resi investing 101

Hi everyone,

I’ve noticed that there are a few people on here who are interested in learning about property on here and I thought I would start a thread discussing the property basics and what I have learned, hopefully this will encourage others to post their knowledge.

For starters, I am no expert, this is not advice, seek professional advice before undertaking any investment. This is all in my honest opinion and my opinion may change.

Secondly, I welcome anyone’s experiences or knowledge from past dealings; positive or negative. However, if you have a chip on your shoulder and feel as though you have nothing to contribute that may help other members, please express your opinion to a parrot or brickwall, not here.

To make it easy, lets make this all one big hypothetical….
Now that’s out of the way, I guess the first thing I would like to tackle would be, what due diligence did you undertake before deciding on an investment property?

1.If I were looking at a property (resi), the first thing I would do is know that area better than the area I grew up in; know what different land sizes, 1, 2, 3, 4, 5 bedroom houses/units have been sold for over the past 5 years. I would then look at where Australia was as an economy at that point and what milestones occurred. Pretty much, I would want to be able to walk into any property in that area and have a knowledge greater than any real estate agent trying to flog the property. By law valuers are, as a guideline, allowed to be within 10% of the market value of a property – that’s what I would be shooting for. Make it like a game and go to openings, guess the price and see how far off you were.

2.I would make sure that I could get finance on the property once I have decided an affordable figure. Now, my idea of an affordable figure, if I own a property and am paying a mortgage, leverage the equity to fund an investment property and I worked out that the lessee will cover my mortgage repayments, I need to be comfortable enough to pay that mortgage if I am unable to attract a lessee to the property, or I want to undertake renovations. This in mind, I would also want to make sure I could cover repayments in a worst case scenario if economic conditions went south. I would have a good and worst case scenario, with me being able to feed myself even if it is the worst case scenario. For me, continuing to leverage properties and increase debt beyond means is not acceptable.

3.I have a trade background, but learning the basics of any trade in order to perform basic maintenance could literally save thousands and it would give me an excuse to visit the property. Not only this, but you feel like a man holding power tools, it was meant to be.

4.IMO, I would know my property and the environmental risks associated with it. Brisbane floods, I hope no one invested there… lesson learned? I know I wouldn’t buy an investment property in a floodplain. Know your property, if I bought a property backing onto national park, I would make sure the gutters a cleared of leaf debris regularly, simple little things.

5.IMO, Good tenants are key, I don’t know much about this, but I would be reviewing references and just judge their character. If I don’t like them in the first few minutes, no deal.

6.Picking the right area, I guess this is the hardest part. For me, I would pick an area close to a CBD (central business district), I would move out of it a few kms until I find where prices hit my targets. Worst house in the best street.

I’m tired and that’s a good start I think…

And please again, I am no expert, this is not advice, seek professional advice before undertaking any investment. This is all in my honest opinion and my opinion may change.