Hi,
Posted a few times but mainly just read posts. I think I've been ready financially to buy a property for about 6 months now but haven't been able to take the plunge yet. I've never worried too much though because it just gives me a bigger deposit but I really need to get into it.
I've read books (Lomas, McKnight, etc). Always a lot to take in and even if I was experienced, I think I'd still be asking the questions. I do have a question about apartments though and want to know if this is a stupid inexperienced mistake or do other people think like this also.
I know about capital gain and cash flow and have been looking into the cashflow side of things but I want to run an example by this forum to see if I'm mad for looking into something like this.
Being young, cash isn't readily available. I have no access to any equity and only have the deposit that I've been saving so a $300,000+ property is beyond my means.
I sometimes see studio and 1 bedroom apartments on the internet and in other publications for $110,000 – $150,000 and even up to $200,000 commanding good rent and with some of the leased for another 7-8 months. I've also looked at student accommodation which has apartments leased until 2009 and commands good rent.
Reason I look at these and am possibly considering them is because I could actually get a positive cash flow on some of these apartments. That includes body corporate and lending fees and doesn't include any tax deductions. I don't know how apartments of this type are treated and whether insurance of some form is needed or whether that is included in the body corporate fees. The student apartments are only for students but from the research I've done, it seems they're pretty popular given they are close to Universities.
Is it not a good idea to consider stuff like this? I mean, if you were not concerned about capital growth and only about cashflow, is there something I am missing in the way that you could essentially buy a few of these and just get cashflow from them? Is there something I'm missing?
Like some of the threads I've read at the forum, it's getting fairly tough to enter the market with prices the way they are. Should I just suck it up, save a bigger deposit and try and enter the market through a normal residential house or should I seriously consider something like this?
I just need to figure out how to get started. Once I can do that, I sure I can handle it. Just that first step is extremely scary when you've been saving so hard. The thought of losing it worries me.
Thanks
Hi Mate
If you are looking for pure cashflows, then student accomodation could do it.
However, apart from the limited capital growth, banks are usually tough when it comes to student accomodations as they are harder to resell if anything should happen.
I myself am a student and I know my fair share of interstate/international students. I found that a large majority tend NOT to rent from unilodge/student accomodation but rather, rent out a 1 bedder or split a 2 bedder with other students near the university and/or CBD. Maybe look into that.
Dont dive into PI just for the sake of buying something. Look at your long term goals.
There are still some areas in Western Sydney where you can pick up sub-$200k 2 bedroom units which are returning 5-6% gross. With a little work, they would improve. The banks would loan more favourably on these (80% LVR), values are a little more reasonable considering Western Sydney has taken a big hit price wise over the past few years and is showing value in many areas.
Thanks for the replies.
I do tend to agree with the sentiments above. After posting I just did a bit of research on the internet and I've been reading the same thing so I've kind of cooled on the student accommodation.
Also, not jumping into PI just because. It's all a long term goal and something I've been looking at for over a year now. I plan to buy and hold. No real turnover unless really needed and either look at cash flow (eventually) or capital growth.
I'm just having a hard time getting started. I'm only doing this myself. Not married or with a joint income or anything. I don't earn a massive amount but I'm a very good saver and have saved reasonable deposit and continue to save until I purchase. I have no debts and moved back in with my parents only recently for this purchase so I won't be paying rent.
Problem is the cost of property these days makes it very hard. I could look to regional areas (I actually grew up in Gippsland so I know a few regional areas). As always, I always wonder whether that's worth it or spending that little bit extra to get something in the suburbs wih more capital growth potential.
I'm going to start a new thread just to see how people got started in the game. That's my biggest problem. Just the initial move because I know once I get going, I won't be able to stop.
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