hello i am about to purchase my first investment property i am stuck on weather to purchase a unit or house and am planning to sell my investment in about a decade in which the predicted median will be around $1000000 using buy and hold but also want a decent rental return to assist with repayments. so my question is do i look to buy a fairly new house ir unit now only 1 or 2 yrs old or go for an older hpouse with bigger land at arounf the same price but propably less rental returns and more capital growth. i am only 21 and am starting to stress about my investment. help please
best bit advice is not to stress, not worth it! secondly don’t over analise things
Smart Investor,
Good to hear that you are doing your research and analysis before taking the big leap. Many investors do not think through their strategy or entry and exit points. Based on my own experience over the last 6 years of investing in property including homes and units, here are the things to consider:
Units – low maintenance, lower rent required, more potential tenants (lower vacancy), lower entry price point generally
BUT also – strata fees, potentially more complaints from neighbors, appreciation at times not as high as housesHouses – both land and building appreciation, more freedom to redesign/restructure, generally higher appreciation if in similar area
BUT also – more structural responsibilities, higher price entry pointIn response to the old vs. new… I have never been able to justify buying and renting out a new property. The yield % have been significantly higher for older properties and provides me more comfort knowing the potential damage costs will be lower since fixtures and the building have already been worn.
Just my thoughts…
Hi Smart Investor,
The main question you want to ask yourself is, what can you afford? If you are financially fit to buy a house, then I would suggest buy a house, instead of a unit due to the reasons outlined by globaltraveller.
Especially, how you made your point, that you wanted to hold it was approx 10 years. Buying a house is definitely the choice u should take in my opinion.
It is very important that you educate yourself before you buy a property. I have the time to educate myself through books, seminars and discussions with professionals in real estate before I did anything. Once you have received some training, you really need to act and buy something. There is no substitute for real world experience.
Can I ask about your plan? You plan on selling it in a decade. Why? What then?
What's your purpose in buying the property? Sounds like your goal is purely capital gain?
How much money do you have for a deposit and legals etc? This will pretty much determine what you can buy. Also how much can you afford to pay out of your pocket each week.
Why are you stressing out? Time is on your side.
Sorry about all the questions. Just trying to get a clearer picture of where you're headed.
It's not really about house vs unit vs new vs old. It';s about A particular property that has the right numbers and gets you closer to your goal. You first need to work out what that goal is THEN look at property and choose something that leads you there.
Hi, catalyst is exactly right. To be 21 again, ah!!!
Consider this: what would you do if your property went backwards for 10 years? You get 4.5% yield so fork out 2.5% in costs. Then price drops by 20% add to that, transaction costs, you have a deficit to answer to.
I bought my 1st house for $166200 and it rented for $400 per month. The house next door sold for $104000 three years later. My house would have sold for $120000.
I gritted my teeth & bore it for 11 years. Prices went up in year 9, 10 & 11. I sold for $310000.
It's rare but it can happen : we can get 10 years of flat or -ve growth. So be prepared.
KY
Aim low and go slow.
IN other words if you calculate you can afford something worth $350000, aim lower, eg $250000 or less (eg regional) and get a feel for the whole buying/managing process.
No point plunging in up your eyeballs in debt at 21, but definitely worth plunging in up to your waist.
You hvae to factor in the unknown, like interest rates increasing, vacancy periods, other unrelated costs you have (eg stuff, kids, spouse etc). Then you will not be pushed financially to the point you get forced to sell when you don't really want to just to stay afloat.
Most people have heard of the saying that the most three important things about real estate are location, location and location. For investment, there are also three things that matter the most – diversification, diversification and diversification. There is simply no magic rule of buying only one type of real estate to get rich, such as land or commercial premise. The reality is that with properties, there are markets within markets in terms of both property type and location, and each market has its own ups & downs and return potential etc. The question is not do you take money out of apartments and put it into land & houses, or the reserve. It should never be a ‘either/or’ scenario. If possible, try aiming to build multi-state portfolios of houses and apartments over the long term.
Please visit my blog for more info on property investment:
http://propertyportfoliospecialist.com
You must be logged in to reply to this topic. If you don't have an account, you can register here.
