I have been doing some research on investment properties in Canberra.
Particularly, Investment properties in the 400-420K range (3 bedroom houses) fall into the following criteria :
(1) houses built on / around 1989 in and around Tuggeranong, 500 to 750 square metre, rent $400 per week
(2) houses built in 2010/2011 in suburbs around Gunghalin, 200-250 square metre, rent $450-480 per week.
Option 2 would cost less to hold (owing to higher rental return, low maintenance, depreciation).
Option 1 would cost more to hold but it has much bigger land area than Option 2.I am bit undecided on which option is better? Any suggestions?
Hi Mike
I own both types – and I have a preference towards option 1 type properties in Canberra.
Main reasons being the large land content and the ability to add value through basic, cosmetic renovations (which you will be able to depreciate). You could also look at extending – there could even be scope for sub division if the ACT govt. changes its planning policies in the future.
With option 2, you can't add value and the block is so tiny (which, in my opinion, will jeopardise future growth).
I also reckon you could achieve at least $450 p.w with option 1 – possibly more.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
I would only consider option 2 if you are in an extremely high tax bracket and you wanted to offset your tax using the depreciation of the property. I don't know if that specific area is high capital growth though…
I prefer older houses as you can add value to them through cosmetic renovation (painting a bathroom does wonders). This can increase your rent AND your equity almost immediately. With increased rents it could actually cost you less to hold than option 2.
Also the larger land gives you more options in the future. Add a granny flat to the back and rent it out, subdivide and put another house on the back. You have a lot more options to work with.
Ultimately it is up to you.
Ryan McLean
CashFlow Investorps. I think this blog post I wrote may be of help to you. Check out Do New House Offer Positive Cash Flow?
Ryan McLean | On Property
http://onproperty.com.au
Email Meryan mclean wrote:I would only consider option 2 if you are in an extremely high tax bracket and you wanted to offset your tax using the depreciation of the property. I don't know if that specific area is high capital growth though…I think option 1 will be negatively geared more than option 2.
With option 1, the depreciation will be less and the rental yield will likely be lower. However, there is much more room for value add and I think longer term growth due to the land content will be much better as well.
The historical growth (last 10 years) in Canberra has been quite good.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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