Hi all,
Within 12 months I am looking to invest in my first property. I will not be living in it, rather renting it out and still living at home.
I believe I'll be able to spend between $250,000 – 350,000 based on my income, deposit etc.
I would like to gauge your thoughts on the best option;
1. Inner-city suburb small apartment – eg Carlton, Brunswick, Northcote, Footscray etc.
2. Outer-suburb small house – eg Cragieburn, Deer Park, Werribee etc
From what I have been told, an inner-city apartment is likely to increase in value quicker and relatively more aggressively than an outer-suburb house and the rent demand is higher. I am open to opinions, thoughts and suggestions.
Thank you,
Robbie.
Hi Robbie,
In my opinion houses are better deals than apartments because you have greater options on what you can do with them going forward, and generally capital gain is higher with houses than apartments all things being equal.
Within your price range you will most likely be limited to one bedroom apartments in the inner city suburbs (you might find some 2 bedroom student apartments but I would stay away from them) which limits appeal and your future growth. While in the outer suburbs like you mentioned, even though they aren't the flashiest going around, you can get yourself a decent 3 bedroom property.
Though I would probably stay away from Werribee, not my cup of tea.
Others may have different opinions to me.
Cheers
Tom
Hi there, don't buy an inner city apt 'in general'. Why? they are overpriced and priced for the wealthy chinese market, and generally 10% over FV. If you buy off the plan, you need to consider the valuation now and at settlement as many banks are very conservative around the FV of the apt at settlement causing issues.
For investment there are opportunities in the West, however consider the east.
Cheers, Ivan
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Hi Robbie,
I'm with Redwood (and PLC) who says this :-
Quote:don't buy an inner city apt 'in general'. Why? they are overpriced and priced for the wealthy chinese market, and generally 10% over FV.Another major reason why apartments (especially in highrises in major cities) are not such a good deal is that a huge percentage are sold to overseas buyers (I don't know current figures, but have heard up to 50% can be to the overseas market).
Because of FIRB rules, o'seas buyers are ONLY allowed to buy NEW properties (it helps to keep our builders employed). If 50% of an apartment complex is thus owned o'seas, what happens in a downturn in their country? Many of them might wish to sell what are now second-hand properties (thus they CANNOT be on-sold to other o'seas people, leaving only Australian residents to buy them).
If too many come on the market at once, and with half of the original buying market now GONE, what is likely to happen to the prices of these apartments ? Hmm…….
Benny
I'm not going to answer your question Robbie.
YOU are going to answer your question.
I'm going to fill you in on what you look for in an investment that is different from what you look at as a consumer. OR IS IT DIFFERENT?
As a purchaser of a unit or house for usage you look for the requirement of facilities of utility value within easy reach.
You know … schools .. shopping thats worthwhile .. maybe a nice restaurant or two .. hospitals .. transport .. places to see .. things to do.
and thats basically your list of requirements. It has to be liveable for you .. and you have to like it.
As an investor you are actually looking for the property to move in value (preferably sooner rather than later) either in capital growth .. or in rental returns (both make the initial investment worthwhile).
So what is going to make that movement in prices happen?
DEMAND, SCARCITY, TIME
DEMAND – There has to be someone wanting to either purchase or rent your property after your initial purchase AT A BETTER PRICE THAN YOUR INITIAL PURCHASE WAS to validate your purchase. There has to be someone willing to pick your property. So having a property that someone else will also want later is a first consideration in considering anything an investment.
SCARCITY – If you have a purchased property .. in a place where your property is the only one available and in high demand you can ask what you want for rent .. and for its resale price. IF ONLY PROPERTIES LIKE THIS EXISTED. Most of the time you'll find yourself in a group of properties where there is a large trading arena and reasonable demand. Unless you head out to low demand areas (country towns .. mining villages). TO ESTABLISH VALUE IN YOUR PROPERTY THERE MUST BE ENOUGH SCARCITY TO JUSTIFY ONGOING DEMAND.
TIME – Eventually .. despite the worst of purchases .. in the worst of areas .. and the lowest level of tenancy possible .. most properties will eventually accumulate anyway due to inflation over time. Its the longest wait .. if your property is relying on this factor only .. for its major format of ongoing growth. Every property will do it .. it just helps if you have both SCARCITY and DEMAND driving your property value too.
See how all three overlap? Thats because for any property you are going to need all three to be relying on a winner for the longer term.
Now .. I've just given you the feedback.
Its time for you to go out there and work out Robbie .. whether your property you are investigating .. will match the three conditions it needs to justify it as part of your ongoing wealth strategy.
P.S. Note i did not mention renovation or subdivision as part of the strategy. Thats actually just changing the DEMAND of the property and so .. its already covered above.
Thanks for your assistance, very helpful and interesting.
I have been searching some CBD studio apartments that are quite cheap and look quite nice inside – is this a trap? Do they generally not go up in value?
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