Three strategies for buying property bargains that perform

MEDIA STATEMENT | January 30, 2013

If you don’t have big bucks to spend, careful selection is one of the key criteria for securing a home or investment property that still has the potential to deliver financially, according to a Perth property buyer’s agency.

 Property Wizards Buyer’s Agency’s Liz Sterzel said there were three solid strategies for hunting for property bargains on lower budgets.

 “Above all else what makes a home or investment property valuable is its potential for good capital growth or good rentals yields,” she said.

 “In essence, there are three ways to find those properties – look for areas that are undergoing changes that will make them more attractive to live in, buy where you can add value, or buying for yield, not growth.”

 

Areas Undergoing Changes

 Ms Sterzel said suburbs that were evolving in ways that would appeal to better tenants and more affluent home owners could often be home to property winners.

 “Look for infrastructure changes such as a new freeway or train station which may make it easier for many people to get to work, significant developments that lead to an upgrade in the area making it more attractive for people to live there and suburbs where many properties are being renovated or refurbished,” she said.

 “A word or warning though – be sure that these changes and government-announced plans are definitely going to happen so that you don’t end up with a dud property on your hands; check with local authorities and agents.

 “The trick with this strategy is that you need to get in to the market before the area’s a proven winner or you will already be paying a higher price – on the other hand, getting in too early may mean the suburb doesn’t take off like predictions suggested.

 “It’s also an approach that takes time so it’s not for those wanting to make a quick buck.”

 

Adding Value

 A second strategy for property bargain hunting was to buy where you could add value.

 “Sometimes you can get in to a low priced home and boost its value through a clean-up, renovation or subdivision that can help you on to the next step of the property ladder,” she explained.

 “Seeking out properties with potential to increase in value through being rezoned is also a good option.

 “But, these add-value homes are not all ideal for holding over the long-term; most are primarily going to go up a notch quickly, once you’ve added the value, but will be unlikely to increase over time, unless there are more solid reasons for them to do so.

“This option does carry a risk because there’s no guarantee the rezoning will take place, so it’s important not to pay a premium price and to check it out thoroughly or enlist professional help.”

 

Buy for Yield

 Lower priced areas could serve as good hunting grounds for properties delivering higher rental returns without the capital growth prospects according to Ms Sterzel.

 “If this is your approach, look for older homes in good condition where your rental return is five percent or more and focus in on areas with a median price in the $350,000 or less range,” she said.

 “To do this, research median prices on the Real Estate Institute of WA website – this will show you suburbs with lower priced homes to help you target the right suburbs for your strategy.”

 She said the concept of buying in suburbs that lay next to areas that had grown in the past year or two on the expectation that the neighbouring suburb would mimic the rise was worth considering.

 “It can work but it’s risky and the growth is short term, so ensure it is a good buy without this factor also,” she warned.

 

Property Types

 Ms Sterzel said the strategies would work with most types of properties.

 “Whether you are buying a house, apartment or villa, the key is to make sure the bones of the property are good because if you end up spending too much on repairs and maintenance, you’ll be out of pocket,” she said.

 “Do prioritise a building and termite inspection and have the inspector report on all required maintenance to the property.

 “If you’re adding value, set a budget that fits the area and the specific property as you don’t want to overspend on a luxury renovation that delivers you only an extra $10 a week in rent.”

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