Investing in the Worst House in the Best School Catchment
This is a contribution by Andrew Mackintosh, lead inspector at Brisbane firm Action Property Inspections. Andrew has been advising savvy investors for 24 years and his experience includes working with investors in the highly desirable inner-west Brisbane catchment areas. Action Property Inspections is a multi-award winning firm with a reputation for excellence in the Brisbane property industry so we’ve invited him to share his tips on investing in a Brisbane school catchment area property.
Buying the worst home in the best Brisbane school catchment
It’s no secret that school catchments have a big impact on the price of properties in Brisbane and across Australia. With private schooling costing far more than the mortgage shortfall, it makes sense to choose an investment property in your choice of school catchment zone of your choice of public school. The right catchment can inflate property prices by more than $50K – so does this make for a “bad investment”? Holland Park for example has become a property hot spot as parents hope for an enrollment at Cavendish Road High School and Shorncliffe State School sees out of catchment parents camping out in a hope of gaining entry.
Investing for rental return
While the cost of your rental property will likely be inflated by catchment demand, the property will also be in high demand for renters. Parents who can’t afford to purchase in the area may invest in a lease to guarantee their child’s placement at the school. This can mean guaranteed tenancy and higher rental returns. You’ll need to plan carefully to have your yearlong leases run from enrollment period to enrollment period.
This is generally around June for state schools, with open days commencing in May but it differs from state to state, school to school. Some primary schools offer no open days and open their enrolments at the beginning of the school year so that out of catchment families are “first in best dressed”. To find out, call your catchment school and ask when their open days and enrollment periods commence.
Know the school catchment rules
School catchment rules mean that parents must provide documentation to prove the child resides within the catchment area. Generally, the evidence is a lease or a mortgage and most Brisbane schools also require utility bills to prove actual residence. If you’re considering buying a property in a hot catchment, for your own child, or for rental return, call the school and ask for their specific “evidence of residence” rules. When you are renting your property, equip your real estate agent with all the catchment information they need to sign up tenants.
Worst house in the catchment?
Let’s face it, you’re investing in an address first, a home second. To see good return on investment, look for the properties that aren’t top of everyone’s list.
The paper (pay per) lease
This is the tiny studio apartment, so small that banks turn down high risk first home buyers. This is deemed too risky because its floor space is close to the national minimum of 35 square meters. These “dog boxes in the sky” are harder to secure finance if the borrower hasn’t a healthy deposit and some real assets. This opens an opportunity for the savvy, established investor. These little apartments are cheap to furnish and desirable in the inner city. Looking at the Brisbane State High catchment area? A two bedder will cost you close to half a million, a tiny studio can be as little as $300K. They’re also very popular on AirBNB so be sure that your “tenants” aren’t subleasing!
The worst house or apartment
A “fixer upper” in the catchment is a good way to get in cheaply. Families looking for a foot in the classroom door will temporarily reduce their expectations to get the right education for their children. Holland Park and Kedron both have fixer uppers regularly for sale. You don’t however want to invest in a well situated lemon. Like all investment renovators there are a few rules to abide:
- Expect to have to shell out for kitchen and bathroom renovations. They’re the most expensive renovations on an older home and are least likely to be completed before the sale
- No matter how badly you want the address, don’t buy an “asbestos palace” or a “termite’s nest” – get a proper building and pest inspection and rule out the most expensive problems. See a full inspection checklist here.
- Look for properties where the desirability can be quickly improved. A coat of paint, some floor polish and a little landscaping can make a lemon into lemonade for renters.
- You’re targeting families – make sure the property is family friendly. With over 92,000 new apartments being built, ticking the boxes for mums and dads will give you a rental advantage. Making your investment property child-friendly may be as simple as adding a front fence or allowing pets on the rental agreement.
Before you invest
- Use the MySchool website or Google School Catchment Maps in your state to find the most in-demand schools.
- Remember that popular catchments change year by year so check that your potential purchase is well within the catchment area. You don’t want to buy on the edge only to be rezoned in a year or two.
- Learn when the school’s open days occur and when enrollment is due and plan your annual leasing around that timing.
- Understand the requirements for “proof of catchment residence” and be sure that your real estate agent can communicate those to potential tenants.
So, should you invest in a Brisbane school catchment for your child’s future? Remember that your child will be one of the few in his/her class who don’t actually live within a few minutes of the school. If your child is going into high school, it’s best to discuss this concept with them and make sure that they’re OK with the idea – as it does amount to a little white lie. Buying in the school zone should never be the only consideration, be sure that the property will benefit your family’s future as much as the address.