Good morning all,
I have been trying to work out just what sort of property to buy and where, the choices are endless! I am trying to buy smart with a theory of buy and hold/rent for long term positive passive income.
Last week I looked at a very old home in a little regional town of only 3,000 people. This appealed to me as it has a cheap entry level (under $100k) can renovate and improve value immediately, would rent and pay it way almost immediately and shows some potential for captial growth (although as such a small regional area I see there is a high risk component to the capital growth). total investment probable $150k.
This week I looked at an old home in another regional town (a little closer to home, 15,000 people). This town appeals to me as I know it well and believe it will show consitent rate of capital growth. The property would need some work but would yield about 4.5 – 5%. The property is priced just under $400k. I liked this property as apposed to other newer properties in the town because it is on a large parcel of land (1500sqm) in the towns medium desity area (based on town plan). Therefore I see this property has two way to have its value increased 1) reno the home 2) get da for the land.
I was very excited about this despite the fact it would extend us financially (doable now but a dit disastrous if my not so stable income became no income).
Last night my partner brought up a very good point. He says if you plan never to sell then why buy a property based on re-sale value why not buy a home in the same suburb on smaller block, newer with same yeild and similar capital growth? hmmm??
Anyone have any ideas / advice for me?
It is a minefield isn't it!! Don't really have much to offer except the property in the town with the pop of 3000 you may have trouble with finance.
I'm not that into passive investing so my first thought when I read your post was that I would buy the $400K property, rent out the house and subdivide the land – selling the block to take a huge chunk off the mortgage thereby creating a +ve cash flow property.
Thanks Mosic,
That would be ideal however the configuration of the block does not really allow for it (25m wide by 55m (ish) deep). Would suit development but not subdivision. It is the only allotment in the town that is large enough for medium desity development within the medium desity zoning and thus the reason it pricked my interest. Was thinking this fact would make it desirable in future for those seeking a development opportunity.
Would you not consider doing the development yourself?
yes I would I guess my concern was my ability to get funding….
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