Forum Replies Created
Hey Matt,
If your going to buy, develop, demolish and attempt to sell each block this could be a bit risky unless there is a high demand in new land in your suburb. You don’t want to be holding two blocks that aren’t producing income while repayments keep coming in and worst case you are forced to sell and make no profit or even a loss.
You could always buy an investment property with development potential and hold for the medium to long term and subdivide it and keep renting it for 5-10 years before looking to sell as a whole or blocks individually. Something like this? 9km from Brisbane CBD, direct train line, looks like a pretty straight forward subdivision (havent looked into it at all). Salisbury has had decent growth and a low vacancy. Was not flooded in 2011. If you could knock down the price its looks pretty inviting to me.
http://www.realestate.com.au/property-house-qld-salisbury-110403437As others have said why not look for a property where the house can be retained or even moved on site. This is pretty popular in Brisbane. I did some work on a report for a house within a Demolition Control Precinct (DCP) on a large block with a large frontage recently. The house was positioned horizontally across the front and we achieved a DA for the house to be rotated 90 degrees to fit on one block and create a new entrance fitting with the character of area. The block was subdivided, the investor renovated the old queenslander and sold off the vacant block.
I am still a town planning student but what I have found so far through my course and part time work that a lot of the time you just need to have a bit of imagination and get the right people involved that can work things in your favour. There are some rules that cannot be challenged but there are also many that if you have a good town planner on your side you can achieve. For example that block in Brisbane specified that area had zoning that said subdivisions of land that were character and in a DCP required a min block size of 450 and 10m frontage. So in our case the second block had a 420m2 but a 13.5m frontage so we seeked a relaxation of the lot size as the frontage was significantly greater. A good planner can negotiate with the local council as well as produce a good arguement with justification working towards your goal.
Overall, call your local council planning department – be polite and give them the address and ask them for a vague indication on their opinions of subdivision potential. As you would expect if properties with similiar dimensions and characteristics in your surrounding area have been subdivided then it is probably more likely yours will be approved as council would have already approved theirs.
Overall simple 1 into 2 lot subdivisions are generally pretty straight forward – just call a local private planning consultancy in your area and they will usually discuss options of your lot for free and you can then decide to move forward or not. I wouldn’t go looking for a development company to help you – any town planner with experience should guide you in the right direction and get you a result.
DY
For initial measuring of properties dimensions without having to purchase title copies I find nearmap very useful. It gives you the option to measure line, path and area. Obviously you shouldn’t rely on it but I use it all the time to get a rough idea of dimensions. Nearmap is also one of the better services that is regularly updated imagery which is also useful as often google maps doesn’t pick up newer roads or developments surrounding your site.
On a side note I found one of the quickest ways to see if a property was flooded in the Brisbane 2011 flood events is to click back the date over Brisbane and search your address, again this shouldn’t be solely relied on.
http://www.nearmap.com/
(just click personal use and continue)DY
For QLD:
I find information Queensland interactive mapping an excellent way of searching a property to identify its exact land size and which local government it resides in.
http://gis.qld.gov.au/iqed/map/
As Andrew has mentioned a number of larger councils within Queensland use the PDonline system i.e Brisbane, Gold Coast, Ipswich, so on.
As you would expect larger and more develop LGA’s provide a better service for finding out zoning information and the smaller LGA’s with limited resources it is definitively going to be easier to just contact the local council from the get go.
Hope this helps.
Agreed.
You seem to have a clear strategy of your own and appears to be working well for you.
So I wish you all the best and hope that you can achieve your retirement goal ASAP
As others have mentioned all have their pros and cons and it is impossible to claim that one trumps all.
I agree that their is a general misconception that property with the highest land component will always be the better investment. This is not necessarily true. It all depends on the market and what the demand is for this properties. Remember even when buying apartments and units you are buying land component which although is smaller will most likely have a higher price per square meter as it is most likely closer to the city/ in a better location.
As Aaron mentioned above – where are you looking and what is your budget. In some places if the demand is there inner city apartments and townhouses can experience far greater capital growth than outer suburb houses.
There is also the fact that apartments and townhouses will be less maintenance, however there will be a body corporate to accompany these.
You may find a huge demand for quality apartments in inner city locations sought by a young working force, etc.
