07 Dec Tips for investing in median priced areas – Chris Gray
In today’s show property investor and TV host Chris Gray has some tips on safe property investing.
Kevin: Median-priced urban investment properties make the safest investment. That’s according to Chris Gray, one of our experts, who joins me.
Good day, Chris.
Chris: Hi, there. How are you doing?
Kevin: Good, mate. Chris what are your tips for investing in these areas; these median priced areas?
Chris: I think the main thing is to use the research companies like Residex, RP Data, or SQM Research – all of those guys. Those guys are people who study the markets for decades and decades, so they have a really good idea.
You can then suddenly use those guys to find out what are the blue chip areas, what are the median prices in those areas, and then check your affordability to see what you can actually afford.
I know Residex for one – and I never get a dollar for this – they do a top 100 report for rents or capital growth, which costs about $250. I reckon it’s a nobrainer to buy one of those reports and just double-check what you’re thinking of investing to see where it comes up in their top 100.
Kevin: Well, based on your experience, where do you find the properties that actually perform better than others?
Chris: I think the main thing to realize here is I’m looking 10 to 30 years, so I’m not looking for the latest, greatest thing that might flip for a year or so. I typically stay away from the CBDs because there’s no limit of supply. You can keep building these massive tall towers, and they keep getting taller and taller. There’s a limited demand because not many people want to live in the heart of the city.
Typically, it’s my general rule of thumb to be roughly 5 to 15 Ks from the capital city anywhere in the world, because that’s where most young people with money want to live. It’s close to the beaches, the cafés, the parks, the schools, all of that kind of stuff. Generally you get [1:36 inaudible], so if there’s no supply and there’s plenty of demand, basic economics says that’s going to lead to price rises no matter what’s happening in the economy.
Kevin: Tenants being happy are pretty important to you. We spoke to you a few weeks ago about a recessionproofing your investment. One of the points you made is to make sure that your tenants are happy. If you do, then you can apply those rent increases, as well, Chris.
Chris: Exactly. My target market for my properties is to get 20 to 35yearold suits, because they, basically, work in the city, they probably earn sixfigure salaries, they probably have wealthy parents, they have massive disposable incomes, and they worry about where they want to live.
They don’t want to commute. They don’t want to spend hours doing stuff. They want to be next to the parks, the clubs, the restaurants, and the leisure, so I think they’ll pay whatever price it takes.
What I even knew when I invested 20odd years ago when I was 22, was I thought if you have a good job you’re going to pay your rent because you don’t want your boss finding out that you haven’t paid your rent and you’re deep in debt. That attitude seems to have worked for the last 20 years.
Kevin: You’ve developed quite a good portfolio over the years. I know even from this chat that you look to the long term. How important to you is it that you look at an investment property that if you needed to sell it, it would sell well – that is, it’s popular in that particular area?
Chris: I reckon I could sell my whole portfolio within a week, and I reckon I’d get 95% to 100% of the value, maybe even 105%. Again, one of my keys is that I buy at the median price level for that area.
Chris: I want 80%of the population to be able to afford to buy it or rent it, because then I know it’s in massive demand.
Kevin: Yes. We quite often see medians improve, and people think that this is an improvement in price, but it’s actually just a reflection of the fact that people are buying in that popular price sector. While it may increase in price, it doesn’t necessarily mean that values are going up.
Chris: Yes. I bought in 1990 just before the Olympics when I first immigrated to Australia in Fuju, a few beaches down from Bondai. I paid $360,000. Everyone said, “Chris, you’re mad. You’ve paid over the odds. It’s going to collapse after the Olympics.” But I knew young professionals could spend that kind of money.
Now that same unit is a million dollars 15 years later, so it’s doubled and then some maybe another 50% or so. A million dollars sounds like a lot of money, especially to people outside of Sydney, but for the local area, people can afford it.
At 4% or 5% interest rate, it’s $50,000 a year mortgage. If you get two young 30yearolds on $100,000 salaries, they can afford $50,000 a year in payments.
Kevin: Chris’s website is www.YourEmpire.com.au.
Chris Gray, thanks for your time.
Chris: My pleasure.