Hello guys, I am a newbie here and have been reading a lot on this great forum and we are coming slowly to a point where we are planning to buy our first IP. We currently have a PPOR with outstanding mortgage of 350K (House Valuation 620K) in Perth. So this is my situation. I'll have around 50k deposit available and around 150K in equity. I wouldn't want to stretch my buying power too much, so I'm willing to spend around 500K. So my question is, do I buy a townhouse in a really nice area or should I buy a old house on a big block with sub-division potential in not so nice area (Balga, Girrawheen, Nollamara)? Everyone mentions buy a house to avoid Strata fees, but if i buy a freehold/torrens Strata townhouse I won't be paying Strata, right? Also as they say 'land appreciates, building depreciates', but as an owner of a townhouse I still own a share of land, right? And that land can be on a much more expensive location. Also I have been researching in other capitals like Brisbane, Adelaide, Melbourne. Please share your thoughts and help out a newbie like me. Cheers
Hi AP121, and welcome. There are lots of threads in PC re: what to look for when choosing an IP. Let's start with finances.. What do you mean you'll have $50k deposit and $150k in equity? If your PPOR is worth $620k, you should have: $620k x 80%LVR - $350k existing loan = $146k in available equity Does that mean you have $50k in cash saved? If so you need to read @Terry_w 's tips. Don't use cash if you can avoid it. Without knowing your personal situation, I'd think you'd be better off holding the cash in an offset against the PPOR mortgage, and setting up a few LOCs (line of credit) against the $146k in equity. In WA, you don't pay strata fees on Green Title (Torrens Title), nor do you pay it on Survey-Strata. Strata fees only apply to Strata developments with more than 4 'units' (e.g. villas, townhouses or apartments). As for what and where to buy, that will largely depend on your strategy. Are you looking for positive, neutral or negative cash-flow? capital growth? buy and hold? develop/renovate? Perth in general is a very soft market right now, and I think it will be a few years before prices start going back up, some areas might keep going down yet! So you'll be tying up capital for a few years with little/no growth prospects (just my opinion). The issue with outer suburbs at the moment is that there is a lot for sale, and even more for rent. If you do pick something there, it will need some stand out features that make it more desirable than surrounding stock (but you don't really want to be paying extra for those features). Yield and occupancy rates are not great in Perth right now.
I am looking for positive cash-flow and capital gains and was thinking that since Perth market is very flat at the moment there are certain good opportunities out there.
@Phase2 Thanks for sharing your thoughts very useful information. I am actually exploring other cities such as Adelaide/Brisbane
Hey there, I would always suggest buying something subdividable over something that isn't. You'll find that with recent lending changes that having the ability to reduce debt if need be, or being able to get a 'free' block, you'll go much further than just relying on a buy and hold strategy.
Rents have a dropped a lot in Perth so you might struggle to find positive cash-flow. Renovating, extending and building are ways to create additional cash-flow
@Jess Peletier Thanks for the suggestion. Weill I am looking at the idea of buying in Nollamara/Balga that are kind of low socio economic suburbs with big blocks R30/40 zoning and potential for capital growth.
@Perthguy I have noticed that as well. Rents have significantly dropped and that's why exploring other cities as well.
For something exceptional, yes. I settled on a property in July of this year. But you will be looking for: * buy under market value * opportunity to increase cashflow (renovate, reconfigure, extend, retain and build, demolish and build) * future development potential * capital growth potential The property we settled on in July was under market, reconfigure from 3x1 to 4x2 and CGT potential. Prior to reconfiguring it was cashflow negative. Afterward it will be cashflow positive. Down the track we can build at the back of the property.
AP121 ,i would wait if I was you,I live in Balga ,prices still going down here,to many construction going on here and so many empty rentals too
