Hi all,
I'm a bit frantic at the moment. Two days ago I purchased a unit in Ivanhoe (Melb) which was meant to be for investment purposes. The price set was around 350k but there was a huge interest in the property so we ended up paying 400k for it.
The issue now is that I've been having second doubts about whether putting all that money into a unit is the best option. I guess it's the whole "location vs land" debate… what is more important? I'm looking for something that would give me good rental as well as capital growth in the next 5 – 7 years (50k at least). Would this unit be able to go up much further, seeing as I purchased it already at such a high price? My original thoughts where that places like Camberwell/Mont Albert/Ivanhoe would always be desirable and seeing that the houses are so expensive the units must also go up, however now I'm not too sure.
400k doesn't really get you much in Melb and I would have to buy in more outer areas. I've seen a few places in Yarraville/Footscray for 350 – 400k but for that price they're not very centrally located and the houses themselves are very shoddy. I also feel those west areas have had alot of growth in the last year so I'm not sure whether it would slow down now or not.
Any advice would be really appreciated! I have a 3 business day cooling period so I'm now seriously considering canceling the sale. I'm only 22 years old and this is my first property so I feel that it's really important to make the right choice which might help set me up for future investments.
I've linked the purchased unit below. It's 5 mins from the station and also Ivahoe Village. The thing I'm most worried about is that in this economic situation I wanted to purchase something below market value but with all the interest there isn't much difference buying this now or a year ago.
Thanks in advance!
http://www.realestate.com.au/cgi-bin…&tm=1231406118
It is rather unusual to pay $50k more than asking price. Especially in this market where there are supposed to be less buyers out there. Will the valuation come in that high?
At the very least I would not go ahead until the bank has done their valuation. So make sure you have a finance clause in there. I would also do a lot more research. Generally it is the land that appreciates in value and the building that goes down in value, but units can be still a good investment.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw wrote:It is rather unusual to pay $50k more than asking price. Especially in this market where there are supposed to be less buyers out there. Will the valuation come in that high?At the very least I would not go ahead until the bank has done their valuation. So make sure you have a finance clause in there. I would also do a lot more research. Generally it is the land that appreciates in value and the building that goes down in value, but units can be still a good investment.
Well I do believe it was underquoted at 330 – 350, if anything I think 380k would have been the more accurate figure and by that I've only really paid 20k over at the least. The valuation for 2008 was written as this:
Site valuation: 215k
Capital : $366k
Does that help in any way?? I'm just wondering if it might be better using the same amount of money to purchase something in Footscray near a trainline or something on a 700m block. In terms of capital, would a unit in a well established location fare better then a house in a more industrial area?I myself would prefer a house – especially one with potential. It is hard to add another room to a unit!
Also with the valuation – who ordered it and when? I would only rely on a bank valuation. Do you realise that you can only borrow on the price or valuation what ever is lower?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I may be wrong but it seems to me that you have joined the site because you are so unsure about whether you have made the right decision. This suggests to me that not only are you are unsure, but you have gone to the trouble to ask property investors their thoughts. It seems to me that you are VERY VERY unsure!
It's a buyers' market out there. There will be lots and lots of opportunities for you to purchase in the next year or so. You are asking all the right questions and from my reading of your posts you are leaning very much towards a house rather than a unit.
My suggestion would be for you to "cool off" on the contract, spend some time on this forum, start researching an area that you want to live in and take your time with a purchase. The last thing you would want to be doing at your age is kicking yourself for making a $400,000 decision that you regret.
The deal of a lifetime comes along every week or so.
Cheers
K
, I have to question whether you should proceed. Obviously you are very very unsure
I agree with the pp. Exit the contract. Real estate mistakes are expensive. Lurk here for a while. There is supposedly another fall in interest rates to come. The market is largely tipped to fall or at least remain still. Not sure who convinced you that there was so much interest that you had to pay more. You'll find that on this site, there will be people who know the Melbourne market well, and you will learn much from their conversations. It's good to see a first home buyer considering investment property rather than blindly chasing the first home buyers grant. Do lots of maths. Make a spread sheet with a few different "what if" scenarios. What if the value fell by 10%, 20%, what if rent fell by 10%, 20%, what if your interest rate went up by 2%, what if you lost your job, or your tenant? How much movement in all these variables can you afford, and what is a likely and unlikely level of movement. Another opportunity will come up – probably many more. Exit while you can, cheaply, under the cooling off period.
