$900k purchase vs 2x $450k purchased?

Discussion in 'Investment Strategy' started by Bryan Loughnan, 22nd Nov, 2016.

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  1. Bryan Loughnan

    Bryan Loughnan Well-Known Member

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    Just wondering what everyone's thoughts on this are if you had the capacity (considering investment only)?
     
    Bryan Loughnan, 22nd Nov, 2016
    #1
  2. spludgey

    spludgey Well-Known Member

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    Definitely more smaller ones. You'll (most likely) have more cashflow this way.
     
    spludgey, 22nd Nov, 2016
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  3. Barny

    Barny Well-Known Member

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    O
     
    Last edited: 22nd Nov, 2016
    Barny, 22nd Nov, 2016
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  4. D.T.

    D.T. Specialist Property Manager Business Member

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    Can't say without more information. It really depends on where you're buying and what $900k or $450k actually gets you in those places.

    If you're keeping to Sydney, $450k probably gets you a shoe box somewhere that probably isn't a very good investment.
    At the other end of the spectrum, $900k gets you a PPOR spec place here in Adelaide that you won't have much rental demand for (above the bell curve of tenant affordability)

    Ie get me 1x $900k in Sydney or 2x $450k in Adelaide any day. Never the other way around.
     
    Last edited: 22nd Nov, 2016
    D.T., 22nd Nov, 2016
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  5. Big Will

    Big Will Well-Known Member

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    To hard to answer as there isn't anything that I can base a decision on.

    The 2x 450k will likely provide you with more CF so holding them will be easier but the 900k could still be CF+ (less chance) but what if it was going to achieve 10%+ growth p.a compared to the 450ks getting 5% growth?

    My recent purchase is around 700k and it has a huge land content (1,600m2+) and is about 10km from Brisbane CBD.

    Would I rather this or 2 houses in Woodridge (median is 300k or 4 bed median being 340k, so roughly the same as your question), I would prefer my purchase.
     
    Big Will, 22nd Nov, 2016
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  6. Chabs

    Chabs Well-Known Member

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    You're focusing on the wrong variable (# of homes). Focus on the right things:

    - Risk profile
    - Expected capital gains
    - Expected pa. cash flow projection
    - Confidence in your answers to the above

    Buying investments is mathematical...
     
    Chabs, 22nd Nov, 2016
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  7. Bryan Loughnan

    Bryan Loughnan Well-Known Member

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    Thanks for everyone's comments/responses.

    Understand that it is a very hypothetical question and obviously without more information is generally hard to answer.

    I guess what I was getting at was trying to see how comfortable people are placing more than a figure like $450,000 on a single investment? I know I certainly wouldn't and have plenty of reasons for that. It is however a question I get asked daily and just thought I would put it out there to see what the general consensus was.

    Thanks again for the feedback - greatly appreciated.
     
    Bryan Loughnan, 22nd Nov, 2016
    #7
  8. DaveM

    DaveM Well-Known Member

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    Not that easy. If I can turn the $900k property into 1.5m worth of property via development/subdivision then the $900k prop is the obvious choice over 2 x $450k props earning you $10pw cashflow
     
    DaveM, 22nd Nov, 2016
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  9. The Y-man

    The Y-man Moderator Staff Member

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    @Bryan Loughnan

    The "capacity" is the key thing here - "capacity to buy" is a totally different thing to "capacity to hold" in a market like Melbourne.

    1 x 900k house or 2 x 450k apartments in many parts of Melbourne (and I suspect many parts of Sydney) is a totally different holding cost.

    If holding capacity was not the issue, then the 900k house for me.


    The Y-man
     
    The Y-man, 22nd Nov, 2016
    #9