The weather may be getting warmer but it still takes a cool head if you are thinking of entering the property market this spring.
Expectations are rising along with the mercury as low interest rates and falling prices in many areas have made investors think this could be the time to buy or sell.
RP Data says property prices have fallen in all capital cities except Darwin and Canberra in the 12 months to July this year. Sydney property prices dropped by 1 per cent and Melbourne's 4.4 per cent.
That suggests there are good deals to be had for those brave enough to bet that prices won't fall much further. Also, vacancy rates are tight, which means solid rents can be charged on most good properties. Rents rose by 3 per cent on average for both houses and units nationally last year.
With spring being the most active time for the residential market, many investors may be thinking this is the time to swoop. But there still needs to be an element of caution before you make your move.
Perhaps the biggest mistake you can make is to pay too much for your investment property in the first place. That can easily happen if you get carried away with a property and start competing with other bidders.
The chief executive of Raine & Horne, Angus Raine, says investors need to be sensible. ''Due to their emotional attachment, owner-occupiers will often be prepared to bid more for that particular house or unit.''
Raine's advice to investors is to let that property go and keep searching for another opportunity. Eventually you will get a place, he says.
''Spring has always been the time of the year when stock levels are highest, that's the case even when the market has been slow, as it has been in the past few years. There is more activity this year than there was last year, so that's a good thing, but the market's still only slowly coming back to life.''
The prestige end of the property market is struggling but it improves in the more affordable price zones, he says.
There is a good market for investment properties in the $800,000 bracket. In Sydney, that means plenty of interest from investors in the middle-ring suburbs of the lower north shore, west to Parramatta and south to Mascot.
In Melbourne, good investment spots include Elwood, Elsternwick and Sandringham.
The chairman of Ray White, Brian White, says many investors decide to buy near their own home.
''We did some analysis a couple of years ago and found investors were 25 per cent more likely to buy an investment property within about five kilometres of their residence.
''A couple of the main reasons are probably the ease of access to their investment, which then makes it easier for them to monitor the property, and also the familiarity with their own area.
''Which is not to say that buying in a place like Gladstone in Queensland is a bad idea. It's just that a lot do prefer to buy close to where they live.''
In the past, many investors headed to the Gold Coast for their investment property. It may still be a brave move to new investors to buy on the holiday strip but White says there are some great deals on offer.
''It's been tough on the Gold Coast, values have probably fallen 35 per cent from their peak in the boom times.
''So the $600,000 property is now selling for around $400,000. But there are buyers getting interested again because of the exceptional value on offer. Prices are rising again, although of course not to the levels they were in the boom.''
Regardless of the area, the experts argue you should not buy a property that needs a lot of repairs unless you are a DIY specialist. Expensive repairs will quickly eat into your profit margin.
Research is critical before any property investment, the director of sales at McGrath, Matt Lahood, says. That's not just finding out about the area in which you want to buy but also how the sale process itself works.
''Learn the language of the property market. So when an auctioneer says a property is on the market, it means it has met its reserve price set by the owner. Not every auctioneer will use that phrase but some claim it stimulates the bidding process.''
A building and pest report should tell you if the property has a faulty roof, Lahood says. You might decide to offer less for that house because you might have to spend $50,000 fixing the problem in a few years.
Similarly, strata reports for apartment buildings are critical. They show all the strata committee meeting minutes, which might indicate there is rust in the windows, for example. It follows you could decide to reduce your bid for that unit because you might have to fork out for a special levy to fix the windows at some stage.
''You want an area which is close to infrastructure like transport and education, which is what makes the inner-city areas
so popular,'' Lahood says. ''Also you want a suburb where tenants will tend to stay around.
''Not only will you be up for more agent fees if you need to keep finding new tenants, but tenants moving in and out of your apartment increases the chances of your property being damaged while their furniture is being moved.''
If you're bidding at an auction, Lahood recommends bidding strongly early to let other buyers know you are keen on the property.
