Hi All,
I am quite new to this property game. I have 2 specific questions that I need some help with.
Question 1: There are various house styles out there, including – Houses, homettes, units, duplex, flats, apartments, townhouse etc (please add more here). What are the differences?, do they give different returns?, anything else to look out for?
Question 2: Closing costs are a big thing in regards to when finally purchasing a property such as stamp duty, legal fees, mortgage application fees etc. I was wondering what are the most important closing costs to look out for (please rank them in terms of importance/$), what is the average $ of them, where do you find out what they are.
Thanks for your help.
Kev
Hey Kev Welcome to the forums,
Yes different styles of housing has differnt returnsbut it all depends on where they are located. For closing costs you should generally allow 5% on the property to cover the costs.Hope this helps.
Matt“If you do what you have always done, you will get what you have always had.”
“Isn’t it time for a change?”
Thanks Matt,
The 5% rule helps
I was hoping for something a bit more specific. Of the different dwellings, how are they aesthetically simlar/disimilar (ie share a common wall, are multiple stories, clustered with others etc)
Also, where do you find the closing costs. Do you ring the agent, council, is it available on the internet?
As you can see from my questions, I have never purchased a property and hence are quite simplistic.
Any help is much appreciated
Thanks
Kev
Kev
From the top of my head, closing fees will consist of
Stamp Duty (avaliable from state revenue, or many websites will calc it for you if you input value – check out links on this site)
Solicitors Fees $500-1000
Mortgage Stamp Duty (not sure, ask a broker)
Loan App fees
Adjustments for rates etc at settlementCan’t think of any more at the moment.
Houses – freestanding, with backyard.
Townhouses – generally strata titled, with some common walls, courtyards. Lower maintenance
Units/flats/apartments – some say there is a difference, but I can’t remember the ‘definitions’. Generally many small units joined together, many times multi storey. Possible underground parking. Also strata title. Many common walls (obviously)
Duplex – two houses on one block, (I think) joined together, often mirror image, or identical.Hope this helps
Cheers
MelHi Kev:
Matt & Mel have given good answers, so I’ll answer other bits of your question.
‘do they give different returns?’
Returns comprise both yield and capital growth
Which of these is most important to you? High yield so the property is self-financing and provides you with an income to retire on, or capital growth so your wealth grows and you can borrow against it to buy more properties?
Different gurus advocate different approaches; Steve McKnight is a yield man, whereas Monique Wakelin is a one-eyed growth girl. Some of us attempt both (eg have several high yield properties supporting a growth property).
It is commonly said that land appreciates, buildings appreciate. So if capital growth is your aim, an old (but structurally sound) weatherboard house in a good suburb near the CBD could be OK.
But if you were going for higher rental yields, you need to go for maximum rentability to ensure as near as possible 100% occupancy.
This means a convenient (but not necessarily inner-suburban) location and a building that’s as liveable, tenant proof and low maintenance as possible. A brick & tile villa or duplex in a suburban location or country city would be fine. Air conditioning and a garage or carport would be an advantage.
Most of the value would be in the building and not in the land so long-term growth might be lower, but the rental income should be higher, especially if you buy two suburban properties or four country town properties for the price of a near-CBD house.
As for the new inner-city towers, their rental yield is lowish. I don’t know about their capital growth prospects as the land component for each unit must be small. But the depreciation and other tax deductions are huge, to (partially) compensate for the other losses.
‘anything else to look out for?’
* Body Corporates: If considering a villa or flat note body corporate fees that are an extra cost. But somewhat offsetting this is that your maintenance costs should be lower than a house. But not everthing with a strata title need have a active body corporate; I have a duplex half which has no common areas and no b/c fees.
* Multi-unit developments: I have a bias (prejudice?) against these. If you buy in a complex of 20, there is a high chance that one or two will be vacant at any one time. Your property will not be unique and your ability to charge higher rent will be constrained (no matter how many internal improvements you make). Also you have less control over what you can do compared to if you had a free-standing house or even a duplex.
Also multi-unit developments may have gyms and lifts and attract high body corporate fees.
* Building depreciation allowances: I know Steve is lukewarm on this but I would opt to claim these to help cashflow in the early years, provided 1. you’re happy to keep working, 2. pay enough tax for there to be deductions and, 3. intend to buy and hold. Most important is that the building was built after 1985/87. Books by Margaret Lomas (over?) emphasise this aspect.
‘closing costs’
I concur 5% is a fair estimate.
Regards, Peter
Kevin,
http://www.homehunter.com.au/calculators/stampduty.asp
here is a stamp duty calulator i find quite useful , it also calculates the stamp duty on the loan amount, and allows for different states having diferent rates. I hope this helps.RABBIT
Thanks everyone.
You answered my questions perfectly. This helps a lot. It just dawned on me that I have a long way to go before I hope to be on par with you all in terms of property investing.
Cheers and this forum rocks – yeah
Kev
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