Acreage or investment unit

Currently tossing up whether to buy acreage in the Bendigo region or to buy a unit/apartment somewhere smart in Victoria. The land would eventually become my home (dream property) whereas the unit/apartment would simply be income to save more for a block of land later down the track.

I’m quite young but have the money available to do one of these (not both). I’d love to purchase my dream land now as I’m worried land will run out but could an investment property help me more in the long run?

looking for an unbiased opinion. Thanks.

 

What’s the point if buying your “dream land” now if it doesn’t perform as well as other investment vehicles in the meantime?

 

Well exactly. It’s my dream land but it won’t be making me money. It’s something I’d do because land isn’t something that’s going to be easy to get in 10 years time.

 

A couple of comments:

1. If one buys vacant land where there is no income, then all expenses (rates, maintenance, etc) are paid with after-tax dollars and there are no tax deductions.
2. Whereas when one buys an IP, there is is income and expenses are tax deductible. The tenant and the tax office help one to own the IP.
3. When buying an IP, my preference is houses (not units) on as big a block and as close to the CBD as one can afford. Land appreciate, buildings depreciate and all that stuff.
4. Finally, in my experience, dreams change over time. If one wants to live the dream, live it now.

Hopefully that is some food for thought.

 

Your initial post is a little light on for detail.

Are you intending to purchase either the land or the unit with cash?

 

no I don’t have that much . I have enough for the deposit and I earn enough to pay it off alongside my house that I’ve recently bought.

 

Thank you, very good points.

 

How young are you, exactly?

 

Not sure why that’s relevant? Young enough that there’s no pressure for me to buy either but I have the money to do so, unlike many my age, so why not? I’ve recently bought a house to live in and don’t see why I should stop there.

 

Why would it be harder to get than anything else with money though? So maybe just focus on making money with your investments in the meantime?

 

Hard to give an answer without knowing how much money you have. If you can buy a unit such as one I saw advertised for sale last week for 169k which is advertised now for rent at $270 which could net you 7-10 k p/a depending on how much you borrow, I think would be better than buying land. You could take out 100k equity buy some shares and have $ 700 a month from rent to DCA into more shares. The shares could be cashed in to buy a property latter. Or The rent , dividends, partial sell down of shares and property GC could help finance the dream property. Altternatively just buy shares if you like land maybe invest in an REIT such as RFF. It would be better than directly buying land because it doent have the costs and has better returns and is just easier. Land will probably have a significant correction or may at least have minimal growth for a decade or more.

 

Your dream home might change when you have a partner, kids etc.

If you invest in stuff that goes up faster than the dream land, that would make it easier to buy in the future? And have extra for income in retirement.

if you are young, plan the investments. Do well and you can always afford to buy better later. Esp if you dont plan on living in it for a while yet.

 

land generally is what goes up in value. You can subdivide it, build on it, add value to it, enjoy it etc.
Units have low land content generally and you have strata issues.

But depending on the circumstances each could be better than the other.

 

Buy land as it goes in value and building depreciates. But this is in general. If you buy unit at right location, it can go higher in value too. So it all depends. So many factors come into plan and only you know your circumstances. Right question to ask is pros and cons of land vs units. I think @kierank has provided you answer to that.

 

To clarify....
You have a recently purchased house/home, and find yourself with enough cash left over to buy a unit or land ?
Or have you recently bought a house/home and have enough equity and servicability to facilitate a further purchase ????
Clarification of the above really makes a BIG difference !

Without the info, Bendigo region and land is like throwing a stick, there's miles of "land" in every direction
I wouldn't be looking to buy a Melb unit/apartment either
Buy a regional house for investment or invest in shares/managed fund as @Ruby Tuesday suggested, build up your portfolio and buy bigver better property later

 

Yes! I’ve had this thought process too. Thank you, I agree!

 

100% would not buy a unit in Melbourne

 

Exactly right yeah.

 

I’m in the very early stages if planning this purchase but here are my numbers:

Cash: $114,000
Income: $4400 per month
Current house repayments: $1000 per month

So right now I’m only putting a quarter of my income towards real estate so I feel comfortable to purchase something else and pay more.

If I were to buy either land or a unit my budget would sit pretty strict at $300,000 with a 20% deposit ($60,000). That would make my repayments roughly $1000 per month for 30 years and cash leftover: $54000 (use for investing in stocks etc).

That then gives me 50% of my earnings going to savings/expenses.

If investing I could obviously make profit but I want to be sure I’m making enough for it to be worth it.

If purchasing land I lose the ability to have an income stream for the future. But, with rent being paid, I could use that to save/invest in order to buy land further down the track. It’s all going to be based on logic and reason I’m thinking.

Very new to all this so no judgement thanks

You’re all being very helpful

 

I’d buy an acreage. Simply because I like acreages. And guess what, they go up in value.

I have thought about buying acres in the past and now regret not buying.

About 8 years ago I thought about buying 5 acres on Stoney Creek Rd at Shanes Park. 600K with an old house. (about 50 km west of Sydney).

Todays value 2 million at least pffft. Missed opportunity.

So I wouldn’t dismiss acreages.