Questions:

What is the yield for each? (the unit should be higher than the house)

What is the vacancy rate in the area? (houses & units)

What is the capital growth rate for houses and for units likely to be over the nest 3, 5, 10 years?

How old are they?

How depreciation are you likely to be able to claim?

My hunch is three one bedroom units are going to out perform a three bedroom house, or at least they should in theory. I would prefer three rents over just one, especially if I was just starting out. Way less risk!

Hi Kurtuk,

I agree that north of the Brisbane CBD is the area, but not too far if you are looking at units.

OLD vs. NEW?

This is a decision each investor needs to consider based on their own tolerance for risk and how they see the upside.

Overview:

Owning investment property is a business, and at the end of the day it needs to make a profit for its owner. Like running a business, the owner needs to balance managing risk vs. creating wealth. The risks with NEW are manageable and mostly known vs. those of OLD which have many unknowns, and can’t be fully known prior to taking ownership.

Pros:

Old Property

• Possible to add value by renovating.

• Lower purchase price for OLD compared to NEW of the same size, location, etc.

New Property

• Rent demand for NEW property is far greater. NEW is more likely to have less vacancy.

• NEW is more sort-after by tenants. On a square metre by square metre comparison, NEW rents for more.

• Depreciation credits for NEW far outweighs the price premium NEW has over OLD.

• Repairs and maintenance expenses are low and predicable for the first 10 years.

• NEW property attracts better tenant due to the higher rent than the OLD property.

• Lower stamp duty on NEW House & Land investments.

Cons:

Old Property

• OLD has many potential unknown maintenance issues. Extensive due diligence, building reports are required prior to purchase.

• With apartments special levies can be sprung on owners without any notice. Major repairs may have potentially been overlooked and not yet recorded at body corporate meetings. Once a special levy is called, owners have no option, but to pay the levy as directed.

• No depreciation credits for property built prior to 18 July 1985.

• OLD properties rent for less, and tend to have a higher vacancy rate than NEW.

New Property

• 3% – 5% more expensive than an OLD comparable.

• With apartments there can be many similar properties on the market for rent at the same time at completion.

FOLLOW this link to view a comparison depreciation table between OLD & NEW.

We create a 20 year cash flow for each IP for our clients, they can then see the "what if" options they have going forward.

“You’ve got to think about big things while you’re doing small things, so that all the small things go in the right direction.”

― Alvin Toffler

For the best results, I suggest, stay north of the CBD.

+1

They are sure moving in the wrong direction on this one.

Off the plan has it's risks, all be it small. Buying from the right developer, buying at the right time in the market cycle for that area are both key. We have a rule that if a developer is discounting on the sale price then we stay away. As soon as the sale prices are dropped or discounted for some buyers, the valuations at settlement a put under (a lot) pressure for the other buyers, that's not a good thing.

The main point is that you are buying new, and that is a good thing for someone keen to build a high growth portfolio. The risks with NEW are manageable and mostly known vs. those of OLD which have many unknowns, and can’t be fully known prior to taking ownership.

OLD vs. NEW? This a decision each investor needs to consider based on their own tolerance for risk and how they see the upside. 

Pros:  

Old Property

• Possible to add value by renovating.

• Lower purchase price for OLD compared to NEW of the same size, location, etc.

New Property

• Rent demand for NEW property is far greater. NEW is more likely to have less vacancy and usually attracts a better standard of tenant.

• NEW is more sort-after by tenants. On a square meter by square meter comparison, NEW rents for more.

• Depreciation credits for NEW far outweighs the price premium NEW has over OLD.

• Low repairs and maintenance expenses and predicable for the first 10 years.

• NEW property attracts better tenant due to the higher rent than the OLD property.

• Lower stamp duty on NEW House & Land investments.

Cons:

Old Property

• OLD has many potential unknown maintenance issues. Extensive due diligence and building reports are required prior to purchase.

• With apartments special levies can be sprung on owners without any notice. Major repairs may have potentially been overlooked and not yet recorded at body corporate meetings. Once a special levy is called, owners have no option, but to pay the levy as directed.

• No building depreciation (Div 43) for property built prior to 18/7/1985.

• OLD properties rent for less, and tend to have a higher vacancy rate than NEW.

New Property

• 3% – 5% more expensive than an OLD comparable.

• With apartments there can be many similar properties available for rent at the same time upon completion.

There is an excellent estate planning lawyer in Bowral, not far from Tahmoor. http://www.bertolloadvisory.com/about-us. As well as being an estate planning specialist, Denis Bertollo has financial planning qualifications, these will help when planning your property investment strategy. We are situated directly across the hall upstairs in Springett's Arcade, feel free to drop in for a coffee. 

Good service far out weighs the location.  Over the life of the relationship you will visit them once or twice, but mail them a 100 times. 

To have the greatest chance at success in property investing, you need to buy the right 1st property. A lack of a Strategic Plan causes 74% of investors to stop at one and 93% of investors to stop at two*.         * according to the ATO

A Buyer's Agent can help you buy the property, and a Property Investment Advisor will create a plan as well.

Start by creating the plan around the four major steps you need carry out before you start building a property portfolio. Note: purchasing a property is the last item on the list!

