3m spend buy one or multiple? Historical growth vs gentrifying suburbs?

if you have 3m to spend and have the option to put it all into one expensive property or multiple more affordable properties, what would most likely be the best strategy for wealth generation over the long term buy and hold? Also does this change whether I have no PPOR? In which case if i bought 1 expensive property it can be sold tax free in the future vs multiple properties where all the investments are taxable.


Also as part of the strategy we need to consider the suburb. In general is it the safer bet to go with the suburbs with a proven track record like in Vic, brighton, kew, camberwell, st kilda, geelong or gentrifying suburbs like footscray, west footscray, frankston, seaford?
Does it make sense the blue chips suburbs will always continue performing? Or would we eventually hit a ceiling and plateau while the more affordable gentrifying suburbs catch up?

 

It starts a discussion about getting into some commercial property.

 

Why commercial over residential? I assume there is some specific considerations in my situation you recommend this?

 

Use the search function and read up on commercial.
Far longer leases, better return, tenant responsible for fit out (in some cases also the maintenance/rates/land tax even).
So overall less head aches as a landlord
Thoughts @Beano

 

Yup

 

But only if you've got tenants. Some commercial can sit vacant for a long time.

 

I knew there was a catch

 

So I guess your advice is to diversify and that way either way it plays out there would be some gains?

 

I would be looking for something in the inner ring of the CBD like brighton, kew, camberwell, st kilda, geelong with a big land component, established home with development potential down the track.

 

So something high cost, low yield, and high land tax exposure?

 

Well, yes, if it's your PPOR, then we're talking a totally different story.

 

Many of the investors on this forum have been incredibly successful through a strategy of multiple properties in gentrifying suburbs.

 

That rules out commercial

 

I've always been an advocate of buying in cheaper suburbs that have potential to gentrify and have investment going into it.

There are a lot of benefits to me with this strategy.

1) Spread out risk/exposure to a single area.

2) Cashflow. Having 5-6 x houses producing $450 per week vs having 1 house producing $1200 per week. This will help with continuing your investment journey rather than being a 1 or 2 house wonder. Cashflow as an investor is very very important.

3) In the past depreciation would be a lot more on multiple properties than a single one. Now its changed so not sure.

4) Opportunity growth. Having multiple houses grow at the same time vs 1 house grow. This has worked for me. But I know some ppl who bought $1.5M investments and sold for $2.5M within several years. So right now I'm benefiting from 17+ houses concurrently growing for me together.

As a basic calculation just if each house was increasing in value at $5k per month. Thats $85k per month in capital growth your potentially getting. Its most likely $10k per month or much more at this current climate.

5) Holding costs. With larger investments in prime locations usually holding costs far outweigh your rental income. This means your putting in your own money into holding it. This is real cash your actually losing. So you better pray in stagnant times that your house is growing at least the rate of how much money its costing you to hold.

6) Tax benefits. As mention depreciation on all my investments allow me to get a massive tax return each year. (i.e) in excess of $50k for the last 4-5 years.

7) You need to be careful with land tax. I kind of stuffed up with QLD as I bought too many there without too much thought to land tax. Im scared what my land tax bill in QLD is going to be next year after all this growth.

Both options can work. If you are lucky and bought a $1.5M investment and sold for $3M well you've done extremely well. My journey was not that and I will never buy at the top end of the market for investment based on some of the points above.

Goodluck.

 

It does, but I was under the impression he was looking for resi.