Hi All,
I have pre approval for about $700k. My initial thoughts were buying two places at $350k so that I can diversify etc, but this also means I will pay double stamp duty, rates, bills etc….
Would it be worth my while rather spending $700k in one property to minimise the bills and hopefully get a higher caliber tenant?
I am looking at keeping the properties long term and looking in a 10km radius of Brisbane CBD.
All opinions welcome!
Thanks!
Kurt
Hi Kurtuk,
What does your due diligence tell you?
Have you crunched the numbers for both scenarios?
Personally, I will diversify to two or three investment properties. Yes, more stamp duty, rates, bills but you factor all that before buying. You should have the numbers worked out already before buying. If worrying about multiple bills is the only factor limiting you to buy multiple properties, then I think you really need to get your mindset right. Having a diversified, quality properties is what you need. having said that, there is also no point having 10+ properties if you will struggle to hold it long term and has very minimal CG or under performing properties.-
This reply was modified 10 years ago by
PHP.
PHP | Mortgage Station Pty Ltd
http://www.mortgagestation.com.au
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Work out what the net yield will be for 2 $350K properties VS one $700K. That way you know what the holding costs will be. Lower priced properties often have a better gross yield (but, as mentioned factor in rates etc) to get a NET yield.
Holding 2 cheaper properties helps alleviate worries for new investors. What are the chances that both will be without tenants as opposed to one dearer one without a tenant? I like cashflow so like lower priced properties. But everyone is different. Others say they would rather a “better” property as the CG is more.
I have a good number in Sydney’s west. Never had a problem. I have friends with “good” properties in “good” areas that have bad tenants. It’s not area specific.Remember your buy costs will be more expensive too on the 2 cheaper ones you have more stamp duty, more solicitor costs etc.
Crunch he numbers. It’s all about the numbers.
Hi Kurtuk,
As the others have already said, the “numbers” will tell you.My initial thoughts were buying two places at $350k so that I can diversify etc, but this also means I will pay double stamp duty,
The Stamp Duty subject brings up an important point – first, each State sets its own Stamp Duties. I used Qld figures to get this :-
Purchasing one IP at $700k – Stamp Duty is $24.5k according to OSR’s calculator.
Purchasing one IP at $350k – Stamp Duty is $10.7k according to OSR’s calculator.So, TWO $350k properties will cost you LESS than one $700k property for Stamp Duty in Qld. Worth knowing, eh? What do these Duties look like in the State you are considering buying?
And, re “paying double Rates and bills,” you have two Rental Incomes to cover them, and USUALLY at a higher yield than one higher priced property might offer.
Doing the numbers will have you more confident about your choices. And might contain more pleasant surprises…. :p
Benny
Interesting comments on this one Kurtuk,
Really depends on the purpose of the purchase. Assuming its for investment:
I would go for market share, $700K would give you access to significant options in Brisbane. Including value add opportunity. I would buy one site with zoning for multiple dwellings, this way you purchase an asset with in built value add to exploit. Rather than having to buy more sites to build up your market share.
There are lots of ways to develop a site. Brisbane, from my experience, offers flexible options including keeping the existing dwelling for holding income. Then building additional dwellings on the same lot, yields a pretty sustainable path. Ensuring holding income and a staged approach to help manage risk.
Done correctly you use the future value of the new product to afford the debt, increasing your market share from $700K to $1.8M or more, without burning more of your own equity. This depends on the site and its location. $700K in Brisbane should get you within 8Kms of the CBD – assuming this is your driver. Importantly also, you can hold the completed product (market share) as the income it derives will fund the holding costs, as per the plan..
Alternative strategies would have you buy and hold, and wait for market help for equity, rather than manufacturing it. Which can burn a lot of time in market, as you may have already experienced?
Development isnt rocket science, but it is important to work with a proven approach so you can benchmark your outcomes and qualify market feedback to ensure you maintain your margins to achieve your result.
Have you considered development to continue the growth of your portfolio?
Richard | PPI Investment Advice
http://ppiinvestmentadvice.com.au
Email Me | Phone MeLicensed Property Financial Advisors providing tailored property advice and solutions!
Hi,
Every one will have a different approach and opinion. I never look at how many properties I can buy, but rather the quality of the property I am looking at buying.We bought a development site in VIC for $515,000 and our budget was $600,000. My return will be greater on this particular investment vs buying two properties at $250,000 each.
jpfinancialgroup | JP Financial Group PTY LTD
http:www.jpfinancialgroup.com.au
Email Me | Phone Me(Known as JPCASHFLOW)
Things that will help us answer your question better
How much do you have as a deposit?
Is this your first property ?-
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