HI ALL;
IT IS MY FIRST E-MAIL ON THIS FORUM AND MAYBE SOME OF MY QUESTIONS WILL BE FOUND VERY SILLY FOR YOU, BUT IF I DONT ASK I WONT KNOW, RIGHT?
I AM CONSIDERING BUYING MY FIRST IP, THE POINT IS I DONT HAVE MUCH SAVINGS AT THE MOMENT. I HAVE DONE SMALL RESEARCH AND I NOTICED THAT THE PRICES OF UNITS ARE MUCH CHEAPER THAN PRICES OF HOUSES. I KNOW THAT THE HOUSE PRICE IS HIGHER COZ OF LAND WHICH BELONGS TO THE PROPERTY. IS IT TRUE THAT THE PRICES OF HOUSES ARE GRWOING MUCH FASTER ( MANLY COZ OF OF LAND) THAN VALUE OF UNITS? I AM THINKING ABOUT 3 BEDROOMS, 2 BATHROOMS PROPERTY, WITH NO HIGER PRICE THAN 400K. I WANT TO PAY OFF MY MORTAGE WITHIN 15 YEARS AND GET HIGH PROFIT.
UNIT OR HOUSE?
THNX
DANIKOHi Daniko,
Firstly, House is the safest option, Where are you looking to buy??
Cheers
Ray
Dear Ray;
firstly I would like to say thank you for your respond. I am very new in this forum and I have just started doing research regarding buying my first investement property. I read two books and currenlty there is lots of questions in my mind. Many of them are probably very obviosu for most of peopel participating this forum. I am glad that I wsnt ignored and after few days of patiente waiting I got reply. Thank you Ray! and message for all memebers of this website -guys you are doing great jog advising and helping each other!!! frankly speaking when the time of buying my first IP comes I will feel much more safte to invest knwoing that I can be alwyas heloped by people like you!!!Ray going back to my question; I am living in Sydney and I am thinking about buiyng property in area of Kogarah, Rockdale and Husrtville. Do you have any comments on my choice?
why do you think that house is more safte?
cheers
DanikoHouse is generally safer due to the demand for land. this will drive the price higher eventually. This is also what drives the huge unit development market at the moment – lack of land means you need to build up – hence the unit explosion. This is leading to an oversupply of units in many areas throughout Sydney, therefore, keeping the prices down (or at least preventing them from rising). This is all due to the scarcity rule.
Hope this helps.
Richard
Hi Richard;
thank you for sharing with me your knoledge, it will definatelly help.
cheersHi Daniko
You will definitely get better capital gain from a house, but if you cannot afford a house then I think buying a unit is better than doing nothing.
Our first two IPs were units, we still have them. After 15 years they are worth about two and a half times what we paid for them.
It has been pointed out that that equals about 6% a year, not much better than bank interest. But we only put around $40K cash into them with deposits and costs, and they have paid themselves off and are worth a combined total of well above $440K. This means that our cash contribution has increased about 10 times, far better than any bank could do.
The advantages of units are that you are only responsible for the inside of the unit, exteriors and grounds are the responsibility of the body corporate. Check out the body corp fees and the sinking fund. Avoid lifts. Either buy in a small complex (4-
or a larger complex of 40+ (to share the cost of a manager). Be wary of smaller complexes with managers as there are not enough units to share the manager costs.One of our units is in a block of 8 (no manager, pool or other facilities) and the other is in a large complex of 80 with a manager, two pools, on about 2 acres of canal front land with boat ramp and jetty. The smaller block has lower rent and lower costs.
I don’t know the Sydney market at all so can’t help you with areas.
Good luck!
margDaniko I made a couple of comments to your original post:
– If you decide that you want a house rather than a unit, you may look in more rural areas where houses are still cheaper.
– You seem to be concentrating on long term capital gains. While that is fine, the current climate is probably better suited to either finding a cash flow positive property or making money by improving a property. Units often allow for better yields, while you can be more creative with houses. I advise you to read Steve’s latest book, where he gives many hints how to plan and implement a strategy.
– Paying off the morgage as quickly as possible is not necessary the best option. I prefer to have an interest only loan. This allows me to have as much capital as possible for other projects.
– Remember Steve and Dave needed about five years to become financially independent. I do not try to duplicate their success, but I am aiming at 12 years from now.Good luck
Hi Bridgebuff;
Ive just completed reading Steve’s book and there is one serious question I would like to ask. Steve claims that the best option for propety investment is positive cash flow. I am not sure how situation with proeprties looks in Melbourne but considering Sydney I dont know how achieve positive cash flow. If I would like to buy house about 25 km from Center of the City, I would have to spend about 500.00 AUD. Lets says I am putting 10% than my morgage will be 400.000 AUD, even taking morgage for 25 years , weekly repayment will be about 550 AUD a week. If I wanted to rent the property to family I wont be able to charge them more than 400 AUD per week. I checked many location, different houses and options and I am sorry to say that, but It is impossible to acheive positive cash flow. Is it something I am missing doing my calculations? Please advice me.Yes, but Steve does not advocate to buy in the capital cities.
First of all did you read his 3rd book (0-260 prop in 7 years or an earlier one?). I believe his 3rd is the most relevant to the current market.
Stve started in Balarat, moved to Tasmania, New Zealand, USA. I believe he is now back looking in Balarat but with a slightly different strategy.
There are no cashflow positive properties on the shelf. You have to create them. This is by no means easy. Steve’s philosophie is Problem + Solution = Profit.
But I believe that it is still easier to create cf+ properties in regional centres. I am not ready to look in other states, but I am concentrating in SA.