Step One: Planning

•   Strategic Plan: Where do you want to be financially and when? (Financial Planning)

•   Structure Plan: How are you going to hold your assets? (Financial Planning)

•   Risk Management Plan: What are the risks and how do you plan to manage them? (Estate Law)

•   Finance Plan: How are you going to structure your finance, what levels of debt do plan to carry, and when do you plan to start paying down the debt? (Mortgage Broker)

Step Two: Finance

•   Individual 1, 3, 10, 20-year cash flow analysis for each property you have on your plan

•   Depreciation schedules for each property

•   Portfolio Loan to Value Ratio and Individual Loan to Value Ratio Management

•   Portfolio serviceability management

Step Three: Property Selection

Property research is broken up into 2 categories: statistical and fundamental.

Searching across 15,000 suburbs in Australia, pinpoint the 5 suburbs that have the largest demand/supply imbalance. These will be areas have the best chance of increasing in value well above the national & state averages.

Rate each suburb on a scale 1 to 500, where 250 indicates a suburb is balanced. The higher the rating the higher the probability the increased demand will put upward pressure on prices in the near term.

Statistical Indicators

1. Number of Days on the market – The lower the better, we also watch out for areas that are deceasing
2. % of vendor discounting – The lower the better, less choice and less ability to negotiate.
3. Auction Clearance Rate – The higher the better, indicating higher demand
4. Rental Yield – The higher the better, indicating a higher demand and potential rental growth
5. % of Stock on Market – The lower the better, more demand creates a premium in pricing
6. Online Search Interest – The higher the better
7. Rental Vacancy Rate – The lower the better, this % the better it is for investors
8. Proportion of Renters to Owners – The lower the better, creates better suburb perception

If these metrics combined give us a rating that indicates the demand is exceeding supply (market is imbalanced), then we move onto the fundamental searches to validate the statistical data.

Fundamental Indicators

1. Proximity to Water/Ocean/Beach
2. Views of Water/Mountains/District
3. Transport Infrastructure – Recently announced, in progress or to be shortly started that reduce commute times, increasing demand for a suburb
4. The ripple effect of close suburb neighbours. If suburbs within close proximity have grown substantially recently, the chances are that the subject suburb will grow quickly in order to maintain a pricing balance between the growth suburb and the subject suburb
5. Project Booms – Are there any large projects nearby that will create a spike in demand (Transport links, Business Parks, Urban renewal projects)
6. Ugly Ducklings – Has the suburb been branded rough or ugly in the past and the only problem with the suburb is its reputation? Are private owners updating their properties in the area? Are developers buying up new land and building new apartments? Are businesses and trendy cafes entering the area now?
7. Government Works – Has the government put forward a proposal to improve the appeal of an area (waterfront, parks, malls, entertainment, shopping precincts)
8. Lifestyle Features – Are there any lifestyle amenities nearby like golf courses, large entertainment precincts, tourist attractions

If statistical and fundamental searching reveal the suburb is a potential hotspot, we drill down to find the best streets in the suburb, and then developments within close proximity to give the best chance of the best capital gains & yeilds.

Step Four: Purchase

Now you are ready to buy (Planning), you know exactly what to buy (Product), and you now know where to buy (location). A well documented property investment plan lets you sleep at night knowing you have managed your risks.

Depending on the age of your building, you may find that you could be in breach of the Strata-by-laws or the council issued building approval. In most cases you are required to have and maintain a 50db noise separation between units. A lot of developers used to use carpet/soft floor coverings as part of the this 50db requirement. It is something I always check for now, having been of the wrong end of a new owner ripping up carpet and polishing their floors without strata approval. 

BTW: finished polished concete is not low VOC

OLD vs. NEW? This a decision each investor needs to consider based on their own tolerance for risk and how they see the upside.

Overview:

Owning investment property is a business, and at the end of the day it needs to make a profit for its owner. Like running a business, the owner needs to balance managing risk vs. creating wealth. The risks with NEW are manageable and mostly known vs. those of OLD which have many unknowns, and can’t be fully known prior to taking ownership.

Pros:

Old Property

• Possible to add value by renovating.

• Lower purchase price for OLD compared to NEW of the same size, location, etc.

New Property

• Rent demand for NEW property is far greater. NEW is more likely to have less vacancy.

• NEW is more sort-after by tenants. On a square meter by square meter comparison, NEW rents for more.

• Depreciation credits for NEW far outweighs the price premium NEW has over OLD.

• Repairs and maintenance expenses are low and predicable for the first 10 years.

• NEW property attracts better tenant due to the higher rent than the OLD property.

• Lower stamp duty on NEW House & Land investments.

Cons:

Old Property

• OLD has many potential unknown maintenance issues. Extensive due diligence, building reports are required prior to purchase.

• With apartments special levies can be sprung on owners without any notice. Major repairs may have potentially been overlooked and not yet recorded at body corporate meetings. Once a special levy is called, owners have no option, but to pay the levy as directed.

• No depreciation credits for property built prior to 18 July 1985.

• OLD properties rent for less, and tend to have a higher vacancy rate than NEW.

New Property

• 3% – 5% more expensive than an OLD comparable.

• With apartments there can be many similar properties on the market for rent at the same time at completion.

FOLLOW this link to view a comparison depreciation table between OLD & NEW.

We create a 20 year cash flow for each IP for our clients, they can then see the "what if" options they have going forward. 

“You’ve got to think about big things while you’re doing small things, so that all the small things go in the right direction.”

― Alvin Toffler