DEVELOPING THE IDEAL APPROACH TO PROFIT
MATT and his family (name withheld on request) knew they wanted to settle in Sydney's eastern suburbs, but the process has taken on a life of its own.
From just looking for a family home nine years ago, they are now about to unveil the first stage of a renovated apartment building that will contain a unit for themselves and four two-bedroom units, which they hope over time to sell for an initial asking price range of about $800,000 to $850,000 each.
The family wanted a unit in Latimer Road in Sydney's Bellevue Hill, due to the wonderful leafy location.
''Our budget was about $750,000 when we were looking at buying a unit,'' Matt says. ''But we found there weren't many properties which met our needs.''
Well, there was one - but it was a more substantial building than they had been thinking of initially.
So they set about contacting family and lenders to raise the $2.7 million needed to buy the property. Over time, they have gradually restored and enhanced the property and, in consultation with the McGrath Edgecliff office, they decided now is the time to test the market.
Depending on the reception from buyers, they could offer two of the apartments this spring. McGrath's Janet Morrison says the units could be appeal to investors or owner-occupiers.
''The location will be appealing, as will the standard of work performed on the property,'' she says. ''There is a good market for both investors and young couples in the price range below $1 million.''
''We have a lot of interested buyers for this area, so that's always a good sign.''
Matt's background is in finance and law, but the project has enabled him to engage his creative side, giving the 1920s-era building a series of touches such as private gardens.
All the apartments have balconies, a process he concedes was not easy to get through the local Woollahra council.
Matt estimates he has spent about $500,000 on renovating the apartments, which includes restoring a circa-1927 stained-glass terrazzo foyer with polished wooden balustrades. ''It would be a shame after having gained this knowledge and experience not to put it to use in another project. But I might look at a commercial rather than residential project next time.''
SELLING YOUR INVESTMENT PROPERTY
MATT LAHOOD, of McGrath, says you should expect to spend about 1 per cent on marketing your investment property for sale. ''So plan to spend about $5000 on a $500,000 property. One advantage for investors is the selling expenses are tax-deductible, which may make getting the bigger ad in the local paper more feasible.''
Brian White, of Ray White, says a few thousand dollars spent on the investment property may reap benefits when you sell. ''It may be to improve the garden or change the blinds. Or if you're in a unit, you may decide to repaint … which can be done relatively cheaply and gives the place a new feel.''
White says you want to create as much competitive tension as possible, which may mean a good marketing campaign and then an auction at the end of it.
Angus Raine, of Raine & Horne, says to treat the front of your house ''as your personal billboard''. ''So get the lawns in order and think about water-blasting the house. If you are not confident about doing the work yourself, pay someone to do it as it will be money well spent.'' After all, you will be competing with a lot of other properties in spring.
Make sure the taps are fixed, remove mildew, fix tiles and eliminate clutter. Remember not to leave your pet around when the house is open for inspection.
''When it comes to potential buyers making a second or third inspection of your property, it becomes even more important to get it right. So you need to get an unbiased opinion on how the place is really looking,'' Raine says.
''Ask your agent to pop around … It can be hard if you have lived in a place for seven or eight years to really see it clearly. So get the agent to check it out for you.''
CHOOSING AN AGENT
BRIAN WHITE, of Ray White, says an agent should be upbeat about selling your property.
''You want someone who speaks confidently about the market and thinks they can get the best possible price for your property,'' he says.
Matt Lahood, of McGrath, says presentation is key in selecting an agent
''You want them to be presentable,'' he says. ''If they can't present themselves properly, they may not do a very good of presenting your property, either. Lots of energy is important.''
Plenty of signs in the area with ''Sold'' stickers on them are, of course, a good indicator of a successful agency. An agent should have a good presence in the local media and online.
When your house is open for inspection, have family or friends walk through the property to check how the agent is performing. Get them to leave their details and find out if the agent follows up with them.
If you are going to sell your property at an auction, check out the auctioneer's conduct at other auctions.