3 things to do before buying an investment property

Are you looking to purchase an investment property soon? Amid what is traditionally the busiest time of the year for property markets, make sure you’re buyer ready before buying an investment property.

With the spring season well and truly underway, property markets around Australia are entering a state of heightened activity in what is usually the busiest period of the year.

For those willing and able to buy an investment property right now, this can mean more stock on market, and subsequently a wider choice of properties. However, it can also mean increased competition as more buyers come to market as well.

With increased competition, investors need to be adequately prepared so they’re best placed when the time comes to make an offer.

So what should investors do to ensure they’re buyer ready? Here are 3 tasks to complete before heading out to the market.

• Review your household budget. While you should update your household budget as your circumstances change, you should review your budget before acquiring an investment property so you have an up-to-date understanding of your cash-flow position. You may have additional expenses or income that you have failed to factor in, which could have a significant impact on your borrowing capacity or general finances.

• Book an appointment with your broker. Meet with your mortgage broker to ensure your finance structures remain relevant and to secure pre-approval for an investment loan. The pre-approval will be more attractive to sellers and may be the difference between your offer and another buyer’s offer that is pending finance.

• Know what to look for. Many beginner investors aren’t aware of the different types of property investment options and what’s best for their individual circumstances. For example, typically established houses have high capital growth prospects but low rental returns, whereas the opposite is typically true of some apartments. Villas and townhouses also have their own pros and cons, as do commercial property investments and development properties. Therefore, investors need to understand what type of investment best suits their circumstances and needs, as this will save significant time when searching the market and attending open inspections.However, even in the face of heightened competition, buyers should still complete adequate inspections, including pest, electrical and structural, for example, to ensure the property doesn’t present any surprise defects after settlement.
• For direct property investments, whether it be a house, townhouse or other, it’s important to act swiftly when you find a property that meets your criteria. This includes liaising with the sales agent to obtain the necessary information about the seller’s circumstances and placing reasonable, but strong, offers to best position yourself to secure the property.

Finding a development site

After countless hours of market research and attending dozens of home opens in the hopes of finding a development site, you’ve finally found a site that looks set to deliver a huge financial windfall. But will it live up to your expectations?

When purchasing a property with plans for future development, it’s important to hold a comprehensive understanding of the local council planning scheme to ensure the property meets the necessary criteria.

Typically, land appreciates in value while buildings depreciate, meaning a property with a higher land value proportion has better prospects for capital growth.

Therefore, development sites generally appreciate quicker than those without development potential due to the increased value in the land derived by this ability to develop. (Development sites typically cost more to hold though as existing dwellings are typically older and don’t command as much rent and require more maintenance expenses).

However, if planning polices and scheme clauses limit the site’s development potential, then the capital growth prospects can be restrained.

For example, it’s not uncommon for investors to purchase a split-zoned property (such as R40/60) only to find out later that the site doesn’t meet the dual-density criteria needed to gain the higher coding.

This can severely affect an investor’s strategy, and financial standing, as they may only be able to develop a fraction of the number of apartments they had planned.

If you think you’ve found the perfect development site, it’s important to gain a comprehensive understanding of the relevant local council planning policy before placing an offer.

Failing to do so may leave you with a property that doesn’t live up to your development expectations and could cause significant financial loss.

3 tips to develop a successful medical centre

With the rising prominence of healthcare, many investors and industry professionals are seeking to develop new local medical centres. But what needs to be considered to help find the right location for such specialist projects?

Whether it be for industrial, retail, medical or another purpose, the end-use of a commercial development should play a major role in deciding the location of the project.

So what needs to be considered if you want to develop a local medical centre? Here are 3 factors that need to be evaluated before taking the plunge.

