We only have less than or equal to 400K to buy an IP so that the choices are limited. Where is the good areas to buy an IP within this price bracket – an IP which will give good rental returns, good tenants and better/good future capital growth? Besides the factors of transport and shopping amenities, what are the other things to look for ?
With the same transport, shop facilities and distance from the CBD, which of the following is the best/better choice:
1. an old unrenovated house with a big block – 700 to 1000 sqm block
2. an old renovated house with an average block – 300 to 600 sqm block
3. a 2 -bedroom duplex with a small to average block ( nearer to the city)
3. a 3 bedroom duplex with a small block (farther from the city)
4. a new, or fairly new ( less than 10 year old) 3 or 4 bed, 1 bath house with 500-600 sqm block, 3 zones away ( train transport up to 2 zones, then short bus trip to 3rd zone which travels every 30 minutes.
5. a 2 bed villa without strata fees, older but in a one or two zone suburb.
6. a 3 bed villa without strata fees , new or bit older , in a two zone suburbWith our limited budget, I have been looking at Midland, Midvale, Swanview, Middle Swan, Queens Park, Cannington, Bentley, Manning, Bassendean, Kewdale, Langford, Thornlie, Ellenbrook, Canningvale.
Another factor is we dont have any handyman skills for DIY renovation. We need this rental income to live on in the near future, so this IP will be a necessity for us. Any helpful insights from knowledge, expertise and experience will be much appreciated.
add:
7. a 2 bedroom units in Como, Mount Lawley, with corporate levy
8. a 1 bedroom units in Claremont, Mosman Park with corporate levyJust forget about this topic post I had started. I now have decided to look in Ellenbrook . I now want to close this post. Thanks anyway , even if nobody knows or replies.
You have highlighted three main criteria:
1) Little work (DIY)
2) High capital growth
3) good rental returnsWith also:
4) Sub $400K
5) Tenants
6) Short period to realise its rental value. (How long?)I would say pick two of the first criteria, with a waiting towards looking for high capital growth and putting the work into increase the rental returns. Residential rents, to a point, are often pulled up with capital growth. So it may not have the highest rent now, but in the future it will appreciate much faster (and your loan hasn't gone up) so your returns are higher.
Sub $400k is not too much of an issue. In fact I would say $400k to $600k is a sweet spot for investors market and the closer to $400 you get, intrinsically, the higher the rental yields. Good Tenants are more about a properties presentation and management then the area. I have heard of bad tenants in $1m+ homes on huge incomes and I have heard of bad tenants in those stereotypical suburbs. But the rule of thumb is target properties which match the criteria of the demographic you are attempting to attract. For example, young professionals, target the suburbs/property types they like.
Finally, you say that you have a very short period to hold the property before you need to live off the rent. Property is a longer term investment. Sure, in the boom people made lots of money from property, but that doesn't happen all the time. I feel that a lot of property spruikers market to suggest you can make money fast in property. That may be the case, but these are often the more "active/higher risk" investments.
This isn’t personal advice, but for clients in a similar situation I have suggested to them:
– Get as close into the city as you can.
– Aim for a land value content greater then 50%
– Green title (better) or survey starer (no adjoining walls)
– Go for older properties and steer clear of new ones
– Stay away from new land subdivisions
– Sub out a little work (Painting, new floors, better kitchen/bathroom – amazing what can be done for $10k)
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