Brisbane investment strategy - 2 or 1

Discussion in 'What to buy' started by Acekev, 8th Jul, 2017.

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  1. Acekev

    Acekev Member

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    Hi PCers,

    Fun FACT: The Romans used to clean and whiten their teeth with urine. Apparently it works. Please don't do it, though.

    Now down to business.... quick background info.
    Wife and I are actively looking to invest into Brisbane. We have done seminars, researched, acquired profession accountant (well experienced in investing himself), Specialised Broker, Ground visits and more. However analysis paralysis is still a big thing as I want to make our first investment as successful as possible.

    Today I have finally put down an offer for a property however my question to anyone that can assist is this:

    We have a preapproval for 400K however can very easily exceed this limit if need be (roughly x2). The advice I have been given is that 2 decent properties in the outer rings would be more beneficial then 1 that is closer to the city.

    The area I'm currently looking at is Bracken ridge/Strathpine area. Do you think I should increase finance and be looking closer to the cbd where annual growth is higher?

    What are your thoughts?

    Thankyou for your feedback
    White Teeth Kevin.
     
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  2. larrylarry

    larrylarry Well-Known Member

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    Welcome Kevin. In the current lending environment, the emphasis on serviceability is becoming more important. I think the brokers would offer some insights.

    Would buying one near the CBD:
    1. Give you cashflow after all deductions and outgoings?
    2. Would this property allow you to buy another property easily?

    Also, what's your end goal?
     
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  3. Acekev

    Acekev Member

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    Hi Larry, Thank you for your quick reply.

    To be honest I have yet to look into the inner ring so would not know of cash flow outcomes for this area.

    Because its still early in my portfolio I'm looking to increase growth more than my cash flow. I'm aware of the serviceability issue and thus was looking at my first being negative and 2nd being pos/neutral to counter balance.

    These properties would be a sit and hold strategy and then use the equity to fund the next investments.

    The big question is whether its beneficial to buy into a well established area with proven growth but high price tag or buy twice into an area with potential growth.
     
  4. dabbler

    dabbler Well-Known Member

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    You both have shiny white pearls in that avatar, but I won't draw any conclusions..... but is that what that info was for ? :)
     
  5. eletronic_exp0430

    eletronic_exp0430 Well-Known Member

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    Bracken Ridge is < 20km from the CBD so its a good area for future growth for sure. Its close to the airport and entertainment center and a heap of other good amenities.

    Strathpine, Bald Hills, Bracken Ridge I personally like very much in the short/medium term. TBH with what I have been hearing and seeing on the ground the entire of Brisbane is getting pretty damn hot including Logan, Ipswich and North side. I've attached the same article I did in the other thread which provides input on all the large infrastructure projects going on in each of these councils. Have a read very good insight in there.

    It look me a few weeks to land a deal in Logan recently due to high investor demand and alot of OO as well so I'm more interested in SE Brisbane. I like the suburbs that are in the middle say < 35km from Brisbane CBD and also quite close to the Gold Coast.

    So from someone who is actively looking to buy a house in Logan and sending out offers very recently I know the market is growing. I can only see positives for these areas especially the next 5 years.
     

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  6. Sackie

    Sackie Well-Known Member

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    I'd probably try to get as much of that 800k leveraged in to the Brisbane market as I can. Homes as close to the CBD as possible that a 400K X2 properties will buy you. The key is if you can buy something with a twist or something that will allow you to add value later one. Personally I would not buy TH, only homes on as large a block as you can find.

    So to recap, I'd buy 2 homes with OO appeal as close to the CBD as the 400k will allow and something with add value potential. That's assuming you have the deposits, serviceability and it meets your risk profile and goals.

    My 2 cents.
     
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  7. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    A slightly different option is to buy a bit higher and find something you can split and build-you may find a happy medium that way.
     
  8. propertylad

    propertylad Well-Known Member

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    Just about to settle on a property in Strathpine. Had the help of a BA who recommended Redcliffe peninsular or suburbs within 5k's from the new Petrie Uni at the $400k mark. I personally see a lot of value in the North of Brisbane compared with Logan (where I grew up).

    Certainly a sellers market out there with majority of listings advertised as 'offers above'. Yields are decreasing and banks are tightening so personally I would leverage your money over two properties to improve your yield especially as the apartment oversupply is affecting rental price.