1. Area/centre make-up Some highly developed areas seem like a logical choice to build a medical centre but the local mix of owners, tenants or business may not be right. For example, there may be too many investors instead of business owner-occupiers in the area, which can lead to higher vacancies as tenants come and go. This can lead to lower foot traffic and clientele and can detract from the area’s overall public appeal.
2. Nearby competitors While it can be beneficial for complementary medical providers to be in a local area, building a medical centre near direct competitors can make it hard to attract tenants or a potential buyer. This is because tenants or owner-occupier buyers will be reluctant to lease or buy a property next to a competitor.
3. Tenant/buyer referral business Is a prospective tenant or buyer going to be relying on referral sources for their business, like a specialist can rely on a general practitioner for clients? If so, make sure there is a referrer nearby or incorporate space in the development to attract one to your centre.By keeping these at the fore when searching for potential development sites, you’ll be in a stronger position to deliver a more unique project that leverages existing businesses and avoids competitors, which will be much more appealing to tenants/buyers and will ultimately optimise your returns.Thornlie would benefit greatly under Perth’s long-term planning blueprint with new rail projects identified for the area which would link to major employment and activity hubs.The suburb has a median house price of $450,000. Low-density single residential houses are the predominant dwelling type making up 94% of stock, followed by semi-detached and townhouses at 3% and flats and apartments at 3%.Features of the suburb include Spencer Village Shopping Centre, Thornlie Square Shopping Centre, South Metropolitan Tafe Thornlie Campus, Walter Padbury Park and Tom Bateman Sporting Complex Reserve.There are many schools in the area including 5 primary and 2 high schools. Of these 1 primary and high school are private.Thornlie is bounded by Canning River in the North, Warton Road in the East, Garden Street in the South and Roe Highway in the west. Its main arterial roads include Roe Highway, Spencer Road, Albany Highway and Nicholson Road, and the suburb also features the Thornlie train station in the north as well as bus routes on main arterial roads.The plan showed an extension of the existing Thornlie line to extend through to Cockburn Station and the Mandurah Line.These new rail infrastructure projects, if committed to, would significantly increase accessibility to and from Thornlie, improving cross mobility and provide direct access to the airport and Murdoch Activity Centre (both large employment centres).
4. As Thornlie gentrifies, there is likely to be increased redevelopment, particularly around Thornlie train station and Spencer Village Shopping Centre, where there are higher zonings already in place.
5. Longer term beyond 3.5 million residents, the Forrestfield Airport-link would be extended to Thornlie Station as well.
6. The state government’s long-term transport blueprint, Transport at 3.5 Million, has identified new rail infrastructure that will greatly benefit Thornlie.
7. It has a population of about 22,965 residents with a median age of 36 years, of which about 18.6% identify as technicians and trades workers (which is higher than the state average of 16.7%), while 16.9% identify as clerical and administrative workers and 14% as professionals.
8. Westfield Carousel is also nearby being just 4 kilometres away.
9. About 77% of houses are either owned outright or being purchased while 20% are being rented.
10. Located within the City of Gosnells about 18 kilometres south east of the Perth CBD, Thornlie is a large residential suburb established mainly between the 1950s and 1980s with some commercial areas and state housing scattered throughout.
11. Suburb snapshot: Thornlie
12. When considering developing a commercial medical centre, it’s important to understand the needs of the target tenant/buyer, their nearby competitors, the local supply and demand factors of similar stock and the owner-occupier/investor mix.

Deals and Don’ts – November 2016

In this section we take a look at just some of the different properties on the market and explain why they’re either deals (that represent a good investment) or don’ts (that should be carefully avoided by investors).

Deals

Edgewater

Purchase price: $570,000 Purchase date: September 2016 Block size: 710sqm Specification: 4 bedroom, 2 bathroom, 2 car bay house built in 1983, zoned R20/40.

Deal: This property represents a deal because of its close proximity to Edgewater train station, being just 800 metres away, in conjunction with its development potential. The property is also on a corner block and the large house is in a very rentable condition and features a pool.

Joondalup

Purchase price: $515,000 Purchase date: August 2016 Block size: 810sqm Specification: 4 bedroom, 2 bathroom house built in 1990, zoned R20/60.

Deal: The property features a well-built 1990 brick and tile house, and although it remains in original condition it is well presented with good rental capabilities. The 165sqm house sits on a large block, which has significant development potential and is located just 375 metres from Currambine train station.

Kallaroo

Purchase price: $510,000 Purchase date: August 2016 Block size: 683sqm Specification: 4 bedroom, 1 bathroom house built in 1972, zoned R20/40.

Deal: This property was purchased for a great price in a highly sought-after area that is close to the coast and Whitfords Shopping Centre.  It also offers significant development potential and the house is in good condition to rent, meaning little money would need to be outlaid by the owner for leasing. It also features a pool.

Don’ts

Bibra Lake

For sale price: $499,000 Specification: 3 bed, 1 bathroom house built in 1985, zoned R20 (draft R30).

Don’t: Although this property is located on a 700sqm corner lot and is a draft R30 zoning that could provide significant development potential, the major fault with this property is that it sits directly opposite land that has been earmarked for the Roe Highway extension, which forms part of the Perth Freight Link. This new piece of road infrastructure is likely to lead to increased traffic in the area, additional noise pollution and be an eyesore for nearby residents. This will likely be unappealing for future tenants or buyers, requiring discounting when leasing and restricting capital growth.

Commercial property investment fund launched

Momentum Wealth’s partner company, Mair Property Funds, has launched its latest investment fund, the MPF Retail Fund.

The aim of the fund is to provide investors with strong and secure investment returns from a quality selection of commercial retail centres with solid income returns and high potential for capital growth.

The first asset that MPF has secured (under contract) for the fund is a quality shopping centre in one of the fastest growing areas of South East Queensland.

The property is in a prominent location on a major arterial route in an area with a strong demographic profile and is less than 1 kilometre from the Petri University precinct.

Key tenants in the property include McDonalds, IGA and a medical centre and the fund offers projected distributions of 7.5% per annum paid quarterly.

The fund is open to retail investors with a minimum investment of $50,000.

The launch of the MPF Retail Fund comes on the back of the success of MPF’s MPS Diversified Property Trust.

Earlier this year, MPF purchased its third asset for the MPS Diversified Property Trust. The capital raising for the third asset was strongly supported by investors and closed oversubscribed.

If you’d like to find out more about the MPF Retail fund please call David Ellwood on 9321 5566 or email davide@mair.com.au