great, then we get there are there’s something, you know. For us we’ve got about 40 or 50 things that, if we see them we immediately walk away from the property because it takes away from the future capital growth potential. So you might get to the property and you might find you couldn’t see it on the map, but the property slopes down from the street into the house and that’s going to cause long term rising damp issues or potential flood issues for that particular type of property. Only by inspecting it can you see that and you’d avoid that.
And then the last thing I wanted to say is that so many people I talk to get caught up in this information overload, analysis paralysis type mindset. They’ve done all the research, have selected the perfect suburb, they know the suburb like the back of their hand, and then three months after they start looking online and talking to agents a perfect property comes up, but they don’t act fast enough on that property and they don’t jump at it with both hands and grab it and put a 21 day finance clause in there to protect themselves so that they can do their due diligence while the properties off the marketplace. Depends which state you’re buying in. In Australia, obviously everywhere has got different rules. But I find that they don’t jump in and then what I’ve found, there’s like a sliding scale with time and quality.
So generally, over time, what you will settle for gets worse and worse. I don’t want to say anything about relationships, but I suppose everybody is sane. The relationships where their friends are single till their a little bit older and maybe the quality sometimes of what you would’ve picked up when you were in your early twenties or thirties, compared to what’s left in the marketplace. If you’re a single lady a lot of the guys that you might find might be pretty damaged or they might have their hangups and their issues. Some of the more attractive, good guys are gone until, I suppose, they come back into the market after a divorce. I don’t know why I’m talking about this. It’s completely off topic. I’ve got a few friends that are still single and I’m just thinking about them. Sorry boys. But the reality is sometimes the first opportunity that comes up, if you know your stuff, is the right opportunity and you’ve really got to pounce at that opportunity otherwise someone like myself or one of my clients is going to pick it up. Or somebody that’s really educated as well, and has been waiting as long as you have been for that opportunity.
Just because it’s the first one, if you’ve really done your research and your homework and you know your stuff, doesn’t mean it’s the wrong one. So it’s worth considering, worth backing yourself and knowing if you’ve done the right due diligence and set yourself up from an education perspective property, then move forward with that opportunity.
I know that’s a long winded way of getting back to how to find an investment under market value in a great area, but obviously there’s quite a bit to it. And to really buy under market value, you have to know your stuff and the only way to know your stuff is to go through that systematic process of identifying a good area by selecting a great state, identifying a good suburb and market within the state, knowing the suburb like the back of your hand and better than anybody else on the market, setting up alerts, briefing in real estate agents, inspecting as many properties as possible, and then jumping on it as soon as it arises.
Thank you so much for the opportunity to do today’s video with you. Until next time. Stay hungry.