Friday, June 12, 2009

Get to know your Area BEFORE you Invest if you want to Make Money in Real Estate

Yesterday I spoke to a Broker in my area to check out financing for the 29 lot subdivision, and a smaller deal. I'm glad I did.

He gave me the lowdown on the property, why it hadn't sold (the past developer asked for $80K above market value), and also some useful information on the area.

Apparently, the suburb has two sides. After living in the area for just over a year I've only ever driven through the new housing estate and seen upmarket homes. However, apparently on the other side of the suburb there are some issues with violence. So what, properties still sell in these areas right?

Yes they do. But he also told me that the land across the road from the property I've been looking at took THREE YEARS to sell. Three years, apparently because of the bad name of the suburb. Well, three years of financing would take any profit away. You might be able to make money in this deal, but you might not. It's got too much gamble in it.

There's always the argument that if you price a property right it will sell anyway. But you've got to find enough people who want to live in that suburb who would be willing to buy there, no matter what the price is. I could market the lots as first home buyer cheapies but then I'd be competing with even cheaper suburbs with the same violence issue. Bottom line: product is upmarket but location is bottom market. What does this mean? Longer selling times and lower prices.

With one or two lots, you could sell to people out of the area, but with such a large number you'd rely on local buyers too.

It just goes to show how important public opinion is in buying an investment property. It can give you a great bargain and can also stop you from making money. Even though this area is miles from the rough area, because they share the same suburb name the stigma exists. So get to know your area, or if you don't, ask someone who does.

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