I’m new to property investing so please forgive me if my newbie questions appear to be common sense to others.
My Situation
Dual income long term expats, no kids, with a current property (apartment) in inner north/west Melbourne. No plans to return home for min 5 years. Property rented out.Plans
Wanting to invest in inner north of Melbourne (Northcote/Brunswick East etc) with a townhouse but open to recently renovated period homes. Capital growth the major focus but need rental yield to cover interest payments on loan.Dilemma
1. Buy in established or look to fringe suburbs which are yet to ‘take off’
2. How much to spend on a townhouse. Budgeted at 850k but is this too much for a second investment and townhouse?
3. Two or three bedroom townhouse. Greater chance of securing renters with a 2 bedroom in mentioned areas as rental price for 3 bed would be high?
4. Most 2/3 bedders are priced between 500k to 800k with some going over. Borrowing too much?I keep switching back and forth between a house and townhouse. Keep switching in between 2bed/3bed and established/up coming suburbs. Would love some advice and where to go with the above.
Thank you in advance.
Hi Investa99,
Mate there are a lot of questions in there and I would have a lot of questions for you in order to give you any decent advice, and I would suspect that that is why you’ve had so many views and nil replies. I will throw some questions back to you which I would consider the best way for me to give you advice – that is that you’ll come to your own conclusions as a result of asking more questions and getting the answers to them.
The questions I would ask you is (looking at your dilemmas respectively):
1. Do you live in the area? How much do you know about it? Established vs fringe comes down to a couple of items – what is your pre approval at (as this will dictate how much you can borrow and in turn invest) and what information do you have that supports each area? Break it down as pros and cons for established (better area?/yields?) and pros and cons for fringe (lower entry price?/better yields?/possibly better growth (take off? why do you think it will take off, what evidence is there to support it?)) – all depending on your budget and strategy (as you mentioned).2. It depends on your strategy. Is that too much? its up to the individual to ascertain what is too much or too little – attempt to make it as objective as possible (and not subjective). Work on your strategy – what are you trying to achieve in the next purchase? What is your exit plan? what is your overall goal? These will dictate what your purchase next and what your return has to be.
3. This is a question about the specific market and you should consult the local real estate agents for a comparative market analysis (CMA) for perspective rental yields, and by all means look at the local market through any means to get more information – even go on realestate.com and look through it for rentals in that area and get a feel for it. Go to open properties in that area and ask the RE Agent what the rent would be. Learn the area and ask the locals. RE Agents will be able to tell you what properties rent out faster and why. Always get a second/third/fourth opinion, do not just talk to one person and take their advice as gospel. And of course you can always hire a buyers agent.
4. I dont know what your capital is (cash/equity) that you are going to use, so I dont know how much you need to borrow on a rough listed price. Is it too much? Depends on your strategy and risk, and the potential return of the property (folds back into strategy).
My advice would be to sit down and do a consolidation of everything. This is typical advice I give to a few friends and colleagues – if you have access to equity – how much? How much can you save month to month (do you have a good budget in place and are you saving?)? How much can you borrow? What strategy do you have and what does this dictate for your next property? What is your exit plan for that property? Are you buying in personal names or a trust (dictated by strategy)?
I hope I’ve given you a few things to take away and work on. Good luck, and happy investing. I just got contracts exchanged on my 9th property, and those questions above are questions I always consider for the next purchase or sale.
Cheers
Ben
Many thanks for your reply, Ben. Your assistance is most valued.
When I consider your questions and give my position some thought, I realise I’m somewhat on the right track, just need to articulate it better and punch out the maths more.
Once again, thanks.
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