Investment property

Opee .. the answer is a weight to judgement.

Now, people will say that a house is the obvious answer .. because it may have the additional land component that could lead to additional subdivision and further growth.

Thats all true .. but the overall picture is a house remains higher overall maintenance than a unit. It also comprises a higher additional purchase cost in most cases .. so it may take you longer to achieve an acceptable neutral or positive gearing on the investment.

What must be weighed up in the approach on the investment is the actual demand for a home or unit in the area, the ongoing costs for maintaining and upkeeping the investment .. and the chances of continual and uninterrupted use.

For a reasonable example .. a student unit in Prahran sounds like a cheap option into entry in the market for a unit purchase. However, there are serious possibilities that Swinburne Prahran (the local university campus) may be vacating that site in the very near future. Will there be an ongoing demand in Prahran for student living? Sure the students can go elsewhere for study. But does it change the need for using student apartments in the area? Will you find your student apartment empty for longer periods of time?

It might sound obvious .. but in Dandenong thats exactly whats happening. The new and improved 2BR apartments are of course the preference of choice for the fussy renter. And thats meaning the existing 2BR unit stock is having to resort to better finishes .. lighting and facilities to attract the renter at a good dollar.

Your weight to judgement should entail measuring whether there will be ongoing demand within the next 5 years for your property. As an investor .. no-one can really see beyond 5 years with any degree of accuracy. But you should be able to see ongoing trends that will validate your purchase and its potential growth .. regardless of property type.

Shared ownership costs (body corporate expense), Council Rates, expected rental achievement, ongoing maintainence and accumulated billing totals should be the factors you weigh up when approaching the property. The lower cost you spend on keeping the property sound and lettable .. the easier the property is to look after for the long term.

There are pros and cons for each option. Units are cheaper and thus have an easier entry point for investors. They generally have higher rental yields than houses.

Depending on the area my personal preference is the house for exactly the land. You have more opportunity to get Capital Growth with a house than a unit. Why? You can renovate it more extensively, you can extend up, down, sideways and you can develop (or at least get DA on it).

Make sure you do plenty of research on the property either house or unit before you make a decision. We run property reports on specific properties which shows recent sales, on the market properties, etc. Email me the property address and I will send you the reports.

Opee i agree and that's how i have always structured my portfolio.

Cheers

Yours in Finance

I think you should hire a local real estate agent who knows everything about the area where you want to buy some property. He will help you in finding a better place as per your needs.

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real estate in aventura florida

Hi opee,

Camberwell is great. Just make sure you are purchasing based on the numbers and not on emotion. I personally LOVE Camberwell, but have never bought anything there as the numbers have never stacked up. You can pick up some great (needing reno) units (single level 2×1) for around the $550k mark and yes a house in desperate need of renovation wont be anything under $1mil. Having said that, if you do enough digging you may find someone who wants to get out in a hurry, and might pick up something, if you know all the agents.

I'd take a look at Box Hill South, behind the uni as well. Prices have come down again to what they were around 5 years ago, for some properties, not all. You can get something that will offer subdivision potential, so later you can add value. It's not just a student area, people who can't afford Camberwell buy there, and with PLC around the corner people rent there.

There are some great deals getting around, you really need to do heaps of research and know the area back to front. It's about knowing everything you can about an area, and about the properties for sale around there.

Good luck, let us know how you go!

Cheers

D

Good call Tom,

Yarraville is good and you can still pick up some nice period houses, and the cafe strip is nice there, dodge the trucks on the main road tho!

I still like Sunshine (nope would never live there) but as an area to invest in, it's got some good fundamentals, like transport, shops, ease to city etc. I think it'll still have a bit of growth, but I should have bought there, when you could pick up a house walking distance to the shops for $250k.

What about Kingsville, Seddon?

Good time for some bargain hunting in Melb I think!

Cheers

D

Great points there Tom, it's really about picking areas that have the infrastructure and the appeal of being 'next door' to the nicer parts. Gentrification happens all the time, slower in some areas than others but look at places like Richmond, St Kilda, Brunswick. Years ago these areas were 'dogs' but now…. cost a fortune and full of nice places.

Cheers

D

You are right buddy that real estate is a good business to invest and get profitable return on the investment but I have heard that experts predicted about the real estate market and according to them real estate market is in recession and it will boom again after spring 2012 so people should avoid investing in real estate until spring 2012.