It is probably worth mentioning that the demographic trend in australia is an older population with a significant increase in smaller persons households – this could lead to a greater demand in some areas for units and townhouses. However on the end of the spectrum places like the Gold Coast are experiencing a gross oversupply of high rise apartments and these will lag the real estate listings for many months.
Basically as I have rattled on it depends on the demand in the area, any of them can be the better investment in a specific area – if there is a demand for something its value will increase until additional supply is created or another alternative presents itself.
Catalyst wrote:Im one that would disagree with you.
If you buy the $600K property there's a big chance your portfolio will stop there (unless you have lots of disposable income).
Just the outgoings alone will limit you.
Talking average here (and of course there are places that vary). A friend has a $500K property that rents for $550 pw. 2 of my properties that cost less than $230K rent for $350 + $365. So I'm already in front $175pw (take away $30pw for extra rates etc). I see both areas as having good CG.You really need to take all the advice in and then sift through it to find what suits you. In the beginning I made the mistake f taking it all in and trying to get it all. I passed up a few good deals because of this. Find a strategy that suits YOU then go for it.
You make a very good point that you personally need to develop a strategy that suits your lifestyle, risk appetite and financial situation. If you have bought two cheaper properties with high rental yields and experiencing capital growth then great for you – you clearly researched your area well and it has paid off.
However I prefer to aim to buy properties within a close proximity to major cities where 230k cannot buy you another except studio apartments which I cannot see myself ever owning.
Give me a quality 600k property in a good location with a future development potential any day compared with 2 cheapies in a less desirable location further out.
The real wealth from property is created through CG not rental yields – so even though you may achieve a couple of hundred extra a week in the long run this doesn’t amount to much, investing in areas for the highest capital growth is my choice. Unless you need this extra money to continue your serviceability – this is a different story. As Cat has mentioned you do not want to buy a property that you will not be able to afford repayments and continue to build your cash up for further purchases. I still feel 5-6% yield as well as contributions from your salary you can build this way – not to mention borrowing against the equity of your property once you have experienced some capital growth.
Even though I expect we will not see the levels of CG from the past in the short to medium term – my outlook is the long term. 20 years +
As a general rule I will look for areas with expected CG over the medium to long term with a rental yield of 5-6%. Anything above this yield is most likely to be in regional and/or mining town.
Sure some CG can follow rental yields increasing but again this is not enough justification to believe significant CG will follow.
I am a fan of borrowing as much as the bank will loan you and you are comfortable with – do your research and buy a quality property where you can expect significant capital growth in 5-10 years (with enough of a cash buffer in an 100% offset account for the unforeseen).
As Cat has mentioned, make your own decision as either one or even both of us can be completely wrong on this topic – it is just our opinions.
All the best
Hey Wilko,
Property investing is relatively easy to understand compared to other forms such as a investing in the stock market. Just read a couple of good books, magazines and property forums and within a few months you should have a fairly solid understanding on the basics. The other thing you may find is that you really enjoy property investing and find it really interesting like many others on this forum.
A general piece of advise is to buy the best property that you can afford. If this is a run down terrace so be it – however if you can borrow more and afford a bigger property with another bedroom then buy this. Personally I would prefer to buy a good 600k property rather than 2x300k, although no doubt some people will disagree with this.
Spend the time to do your research so that your first buy is a good one and can hopefully set you up for a long and successful property portfolio.
All the best mate.
DamienHey ALF1, great post extremely useful,
I too agree with investing within a 15 km radius of a city/ major town.
One thing I would add is both new and old properties have their own benefits. For examples As you mentioned new properties have depreciation however as others have mentioned you really need to be in a high tax bracket for this to be a real major factor, newer properties are also likely to use latest technology and theoretically should be structurally sound for 30 years +. Old properties on the other hand have potential to increase equity through renovation and generally have a better chance on picking up something undervalued.
There could be a whole post on the benefits of both but I thought I would outline a couple
Actually one more point I might add: all loans to be IO with a 100% offset account attached to this.
Cheers
DamoWell I am new to the forum but here are my thoughts,
CG is where you make the real money in property investing not positive cash flow properties – rental yield can be important as it can help serviceability as well as being able to manage the loan repayments. But as I said, in the past the majority people who have made hundreds of thousands and millions of dollars has been through capital growth.
Personally, I will never invest in mining towns or places where rental yields are 10%+. I prefer to invest in blue chip properties in established areas where there has been a continued strong demand and is already well services by quality infrastructure and services, accessible transport options and a strong and diverse economy. The yield is likely to be between 4-6% however I do believe it is a safer option and chances of CG are greater.
