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

Something that nobody has mentioned is end game. BTW, I am presuming you are buying for investment, not as a PPOR with this scenario.

Scenario 1: 1 x Blue Chip property worth $3m. Assuming you keep & it doubles in value, you sell it. CG will be $3m. Ouch!

Scenario 2: 6 x lower value properties, bought in different States to avoid large land tax bill. As above, assuming you keep and they double in value. You sell one, each financial year for 6 years. Same amount of CG, but spread over multiple years. Still a big expense, but oh, so much more palatable.

 

What about the idea of buying a single PPOR with good growth potential and selling it CGT free and 'downsizing'?

 

What are some suburbs you recommend to consider in VIC?

Definitely resi, but not ruling out the possibility of adding commercial if it makes financial sense!

 

As I said, it's a completely different story with a PPOR. My comments were assuming you were buying investments.

 

100%.

I have a portfolio with inner, mid and outer metro, regional major towns and regional smaller towns, that I have built over almost 2 decades.

I would pick outer-metro in a cap city with solid infrastructure, connectivity and schools over blue chip any day - like Frankston. And the reasons are manifolds:

-Frankston has delivered the highest CAGR over the past 20 years than any other area that I have been invested in - thats the equity side.

- Frankston has delivered higher yields than all other metro prop I hold (in fact even higher compared to some regionals). The regionals that are better in yield than Frank have excruciating council rates, body corp, land tax. On a net basis, Frank (or something similar) would work out better.

- Sub division potential greatly increases if you buy something on a large-ish block - say 1,000-1200 sqm and this creates significant dev potential and higher on a $ unit cost than inner suburbs where the max you are likely to build will be 2 on a block. If you are near Frank CBD, you could build 6-7 on say a 1000 or 1100 sqm block, so the per unit site cost is minimal, however TH are selling around $750k to $800k.

- Frank also came out tops because it is gateway to Mornington Penninsula region and has seen great results as a result of those regions claiming 4 out of top 10 Aus' fastest growing regions in value.

- The vacancy rates are below 1% and you have a very large gov reliant infrastructure (hospitals, big council, HO of various semi gov and NGOs, etc) which keeps the occupancy levels pretty tight.

- Add on the gentrification and with prop on 800 sqm block fetching c$4m and new apartments that are priced from $700k up to $1.8m and you get the long term picture around the gentrification!

Having said that, I would def consider an inner or middle ring opportunity and then one (largish) or 2 medium sized blocks in Frank with long term dev potential.

But DYOR before investing..

 

I wish cash in hand..70% lvr

 

Buy a $10m property at 7.5% net yield fund the $7m at 2.7% so you get
Rental $750k less interest $189k net profit $561k before taxation
No land tax if you buy in NZ

 

As you are borrowing to finance this venture the above makes more sense.
Better to have all properties occupied, but if you hold 3 and 1 is vacant it isn't as much that you have to tip in until it is leased again

Don't forget "commercial" is varied, everything from $30M warehouses and servo's to little $500K office/retail shops (I hold an office, leases are 2-5 years and tenant covers everything except land tax).

 

What if you are not a NZ citizen, are there any restrictions or additional tax consequences?

 

No restrictions or additional taxes.
Held in a company structure the tax is 28%

 

But my PPOR will always be occupied!

I have 3m total including serviceability not cash unfortunately!

 

Yea ok I would recommend one bigger better location property

% growth wise my $2-3m have done much better than my $700k-$1.3m places (and I’ve bought several in both categories)

Bear in mind $3m doesn’t get you much in blue rib ion Melbourne any more. 200-300sqm renovated terraces in blue ribbion areas go for $2.5-3m. 600-700sqm old houses unrenovated for 60 years on the fringe of blue ribbion go for $2.2-2.5m (you have to spend another $1.5m to build)

So I made this point to my hedge fund and property partner last week. He’s a prolific investor in the west and the north. I asked him if these two areas going to catch up. He said probably not - he thinks there’s a huge cultural rush to blue ribbon

 

Interesting contrarian views. So you recommend putting it all into one prime property vs multiple

 

The thing is, what you need to do is listen to all views, and asses what works better for YOU, in your situation. There's a range of different ways to approach this. Picking the right one for you is the key.

 

Yea not recommending per se, just saying that’s what I’d be doing. Obviously depends what you’re trying to achieve also.

I don’t think it’s contrarian. From what I am see many blue ribbon $2.5-3m places are hot and on trend at the moment

 

Absolutely, but i guess like for most investors not jsut in the property market we are seeking for the best risk adjusted return on investment

I suppose that does make sense where by if you buy 1 property as ppor, then the capital appreciation on the whole amount is tax free versus multiple other properties which will at best have a 50% discount.
Also there is probably the argument that if you buy something more expensive it is more desireable and scarce and therefore will be driven up over time given those factors don’t change e.g. a property on beach rd

 

I'm in a similar situation. Got 1 IP, 1 bed apt in Sydney inner west. Since we have a good amount in offset, the property is in theory positively geared.

We started investing in ETFs and my company is giving me shares on a regular basis and now we started talking about whether we should increase our exposure to leverage by using the equity in our apt to buy another one (similar price, 1 Bed, different area). On paper, it looks good, no need to put additional cash (or less than 10K, but paying around 9k in LMI) and getting a second IP.

The thing is, I think we are already well exposed in real estate and now I'd like to diversify into the share market. Also, and that was what brought me here, I was pondering whether to get another 1 Bed and don't spend a lot or wait when we have more equity and cash and get something bigger or a house.