Possible New Investor looking for some advice

No worries :)

Sometimes there’s the odd gem out there that people put in the too hard basket. But with all the reno shows of late there’s too many weekend warriors wanting to make what they think is a quick and easy dollar and willing to pay top price without doing the proper due diligence.

Few problems with small apartments with the main ones being most banks don’t like them if they are under 50sqm so you need to stump up a fair bit of cash to keep the Loan to Value Ratio (LVR) down, capital growth is limited as people find it hard to get money to buy them and there’s lots of them so there’s not really a unique selling point, can be hard to rent if there’s an over supply and there’s another 24 apartments the same as yours available for rent and body corp can be quite high (due to the lift/s pool, gym etc etc) which would eat in to what little cash flow you’d get from it.

It would depend on what LVR you want to go – (ignoring serviceability and a few other things) with a 90% lend you could get a $220k place and use $22k for deposit ($198k mortgage) and another $8kish for purchasing costs or if you wanted an 80% lend then you could aim in the range you quoted in your OP. There’s a lot of variables but considering what LVR you want to go is one thing to consider.

Hi Phil.

1. Smaller apartments under 40 sq meters generally requires a higher deposit – 30-40% in some cases, depending on the location…so this is one reason why it may sit on the market for a long time as really it’s targeted for cash up experienced investors.

2. Rental yield is important but Capital growth is equally if not more important for your 1st property, as it’s your foundation property; this is where your going to “hope” to get more equity out in 1-2 years time so you can repeat the cycle

3. Have you considered an 90-95% loan??? it’s available and for smaller purchases ie under $300,000 the lMI cost ( Lenders mortgage insurance) is not too bad and def more adorable.

As long as you have an average-decent income and $25,000 in deposit, depending on the lender you choose and your servicing and overall credit file you should be able to buy in the $260,000- $300,000 bracket at a 95% lend.

4. Focus on t he property, suburb, growth potential,. yield and return NOT THE PRICE.
Just because it’s cheaper doesn’t mean it’s worth that price.

5. This is your 1st property and most importantly this money you saved up is your HARD EARNED cash invest in it wisely, dont get the price bracket drive you into the wrong purchase.

Love reading all the comments, thanks for sharing! Something a lot of us can learn from.

Hi Phil, and Ches too,

I’m just wondering what are the best resources for finding information about how certain suburbs are trending and changes in the market?
I have heard of Residex, RP Data, SQM, info on realestate.com.au
Or is it best getting in and amongst the areas I am interested talking to agents and going to open houses and so on?

Much will depend on how you decide to proceed – like, if you choose to buy in an area remote from where you are, then Open Houses might naturally be forced OFF the list. I like the idea of becoming an RE agent’s “newest best friend” in your chosen area. Even if remote, much can be done by phone/email (though it would likely be smart to meet up with them when you are “sounding out” your chosen area/suburbs initially to form a relationship).

With the others you mention (Residex etc), I’ve read that some are more up-to-date than others – and some can tell downright untruths (I have noticed median values posted that seem to indicate massive spikes on a Monthly basis – as useful as an ashtray on a motorbike). A median should be a “rolling window” figure over several months so that spikes are minimised, and overall growth becomes more easily noticed, not the spikes.

In the end, IMHO, nothing beats being in touch with an RE Agent who is “living the market”. They will tell you almost instantly of changes as noted by them.

Benny

PS Glad you enjoyed the “big picture” thread !!! :)