I believe we may be heading into a period over the next 5-10 years where capital growth will be slower – perhaps only a bit higher than inflation. But I do believe there is potential to make profit in any stage of the cycle and any market around Australia. I believe if you buy a property with development potential down the tract than it is a pretty safe bet that CG will occur over the medium to long term. For example at the moment to give myself the best chance of receiving CG I would look for somewhere within 15km of the Brisbane CBD with future development potential down the track, ie. 2 lot subdivision or LMR zoning for duplex/townhouse, etc.
If you do in fact have 600k in the bank then you can afford to take a few months to educate yourself and outline a strategy. Alternatively it is probably your best option to get in contact with a knowledgeable mortgage broker who understands property investment to help guide you and make sure you set up your finances correctly. You could also engage a buyers agent to work on your behalf to locate a property that suits your criteria – the theory being here that the 10k or so a BA charges will be made back through negotiation on the sale price/ buying a property that you can expect CG to cover this.
I agree your best option would be to buy 3-6 properties with this 600k, but personally I would not go above 80% LVR.
Finally last piece of advise – don’t just do something because someone on here or another forum told you it would be a good idea.
Educate yourself and run your own numbers and due diligence.
Anyways thats my two cents – possible I may be incorrect about some points, this is just my opinion.
Hey Samuel,
From one young aspiring property investor to another – I say good work on setting yourself an awesome goal of buying an investment property.
I am slightly older than you at 21 years of age and have just bought my first property, here are my thoughts on your situation.
1. No, you are definitely not in the ideal situation to buy an investment property. But with a bit of luck and thinking outside the box it may be possible. Otherwise you may have to wait a couple of years and boost your deposit. In my opinion the property market may take a couple of years to really see some significant capital growth so you can afford to save hard for a year or two and look to buy then.
2. I think this is definitely something that you should consider. If you feel you have a close and trustworthy relationship with your brother than why not. This is where you may have an option of really sitting down and discussing the pros and cons of buying a investment property together. To be fair I think if you are going to have a partner for your first venture than family is probably the best option and if your brother is driven to succeed and has an interest in property than this could be a really good partnership. Why not get together with your brother and write up a business plan of what you want to spend, yield to achieve, predicted capital growth, minor renovation, etc. and then approach your parents. My parents had to guarantor my loan and helped me fork out the deposit together, there would be absolutely no way I would have been approved without it. Would it be possible to go thirds with your brother and parents. Perhaps your parents would be really impressed that you and your brother wanted to make a positive financial decision and start investing and be willing to work with you to achieve your goal.
3. This question is a post entirely in itself. But I do think that Brisbane is definitely a market with a lot of potential to rebound over the medium to long term. You really need to research and identify some goals. Are you looking for a cheap 2 bedroom unit close to a train station with cosmetic renovation potential to boost rental yield and hopefully unlock equity in the coming years to purchase another? Or are you looking at picking up a cheaper house in salisbury, indooroopilly, with land component as Brisbane is still relatively cheap for land close to the CBD etc.? Do lots of reading on forums, magazines, websites, books and work out what you want to focus on.
4. Not meaning to be condescending, but you are only 18 – how much experience can you really have? In the past 3 years since I was 18 I have learnt so much and see myself as a different person with greater experiences, no doubt I will be saying this when I am 25, 30, 35,etc. I am 21 and I consider myself to be an absolute rookie but I am looking to learn as much as I can so that in the next 5-10 years I have a really solid understanding in all property investing. Remember one of those cheesy lines you can never stop learning. I think you would be getting in over your head if you were expecting to buy and flip with such a small deposit and no experience due to being first investment property – much better chance looking at something much simpler like a small 2 bed unit.
5. There are literally thousands of questions you could ask – and your at the perfect place to ask them. You need to ask them – because if your buy a dud first up it could set you back years and deter you from property. Conversely if you buy smart within an outlined strategy you could be one of the lucky few who have the opportunity to start investing in property at such a young age. How often have you heard others saying they wish they had started earlier – you are really giving yourself a head start and being financially smart rather than going out and wasting your money on a new car, etc.
Anyways, I wish you all the best man
Let us know if your lucky enough for anything to happen
Ask as many questions as you can think of on forums like this – its the quickest way to learn I have found.
Cheers,
Damo