And it is a lot of research, driving around, looking at properties, talking to agents, building a team of experts around you (accountant, land broker, lawyer, agents, surveyor, council planners, valuers, building inspector, etc.)
I also have a few friends, who are further down the track of investing. When I find a deal that looks good, I run it past one of them. They often have good comments, warnings, ideas, etc.
If this would be easy, everybody would be doing it. But I do know, that I do not want to belong to the vast majority that own only 1 or 2 IP.
Less than 2 or 5% of investors own 5 or more IPs. And I will be one of them.
And to do this I either have to wait for another boom or get CF+ properties.
I am currently working on several properties that I want to subdivide. But before I buy them, I make sure that I have as many facts as possible.
Keep at it.
Hi Daniko,
I live in Sydney and have 5 investment properties as well as my own residence where I live. I am also a real estate agent!I live approx. 25km to the north of Sydney near Hornsby and you are mostly right in what you say, you can’t spend $500k on a normal property and expect much more rent that around $400/week, but I have found a solution!
2 of my properties have granny flats attached to the houses and I rent them out separately. One I purchased at the peak of the boom (2003) for $535k and I achieve (and have achieved from day 1) $630/week ($380 + $250). Now , I am nowhere near the return that I could get in regional areas, but being in Sydney, my capital growth will be much better. We had this particular property valued in late 2005 by the banks when we were refinancing and it came in at $580k and other than add a separate electricity and water meter and put a dividing fence to separate off the backyard, we have made no improvements to the house.
Have a think about this as an option. Depending on your circumstances, you could rent out the house and live in the granny or vica versa or you could rent elsewhere and rent them both out, it will all depend on what your housing requirements are. If you find out from the agent selling the property what the rental return will be if you rent them out and get it in writing, the banks are more likely to lend you the extra money that you may need.
Anyway, good luck in your search. They don’ t come up often, but they do come up. Let all the agents in your search area know what you are after and be prepared to be a bit flexible in case you have to modify the property slightly. I now own 2 of these properties and I have never had a problem renting either the house or the granny out, although you do have to be careful who rents the granny. Families with children won’t tend to want to rent the house if a single gentleman rents the granny (no offence, it’s just the way it is!)
Linda
Danniko
It sounds like you dont have much choice with only $400K… I couldnt imagine finding a house in the south of Sydney for that kind of money. Even if you went slightly west there isnt much around for that money… much less 3 beds 2 baths.
I recently bought a unit in Carlton – 1.5 beds (1 bed with open study) 1 bath for $300K that I rent for $400 p/w. I put a new kitchen in and painted, plus its very close to train. I bought this with a view to put my mum in shortly though… but its still an ok investment for the moment.
Good luck!Dear Linda;
Thank you for your advice, that would be a good solution, I will definately keep in mind. You mentioned in your e-mail, that you are real estate agent, so you must have lots of experience. I would like to ask you few questions, if you dont mind. If I buy unit through 15 years morgage, is it any possability that the unit will be worth less after 15 years than now? Is it any chance that the unit will be worth double after that time? How fast value of property grows up?
On the website http://www.realestate.com.au I found many properties for sale offered in Campsie, do you why some many properties are offered in that area? Which area of Sydney has the bigest demand and which the lowest.
I dont want to bother you much, but I woudl appreciate your respond.
Have a great day
DanikoHI Ecatt;
To making clear – I was talking about speding 500K and putting 10% deposit ,so my morgage would be 400K. I would find house for the amount easily, but the thing is I wouldnt be able to get positive cash flow.
I have do admit that you are getting excelent deal renitng unit 1,5 bedrooms for 400 AUD per week. For this amount you can get really nice unit in the City, with nice view.
Kind RegardsHi,
I am also new to PI, just another idea rather than putting all your money in one house, will you consider to break up your investment into 2-3 units as it will give you chances to find tenants easily and also will give u a chance for you investment to diversify and may help in getting more value later.Also that can be at different places rather than in one spot.
Hope it helps.[biggrin]Hi,
I am also new to PI, just another idea rather than putting all your money in one house, will you consider to break up your investment into 2-3 units as it will give you chances to find tenants easily and also will give u a chance for you investment to diversify and may help in getting more value later.Also that can be at different places rather than in one spot.
Hope it helps.[biggrin]Hi,
I am also new to PI, just another idea rather than putting all your money in one house, will you consider to break up your investment into 2-3 units as it will give you chances to find tenants easily and also will give u a chance for you investment to diversify and may help in getting more value later.Also that can be at different places rather than in one spot.
Hope it helps.[biggrin]Hi,
I am also new to PI, just another idea rather than putting all your money in one house, will you consider to break up your investment into 2-3 units as it will give you chances to find tenants easily and also will give u a chance for you investment to diversify and may help in getting more value later.Also that can be at different places rather than in one spot.
Hope it helps.
[suave3]Hi,
I am also new to PI, just another idea rather than putting all your money in one house, will you consider to break up your investment into 2-3 units as it will give you chances to find tenants easily and also will give u a chance for you investment to diversify and may help in getting more value later.Also that can be at different places rather than in one spot.
Hope it helps.
[suave3]Hi,
I am also new to PI, just another idea rather than putting all your money in one house, will you consider to break up your investment into 2-3 units as it will give you chances to find tenants easily and also will give u a chance for you investment to diversify and may help in getting more value later.Also that can be at different places rather than in one spot.
Hope it helps.
[suave3]My appologies for so may similar replies somehow my computer was not behaving properly and it got so many replies there
or a larger complex of 40+ (to share the cost of a manager). Be wary of smaller complexes with managers as there are not enough units to share the manager costs.
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