I was watching TV the other night and apart from shows like The Voice, Bikie Wars and Housewives of New Jersey, I do like watching Foxtel's business channel, 602.
…fortunately for me, it comes on after all the good stuff I just mentioned.
On the show was a guy called John Edwards from Residex.
A smart guy and I like his stuff.
He was asked what he saw going forward in the property market.
Now, you've got to understand, this guy is a research dude who lives and dies by the numbers. He highlighted Perth and Brisbane as the markets that are likely to grow at around 5-7% per annum for the next 3 years.
The market that he liked the least was Melbourne.
He didn't see any growth in that market and his thoughts were that Melbourne has an oversupply of property.
Here's the problem with all this…
The comments are general in nature and really only mean something if you're an uneducated investor.
John reckons Melbourne is stuffed, right?
So, he's talking about THE property market. But within that market there are hundreds of property markets.
I mean, every single suburb has a different vibe and different beat.
Here are a few examples:
One I bought and one I missed out on, but they both illustrate what I'm talking about.
Firstly, the one I missed out on, which is the most recent. The property was a double-front property (smaller than normal) in Brunswick (good area).
The opportunity was to purchase prior to auction and listing… This is key.
The asking price was $650,000. I thought it was cheap, but because I'm involved in some really big deals with huge upside, I questioned whether I really wanted another run-of-the-mill property that I could slot into my buy and hold portfolio.
Consider also the land tax scenario… Not a problem when you've got a couple of properties, but a real pain in the butt when you've got a dozen or more …I let it go.
So what happened?
Three months later it went to auction.
…yep, situations like this make me hate myself all weekend.
So John Edwards says Melbourne's real estate market is going to be dead and flat… Maybe at best 2% growth, if you're lucky.
So how do you explain the opportunity that I just missed out on? Which is in effect, a 25% capital growth gain.
This is why you can't listen to the experts who put out “general information.”
You've got to look for value and more importantly, you've got to educated on how to see value when it's there right in front of you.
Hey, I stuffed up here. I saw value, I was keen to take it on, but it's not as if I'm missing out, I've got a lot of other deals happening.
…But damn, 25% gain!
I mean, who cares if the Melbourne market doesn't go anywhere in the next 3 years. You've effectively created a 6.5% annual growth over that period on the day your purchase.
So, are you starting to see the real picture here?
Within any market, you can do really well if you become very specific in what you're looking for and you don't get psyched out of stuff by the general media, who is giving you useless general information.
Now, the deal that I bought.
A block of 4×1 Bed (bed sitters… really small). So small in fact, you can't even change your mind. hehehe.
The suburb? St Kilda.
500 metres from Fitzroy St. (Cool, trendy, expensive real estate).
Again, I bought them off-market for $670,000.
Revalued a year later for $850,000.
…a 27% gain in around 18 months.
Spent $15,000 cleaning them up. Rent went from $120 per room per week (really bad) to $250 per room per week.
…so the yield's not bad either.
Ok, I hope that again drives home a really key lesson here. That you can't be general in your information and you certainly don't want to be a generalist in your investing.
So, if you're reading this and you're in Melbourne, and you watched the same show that I did that featured John Edwards from Residex, Melbourne is just like any other market to invest in.
It's all about finding value.
By the way, John Edwards is still a very smart guy and worth listening to every time he talks.
Now that's why I love real estate. Unlike a lot of other investments, you can buy below the market at wholesale and make instant capital growth. Don't underestimate the power of real estate.
…and don't be a fool and buy just anything.
The way I found these deals is also important. You'll notice that I didn't buy them at auction. Sure, I've bought at auction previously, but it was a long time ago.
Today, I buy off-market and in the last 5 years I've made sure to develop relationships with agents and buyer advocates who see me as a person who can make a quick decision and settle fast.
…I don't get the first call from them, they typically call their developer friends and offer them deals first. But I do get the second and third call. Good enough for me to make some instant gains along the way.
You need to be building relationships now for future profits.
Don't worry if you can't buy stuff at the moment, I started when I had nothing. But if you're nice to these guys and call consistently, they'll talk to you because they're always looking for buyers and sellers.
The fact is, very few people actually do this.
So the moral of the story is… There's no such thing as THE property market.
It's time to drill down, get specific and make a killing while everyone is talking about flat markets, gloom and doom, etc, etc, etc.
I hope this helps.
Signed with Success,