Average property investor | Allen Real Estate

January 3, 2013

?Never cross a river because it is on average 4 feet deep? ? Taleb

A quick note of caution that it?s not entirely clear what particular wisdom should be drawn from these ?averages?, they do however provide some insight into what is driving the investor market in Brisbane.

Allen Real Estate buys a lot of property for investors. Some common attributes and requests of investors that we regularly notice include:

> A majority of enquiry for investors is focused under $500k
> In Brisbane the sweet spot for residential investors is between $350k-$450k
> The average property purchased by our investor clients in 2012 was for $411,000
> The average gross yield was 5.5%
> The average distance from the CBD was 7.2km
> The three main criteria being balanced are usually:

1) Budget (often fixed and used as a primary criteria)
2) Housing type (house/townhouse/apartment)
3) Location preference (proximity to CBD)

Depending on what the investor is seeking to achieve and what criteria is most important the other criteria have to flex to suit the main criteria, for example if an investor wants to spend $300k and wants a stand alone house on a large block of land in good condition then they likely aren?t going to be looking for a house within 5km of the Brisbane CBD.

A few of the themes that tend to repeat over all of our residential purchases.

A high land component:
There is a saying that ?land appreciates and buildings depreciate? in real estate investing, and there?s certainly some wisdom to be followed in this saying. Each purchase at Allen Real Estate is benchmarked against other properties using it?s land component as a percentage of the total purchase price and making sure that the land content of each deal is sufficiently high. Even strata properties such as apartments and townhouses will have a land component, often significant as they can be built on highly valuable land near the CBD.

A healthy respect for yield:
Capital growth is usually the primary consideration for most of our investors. Regardless of the preference for capital growth the amount of yield (rent) a property generates is very important for a buy and hold investment, balancing the quality of the property with the potential for higher yield is always a key challenge.

Location to services and walk score:
Proximity to lifestyle and services is very important. The ability to be able to be close or to walk to these facilities is a very important plus, ideally you should be walking distance to them but not right next to in most cases.

Supply/demand issues and barriers to entry:
Some excellent locations for lifestyle might not make the best investment locations all of the time, consider the Gold Coast, demand for an area is not going to help if you end up swamped with supply. Balancing the potential for future supply against present day demand is an important consideration when choosing a suburb to invest in. The presence of significant barriers to entry for higher density development is also a rarely considered though very important factor with a property, if you are surrounded by significant houses that aren?t going to be knocked down for units to be built then that is likely to improve the appeal of an area.

Desirability:
A property ideally needs to be appealing both to future tenants and to buyers, what makes a property desirable from a lifestyle point of view and home buyer point of view is usually a prime consideration in making a property equally desirable as an investment. Some of the features that make a property desirable include a location in a quiet street, good cafes and restaurants nearby, well thought out and private floor plans, elevated and breezy living areas, good aspect with living areas and large bedrooms.

Source: http://www.allenrealestate.com.au/?p=1643

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