Apartment Investing??

Are you sure you want to reduce LMI as it is a deductible expense.

Personally I would increase the loan amount and use the additional funds to either invest again it or cover a basic internal Reno. There is one lender that provides additional funds at settlement which can be used for renovation or even for deposit on your next IP.

As for whether you should buy an apartment this will depend on a number of aspects but as long as the Body Corporate expenses are not too expensive and the property is in a good location wouldn’t have a problem.

Sometimes it is a matter of getting on board and building your portfolio from there.

Cheers

Yours in Finance

Hi Jared,

You didn’t state how much you had in total to spend? e.g. $350K – $400K.
It is pretty hard to buy anything decent in Melbourne under $400K unless you are a long way out. You need to be mindful that the further out you go the harder it can be to rent as demand is much weaker as less infrastructure , transport , employment etc.
Let me know some specifics and may be able to help you. All the best of luck.

Regards,
Ian

• This reply was modified 10 years, 2 months ago by  Ian Finney.

jarydneethling wrote:

Thanks for all the feedback guys.

Richard, I had no idea that LMI is deductible! I always thought that you can only borrow against the value of the house and not increase a loan to cover things like renovations. Would you be able to let me know what this lender is?

Hiya

Most lenders will allow an equity release for renos – especially if it’s non structural.

Cheers

Jamie

I was attracted to this site through a facebook ad for Mark Rolton which I have serious misgivings about but that’s another story. A bit of background, im an ex bank employee and ran one of the Big 4s credit operations in Sydney before moving into mortgage broking and am also a qualified financial planner, ive spent all my working career in finance which is just about 20 years.
The short answer to your question Jaryd is – Yes apartments are a sound investment. Though there are many things you need to consider in terms of your personal circumstances and what you hope to achieve medium to long term. Property or any investment should not be considered a short term investment in my view. The mantra here is Time in the market, not timing the market.

Couple of quick ones Richard is correct LMI is tax deductible over 5 years in equal instalments. Why is that important, well if your looking at neg gearing the higher the borrowings the better the tax deduction available though I recommend a max 90% lvr as LMI premiums are ok at that level, above 90% and you paying greater than 2% in LMI which can become exhorbitant in my view. Plus it also gives plenty of options on a lender front

Ians comment rings true, however the main reason you don’t want to be too far from a CBD is the reduced appreciation rate of the property. As it is your first investment I would assume your looking for it to appreciate in value as quickly as possible and the further your away from the city the more likely the growth takes longer. Sure there are exceptions to this but from a safety perspective the closer you are the more saleable a property will be in the future.

Nigel, well im sorry but I totally disagree with your comments, off plan can work no problem, and there are massive advantages, not limited too tax and depreciation savings, but predominantly due to the rent you can command and the quality of tenant, “A GRADE” tenants are what you want and new property gets the pick of these everytime. With any property purchase the research needs to have been done, that is why I recommend a property research house to my clientele, simply these people are professional, have skilled staff who access information that the general public cannot access from sources that most wouldn’t know about. They have key metrics around the state, city, suburb, street and property itself must meet for any buy recommendation, they have a research model that’s independently audited, negotiate price and provide their IP for free but only to clients who are referred to them. They don’t deal with the general public and they are sought for comment in most leading property magazines, tv and radio.

A stat for everyone, Melbourne currently boasts the highest single dwelling household rate in the country at nearly 50%. That’s right approx. 50% of Melbournians reside on their own. Clearly its important to understand market dynamics in an area your considering investing in and unfortunately the public struggle to obtain sufficient info to make informed decisions. Sure people make money out of property or shares everyday, but unless your at the coalface of the industry its very difficult to know exactly whats going on. My analogy here is if im sick I don’t go to the butcher for health advice, I go to the doctor because he is the expert. Investment is no different.

All in all Jaryd my basic advice is this, real estate has 3 interlocking keys, price, type and location. Your price point affects where you can buy and what you can buy which in turn affects the location. You cant buy a 5 bed home in port Melbourne overlooking the bay if your price point is $350k, so what you should do is seek advice from a specialist (just be sure to check their methodology and credentials first). If your ready go for it.

Cheers

I agree if buying anything apartment wise or off the plan make sure it is Low to Medium density and has something special or unique about it. Make sure there is some land component in the project. Buy one of fewer apartments, not one of many ie. “less is more” remember “land appreciates buildings depreciate”.

Regards,