Hey All,
Just need my mind put straight as I am new to investing and my brain is mush with all the possibilities. Bear with me as I want to provide as much information as possible.
35 yrs old, married with 2 young children. Living in WA, rent and ammenities fully paid for by work, so we don't have many expenses. Have a property in Perth with a 5.6% rental yield (2 yr old house, was our primary residence) with approx. $350,000 equity.
We have just purchased a new 4×2 unit, fully mortgaged using equity in first house, providing rental yield of 11% plus depreciating tax return.
I want to buy another property in the town we live in (fully mortgaged as we have no cash as such). The town has had a boom and it is still growing. My concern is that because the town is still growing to accomodate an influx of workers, and they want to build a lot of new houses, that older house prices will drop because of increased supply. This to me is a moderate risk (with my limited knowledge).
there are two areas in this town. Highly sort after but quite expensive and less population. The other is less sort after but cheaper prices and greater population.
THE BIG QUESTION: in this current market climate, do I buy a cheaper house in the second area ($500-600,000) that I can value add (yards and outside of house as this is what I am comfortable with at this stage) and that inside has been renovated. Rental yield would be about 10.5%. OR do I buy more expensive ($800-900,000) in the first area and value add (same as with first idea) with rental yield more like 11-11.5%. The better area is likely to have better capital growth.
(Another option is to buy an older fibro house on big block in cheaper area that is rented out at 10% with a company and in a year or two demolish and build a few residences???)
Both area's have large population of families and rental occupancy is high. Average incomes are also high.
my inner gut is to er on the side of caution and go with the lesser priced house as after i have renovated, it will be in a price range more accessible by more people, and proves a lessor risk because of less debt. I plan on renting the house out for a year or two then selling. Most purchases in this town are by investors. Down the track we will sell our house in Perth and use the equity to purchase a few other properties and possibly put some cash into the other 2 loans.
Yes I am going crazy. Need someone to give me a simple point of view to re-focus. if needed i can provide more information as required
Thanks,
Mrs P
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