Property cliches are not smart buying advice

In the second and final part of a series examining property clichés, I explain why buying the worst house on the best street can be a bad idea, as can trying to be too creative

1. Buy the worst house on the best street:

Buying the worst house on the best street can seem like a cost-effective way of attaining that sought-after location, however, it is not without risk. 

In this instance the goal is commonly to transform the property from the worst to one of the best properties on the street. However, any saving on the initial purchase is often quickly absorbed by renovations to improve the property. 

Conversely, deciding to leave the property in its original purchase conditions can have negative implications for the property, which will be reflected in future capital growth. 

It may actually be more cost-effective to buy a better property and forgo the expense, stress and risk of renovating. 

2. Think outside the box:

When it comes to investing in property there is no need to reinvent the wheel. Properties that offer the best returns aren’t necessarily architecturally unique or modern. In fact, they are more commonly well-located inner-city period and pre-1970s properties. 

Property selection isn’t a guessing game. Stick with tried and tested selection methodologies that rely on empirical sales evidence, not speculated or high-risk returns. 

3. A renovator’s dream:

As a number of new renovation property programs hit Australian television screens the would-be handyman in us all considers the prospect of buying and renovating to make a quick buck. But novice renovators often underestimate the commitment required to transform a property, which can cost them significantly. 

When deciding to renovate it is important to consider where the property is located, the type of property (i.e. house or apartment), whether it will be a rented investment property or owner-occupied and who the potential buyers or tenants of the property are. Put simply, sellers should renovate to their target market. 

It is also important to be wary of overcapitalising in a property, as the amount spent on renovations may not offer an equivalent return in the increased value of the property. A good rule of thumb is to not spend more than 40% of the property’s value on renovations. 

4. Up and coming:

When it comes to property don’t speculate. Purchasing on the basis of proposed future infrastructure such as roads, schools, shopping complexes and communities is risky. Hundreds, if not more, development proposals are put on hold or denied every year and when approved can take many years to build. There’s also no guarantee that the added amenity will add positive weight to local property prices. 

When buying property there is no better way to measure an asset’s future growth than to look at its performance history. 

Buyers must understand that property selection is not just about the suburb or about timing and transitional trends. Rather, it’s a process unique to the individual circumstances of the buyer or seller and the property.

Greville Pabst is CEO of the WBP Property Group.