Good luck.
Haste and uncertainty breeds mistakes and regrets. Time is on your side. Let time work in your favour. A lot of people 'succeeded' during the boom even after committing serious mistakes in buying property simply because of the boom. In the current market you just have no option than to do your research and duedeligence thoroughly. I will hate to see a youngman like you get burnt on your first 'date' with property investment. As many others have alluded to…. more deals will come your way. Cancel the deal, educate yourself some more, do your research and then take the plunge.
Both House or Apartment will apraciate in time, if its for investment personaly i would preper to buy unit in a more populated area or with water font.
I think you have a lot of good advice here, this is not the market in which to make a purchase that you're unsure of. Exit whilst you can and then educate yourself and do a lot of research on where and what to buy and how you're going to finance that taking into account some scenariios e.g. interest will go down for now but then back UP.
Great to see that at least you're out there, just be prudent, certainly wish I started when I was 22!
Hi Reality,
I don't know the Melb market so much as I am in Perth, and new to investing myself, but to me I think you should take a deep breath and ask yourself if you are comfortable with the deal. If not, then pull out – there will be more opportunities abound, especially in todays market, you won't miss out.
Cheers and good luck!
How does a 22-year old get their hands on 400.000 dollars of debt ?
Sorry but there's something really wrong about that picture.
Whoever gave you that amount of money should be sued for child cruelty.
And YOU should know better than to get a 400.000 dollar mortgage !!Scamp wrote:How does a 22-year old get their hands on 400.000 dollars of debt ?
Sorry but there's something really wrong about that picture.
Whoever gave you that amount of money should be sued for child cruelty.
And YOU should know better than to get a 400.000 dollar mortgage !!He said he paid $400k for the property, not a $400k mortgage. He may have $100k saved, as far as we know.
Scamp wrote:How does a 22-year old get their hands on 400.000 dollars of debt ?
Sorry but there's something really wrong about that picture.
Whoever gave you that amount of money should be sued for child cruelty.
And YOU should know better than to get a 400.000 dollar mortgage !!Excuse me??
Scamp wrote:How does a 22-year old get their hands on 400.000 dollars of debt ?
Sorry but there's something really wrong about that picture.
Whoever gave you that amount of money should be sued for child cruelty.
And YOU should know better than to get a 400.000 dollar mortgage !!How very condescending. A 22 year old with the brains to be planning for his future, and investing his money deserves our respect, and what he came here for, our advice.
How did it work out for you reality. Are you still in the contract or did you opt out. If you are this worried at the start, do you think you can sleep properly down the track? Be careful not to spend all your energy on chasing the lifestyle and miss out on life itself.
Hope it all works well for you,
Cheers
Mick
newbi2 wrote:How did it work out for you reality. Are you still in the contract or did you opt out. If you are this worried at the start, do you think you can sleep properly down the track? Be careful not to spend all your energy on chasing the lifestyle and miss out on life itself.
Hope it all works well for you,
Cheers
Mick
I ended up opting out. There would be an extra 20k in renovations and even though I think the area and location is fantastic, the unit is definitely not worth that amount (probably 20 – 30k cheaper).
It was a hard decision to make though! I was grappling with it until the last few minutes. In the end it ended up selling for 395 – 400k to the second best offer – I hope I don't regret it in the upcoming few months.
I really doubt that you'll regret it. I opted out of a deal at the last moment a bit more than a year ago, at some cost. I'm really glad that I did, now, and the few grand I lost just made sure that I learned my lesson. But, really, I was much better off to wear a loss of a few grand on the nose, than to risk everything that I had built so far on a deal that was looking worse by the minute. There'l' be plenty of opportunity around, and this will be a valuable experience for you.
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