SA Adelaide Property News 2018

I have a similar story. After first finding the Somersoft website in 2014 I discovered the Affordable Homes Program. Within 12 months I purchased a 3 bedroom house in Salisbury Downs with 800+sqm of land for 230k in January 2015. I didn't renovate the house (I installed an air conditioner) but the valuation came back as 260k and I purchased my PPOR in 2016 with the help of that 30k equity. The house is modest but built like a bomb shelter. So far it hasn't required any maintenance and is positively geared at $300 per week. At worst it's a positive cash flow property with future development potential.

 

What do you think has best long term (5yrs) return for Salisbury?
Option 1 :300sqm 3 bed newly constructed property at $250k
Option 2: ~700sqm 3 bed 1960 built property at $250k.

I am from Sydney and have budget constraints but want to invest in long term with an intention to have positive cash flow but open to negative gearing in short term.

 

100% option 2

 

Option 2 would have the potential for subdivision and that will give the better growth potential.
However check your cashflow budget as the older home will have higher maintenance and less tax deductions.

 

Any investor in this forum who has followed that path and actually subdivided. Love to hear stories and any complexities involved so that I can be better informed at the start.

 

It's not actually about the doing the subdivision, it's about the potential which increase the demand... which increases the price.
An already developed brand new unit, what are you going to add to this property? Nothing except maintaining a likely cheaply built property.

 

It's because it has the potential to subdivide and create more value.
The trick is to determine if after the subdivision there is actual profit in it, before you do it.
However your looking to hold the property for a number of years and therefore this potential may see a better growth in resale value down the track.

 

Agree, it's only the land component that has any value in little old Adelaide, apartments are not good investments unless you buy new for the depreciation and stamp duty savings.

 

Even with depreciation and stamp duty savings, many apartments sell for a lot less than their purchase price, years later. Plus there is the high ongoing strata fees to take into account.

 

Since I am not local to Adelaide and been there few times to see friends, I am.not aware of any additional complexities. For eg I am struggling to understand how demolition/ subdivision happens in a joined property. I don't know the term for those type of houses which share the wall similar to a Duplex. Like this:
57 Rolleston Avenue, Salisbury

https://www.domain.com.au/2014615135

 

The listing says it's a duplex.
Buy and hold, and hope to buy out the other block, too?

 

I believe it's possible to knock down one half: Maisonette - advantages/disadvantages

But that's a long block with a decent width driveway to it's side... I think the ad may be alluding ("develop the backyard whilst living-in or renting it out") to running a shared driveway down the side and build/subdivide out the back?

 

Would suggest it's just the agent trying to fluff it as much as possible.
Don't think doing a hammerhead, behind a duplex in Salisbury would be very attractive.
Personally would be staying clear of duplex unless you're trying to buy both.

 

Have you gone over the numbers for all the options to see if it stacks up.
Here's a few to consider, current value based on comparable recent sales, Land value as it is now, land value if sub divided etc.

 

Can I ask how you were able to use the 30K equity in your next purchase? I am in a situation with similar numbers but unable to release any equity on account of lenders mortgage insurance above 80% LVR, thus severely reducing the amount usable towards the next one.

 

Sometimes LMI is a necessary cost to move forward

 

Investors shouldn't be fearful of paying LMI, especially if the plan is to hold the property long term. LMI is a loan cost which can be written off over 5 years or the life of the loan, whichever is the sooner. Very much like depreciation and can increase the after tax returns. It is still is a cost and therefore needs to be factored in. LMI is a tool to be used and can increase your ability to fund more purchases or to preserve your capital. Same for homeowners, they can purchase a home with less deposit.

 

This Adelaide home will cost you less than a CBD parking space - realestate.com.au

I am guessing the parking spot would be a better investment?

Is Torrens like Green title in WA?

 

depends how long term you think
5 years - probably option 1
10 years plus - easily option 2

reason I say option 1 short term is because if your bought a big block.and built two houses it would probably cost you 500k

so I think the new house for 250 represents fair value which is unusual for new homes In established areas

obviously the big block has that compounding affect. If a normal residential block becomes 300k at some point I the future then your 700sqm block could be worth 550k

where as your new house which is now almost 10 years old is probably only worth 450k

cheers

 

I had a 65k deposit. At the time I was speculating whether to purchase a house in Victoria around Broadmeadows because I was looking at the median house prices in Melbourne compared to the lower socioeconomic areas in Melbourne such as Broadmeadows and thought they were valuable in comparison. However, due to being inexperienced and hesitant of incurring LMI fees + extra stamp duty + travel fees I took the option of purchasing off the Affordable Homes Program in Adelaide, which I knew was still below market value. In hindsight I would've been better off from an equity standpoint investing in Broadmeadows but you can't change the past.

Since I had a 65k deposit I didn't incur any LMI on my Salisbury purchase. I then used the 30k equity and incurred an LMI hit to purchase a 400k PPOR. Once again in hindsight I would've been better off delaying the PPOR for another 12 months and saving or purchasing in a different location (my income has risen 30k p.a since 2016) but at the time I loved the house I purchased and still do.

As for the next stages in my journey I have now got my PPOR down to <80% LVR as well as the Salisbury property at <80% LVR and am thinking of purchasing a property in inner Adelaide for around 600k next year. I was considering purchasing an IP in middle ring Perth (Thornlie/Gosnells) area but I think in the long run the house in inner Adelaide will probably outperform middle ring Perth.

Edit- Looking for a bungalow in Edwardstown / Ascot Park area for next purchase.