Top Ten Tips For Property Investing in Brisbane. Alistair Kelsall a Brisbane Buyers Agent with 20 years of experience working in the Brisbane property market shares his knowledge when it comes to investing in real estate that ensures the properties he purchases carry a low investment risk yet produce high returns.
The purpose of employing these tips when seeking the perfect Brisbane investment property is to reduce any risk associated with investing whilst maximising the returns.
1. Location
Always purchase as close to the Brisbane CBD as your budget allows. When a new property price cycle wave comes through the marketplace, it starts from the CBD and works its way out so properties closer to the CBD will grow in value faster than properties further out. Properties closer to the CBD will always be in higher demand than properties further out, this creates pressure on the local housing market and prices rise.
2. Land Size
Always target a property with the largest sized block of land that your budget will allow. The true value of a property is in the land, not the house, in Financial Planning terms we describe the land as the asset and the home as an income generator.
3. Construction Type
Purchase a Brick and Tile Home rather than a weatherboard home or what is commonly termed a Queenslander. Whilst the Queenslander is a traditional styled home here in Brisbane and they look magnificent, they also require high amounts of maintenance. A brick and tile property is generally low maintenance and not subject to annual coats of paint and wood treatment. These additional costs affect your overall investment return.
4. Risk & Return
To maximise the return of an investment property and minimise vacancy periods as much as possible, try to keep as close as you can to the standard property format of 4 bedrooms, 2 bathrooms, double lock up garage, ceiling fans in all rooms and at least one air conditioner in the main living area with and additional air con in the master bedroom.
By using this formula when investing in real estate you end up with a property that generates a higher rental return based on the number of bedrooms and it will appeal to a wide range of potential tenants looking for a rental property and when the time comes, the same features will attract a higher percentage of buyers, therefore increasing the value of the property due to higher market demand whilst minimising the risks associated with any type of investment.
5. The Media
Don’t listen to the media for guidance or recommendations as to where to invest, everybody else is listening too and when you turn up to inspect a property there will be another 4 people there trying to purchase the same home in the same area. The places pressure on the local housing market and property prices increases and you end up paying too much for the home and it will be closer to the top of the price cycle which then results in a long period of slow capital growth.
6. Diversification
Never purchase an investment property in the same suburb where you live or have an existing investment property. Some people think it is a good idea to purchase a property close to home so they can keep an eye on it. This is the same as having all your eggs in one basket if a downward trend occurs in a particular suburb or area, it will have a negative impact on all your investments.
To minimise the risk we diversify, that is we spread our investments out to reduce the impact of any downward price cycles in a particular suburb.
7. No Units or Townhouses
The true appreciating asset of an investment property is the land. It is the land value that increases over time, not the structure. You may have to source a property a bit further out from the CBD and maybe target a smaller block of land but it will still outperform a unit or townhouse. That’s the first major rule but there are many other factors to consider when investing in a townhouse or unit.
Property values are dictated to a high degree by market demand. The more people trying to purchase property in one particular area will create an increase in market pressure which therefore leads to an increase in property values. Right now in Brisbane, there are literally thousands of townhouses and units being built by developers. This leads to an oversupply of available properties which therefore decreases the pressure on the local housing market which then leads to falling property prices.
If you have to buy a unit or townhouse then look for something different as it will stand out from the rest of the properties that all look alike and will have a higher level of demand for potential tenants and buyers in the future.
8. Crystal Ball
This is something I am very good at. If you can see an event occurring now or in the future and you are sure it is going to occur then you can accurately predict the effect that event will have on the property market. You need to be able to see this event occurring with your own eyes not what a report states as there are many people out there who will create the most fantastic reports based on a certain piece of infrastructure being built in the future but 5 years later, they still have not even commenced construction. And all these poor investors have purchased property based upon reports generated by marketing teams specifically designed to promote an area and sell property.
This is so wrong and you always need to ask yourself when purchasing a property, is the person selling me this property for my benefit or theirs?
As an example of this and how I work, a very well priced block of land was available in Victoria Point, a suburb about 30 kilometres southeast of the Brisbane CBD. The land was located about 200 meters from Moreton Bay and within a peninsular. There are 16 large new estates located just inland from the location and there were still large tracks of land available for development and most had sold out. I could see evidence many people choosing to live closer to the water as a lifestyle choice rather than being based closer to the Brisbane CBD. There were many real indications you could see with your own eyes of increased market pressure in the future. These events would lead to increased property prices in the next 5 to 10 years. We secured the block of land because it was very well priced, located 200 meters to the water and it was located on a peninsular which creates a natural limitation on the amount of available land which therefore will naturally lead to increased property values.
The real secret to investing in real estate is not to invest in what is hot right now, that just results in you buying at the top of the property price cycle and waiting a long time for capital growth, but if you can see what is going to be hot in the future, then you purchase at the lower end of the property price cycle and receive a far higher amount of capital growth in a short period of time.
9. See Past The Issues
I secure a lot of properties well under the asking price because the home has issues and it is putting off all the other buyers. If I inspect a property and it is dirty and maybe stinks of wet dog, I’m over the moon because I can sniff a bargain coming up for my client. The amount of buyers that are put off by a poorly presented dirty home amazes me and I have 2 real-life examples to prove what I am saying.
The most recent case was a very good property located in Durack, 13 kilometres from the Brisbane CBD. It ticked all the boxes, distance to CBD, 479 m2 of land, 4 bedrooms 2 bathrooms double lock up garage and it just stank. The young male tenant living there had 2 dogs and was not the cleanest person you would come across, there was even what appeared to be a kitty little bucket in the bath tub but there was no cat around. I got on the phone with the buyer to express his great luck in me finding this property, it was off-market and would never be in a state suitable for an open home. I gently coached the agent to ensure he realised how poor this property was and the stink alone would stop people from coming into the property. We purchased the property $20,000 under the asking price, spent $7000 cleaning and painting. Had a few long talks to the tenant who subsequently broke his lease and that property would now be worth at least $520,000, $40,000 more than what we paid for it.
I had the same scenario around December 2020, another house full of cats dropping and stinking with owners going through a breakup, under financial pressure. They were asking $500K for the property and I secured it for $485,000. We spent $2000 cleaning it up which we charged the owners for under the building and pest inspection clause and that property would b valued at conservatively $560,000 to $580,00 in today’s market.
So the rule here is to see past the dirt and odours because they can easily be cleaned and you can stand to make a great deal on money in the short term.
10. Just Don’t
The location you choose for your new investment property is critical. By following the previous rules you will minimise your level of risk whilst maximising the return potential of a property. But some people tend to be driven by the low price of a property and do not look deeper into why the area has a long history of low house prices. I have some very specific rules when it comes to locations, I do not purchase south of Richlands a suburb on the south side of Brisbane and I do not purchase north of the Pine River. Both suburbs are approximately 20 kilometres from the Brisbane CBD.
It’s all about having a deep understanding 0f the Brisbane suburbs and their demographics. For as long as I can remember, people have always been saying what a good area Ipswitch is to invest in and in 20 years it still hasn’t gone anywhere. This comes back to the Crystal Ball rule, it has always been plainly obvious to me that there is a great deal of vacant land around Ipswich and it is being developed right now and will be going well into the future, this decreases market demand which then keeps the property prices low. So a suburb might be cheap and sound like a good investment but you won’t be so happy that it has a high vacancy rate and a low rate of price increases.
