Renovation Resource - Aug 2010 Newsletter special add

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Residex Renovation Resource

In August 2010 we ran the 2 day ‘Step By Step Property Success’   workshop. In these workshops we share our 20 years of investing experience and the tips tricks, websites, resources to make your purchase decision successful.

We look at RP Data 10 year growth statistics as charted on a 2m high map of the capital city and pick up patterns opportunities and themes. The area West of Brisbane near Ipswich had had 16% pa growth over the lst 10 years and the subrub of Riverview had a median below $260k and a rental yield over 5%. So we took another look.

When doing research on Riverview near Ipswich at the workshop, we looked at demographic drivers for the area – namely the large population of infant school attendees – so we were looking for houses near schools. We checked the ABS stats for where the owner-occupiers live vs the renters (amazing what free info is out there if you know where to look) and we selected a few streets. Then we went onto www.realestate.com.au to look at the median value and determine the house type (eg 3br with carport) so we knew what the median looked like.

Next we went to my ‘all time favourite’ website www.suburbview.com and checked out where the 3br houses with carport, $50,000 below and above the median were located in respect to the schools in the area. Now that we could see what was for sale, we looked at photos and floorplans to assess renovation cost and potential and future value.

TIP: This is where most people stop, but there’s so much more you could consider if you wanted to improve your prospects for a better investment.

Using the criteria we had determined in day 1 of the workshop and the resources mentioned above, we found three possible investment options and by the morning of day 2 we had shown everyone how to take that criteria and end up with 3 excellent options to assess. At this point, most people would go and have a look at the properties in question (in fact one participant did send her husband and 3 kids out to do just that).

But what if there was a special tool that meant you didn’t have to drive around and do this?  What if I could tell you instantly which of these three houses actually provided the best opportunity for you to add value quickly through a renovation and was therefore your best investment opportunity?

Well, with the new Residex Comparative Market Analysis (CMA) reports I can do just that. This is the new tool I am so excited about. OK, it’s not free (in fact its the only one I actually pay for compared to all the other tools given away at the SBSPS workshop) but it has the potential to save you thousands of dollars (spent on the wrong investment) and hours of wasted time (spent looking at properties that end up being unsuitable).

How does it work?

The new ‘Street Rating’ feature shows what every house in the street is worth now based on past sale prices and the growth since the last sale. So it’s easy to see where your property fits in.

So, back to our example above; we know the median of the area we’re interested in is $255,000 and we’ve found three properties that fit the bill. Buying at the median price reduces your risk of not being able to on-sell the property to the largest market. It also means you’ll have a rental property that the majority of tenants will want.

TIP: If you are looking at adding equity quickly (so that you can use growth and use that new equity as a deposit for the next purchase) then buying below the median and renovating to just above the median without much cost is a seriously smart strategy.

 

Looking at the chart above using the ‘Street Rating’ feature in the new Residex CMA reports, we’d be aiming to buy at a 1-2 and renovate to a 5-6.  If we consider the three Riverview properties we found during the Brisbane SBSPS workshop we can see that Hayden Street at $225,000 would give us the opportunity to buy at below the median.

 

When we then factor in the photographs of this property from http://www.realestate.com.au we can see that after a low cost reno eg $5,000 - 10,000 (or less if doing the work yourself) a new value above $260,000 is realistic, loking at photos of other comparables. This could generate a higher rent and reduce your out-of-pocket expenses. This is obviously a 'low cost buy, reno and equity add' but its worthwhile using the same tool for higher priced properties with much higher equity increases. Here we have a tool that will tell you in any given street what your buy price and renovation end value should be as per what the market can bear. This can obviously save many hours of research and wasted time. Yes, I have suggested to John Edwards that he adds some of this data to his Suburb profiles as well.

Obviously, I am not recommending you run out and buy a property in Riverview. That suburb was selected during SBSPS purely as an exercise to demonstrate how to build up a profile with the tools available. However it does show you how research can help you make money with every purchase.

NOTE : You can purchase a Residex CMA report for any property you are interested in for $65. As a special bonus, if you’re an Investors Choice Mortgages client you get a number of these free of charge. Just another tool for the toolbox. 

If you want to know what else to look for to improve your property purchase decision-making then you'll just have to come along to the next workshop where you’ll get a complete walk through. I will share where to get all the information you need to do a full assessment of any area so you can define your criteria and find the specific property to add to your portfolio. See you there http://stepbysteppropertysuccess.com.au/ note there is regular discounts and offerings and clients get a special rate all year round.