    On the ground in the right area's of Brisbane it seems the market is hot but overall state economic factors tell a different story so with this in mind I really wanted to focus on local drivers such as the new university and major infrastructure projects in case Brisbane as a whole continues along this lacklustre trend. I liked the idea of the granny flat as something to fall back on which is legal to build and rent out in Moreton Bay Council. Not a massive fan of this strategy especially as CG is more important than CF but a great opportunity to have in your back pocket nonetheless.
     
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  9. Wagyu brisket

    Wagyu brisket Member

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    Your a few years too late for that area unless you can buy massively BMV or splitter/unique etc.
    The 2017 monthly corelogic data (+ RE contacts) clearly shows Brisbanes not a hot market and its markets within markets. You can't throw a dart at the map like previous sydney or Bris after the floods and expect solid CG.
    As a Bris local 20km is deemed far. Comparing Sydneys (global city) proximity to cbd to Bris is unrealistic. 35km is out in the sticks.
    Similar to Leo; i'd buy as close to cbd as possible, large block (810) in a trendy OO area.
    Do your own research, because imho the numbers no longer work for multiple suburbs and their past their peak. All the best.
     
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  10. MWI

    MWI Well-Known Member

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    That's just it, it should be your decision about investment strategy you plan to use and what suits you or what are you comfortable with.
    I personally prefer now closer to CBD, larger block - corner even better, something that can be developed in the future, but when I started out 17 years ago I was a passive investor (no knowledge about investing other than understanding needed to grow asset base) hence invested in Bracken Ridge and many other areas.
    So you see it is ultimately up to you, but it is vital to do your research, how has this suburb performed in the last say 10-20 years, how long you plan to hold it, hopefully forever, etc...
    Perhaps you could use similar analogy as buying in Sydney, would you buy closer 1 IP or further if you could afford 2 IPs in relative terms? Also, remember start slow, do not over commit and get used to the details of running IPs and progress from there?
    In addition, imagine down the tract say in 5 years and your asset base rises say by 10%, from 800K investment that's $80K from $400K that's $40K. So it is helpful and vital to have CG if you wish to duplicate rather than just save for it (but you need also the serviceability!)...
    Perhaps reading some of other successful mentors may help you to decide on your investment strategy as there are MANY WAYS in which we can invest in RE.
    I played Monopoly in real life, bought few in the middle range, then once the equity grew you can then pull out and buy a more premium property (I call it a hotel), that's another way to go about it, just remember there is no perfect investment nor perfect time, but is it perfect for your investment strategy?
    Perhaps the article by Brett Warren (BA for Metropole) may help you to decide (I do not recommend them I just like to read what they have to say - always back up information with your analysis!)?

    Should frustrated home buyers and investors look to Brisbane?
    June 30, 2017
    While the Sydney and Melbourne property markets have been hogging all the headlines, Brisbane has been quietly chugging along in the background.

    But for how much longer will it be on the back pages?

    The latest Core Logic data showed that for the last few months Sydney and Melbourne property prices were flat, yet Brisbane’s increased by a modest 1.2% over the last quarter.

    upload_2017-7-26_18-15-10.jpg

    Affordability plus?

    Untold media reports over recent months have been bemoaned the lack of affordability for homebuyers and investors in Sydney and parts of Melbourne.

    Now I’m not debating that in Sydney in particular it’s not difficult for would-be property owners to get into the market.

    But here’s the thing: in Brisbane opportunities abound for all types of buyers.

    Consider this...

    While the median house price in Sydney is an eye-watering $1 million-plus, in Brisbane it’s $650,000, according to the latest REIQ figures.

    And that median is for the Brisbane city council area.

    In Greater Brisbane, which encompasses the shires of Logan, Redland, Moreton Bay and Ipswich, the median house price is $513,000 – or about half the price of Sydney.

    Over recent years, Brisbane’s market has been producing solid returns, and investment grade properties in the right locations are strongly outperforming the general Brisbane property market.

    Middle-ring suburbs which may offer investment potential in the years ahead include Carina, Stafford Heights, Upper Mount Gravatt and Yeronga.

    If you ask me, Brisbane’s affordability is likely to result in stronger price growth over the short- to medium-term as investors especially look for markets with better capital growth and cash flow potential.

    In fact, a recent Property Investment Professionals of Australia survey found that more 50 per cent of investors were looking to the Sunshine State to buy in the next 12 months.

    Unit opportunity?

    But…be careful!

    Not all properties in Brisbane will make good investments even though apartments in Brisbane are extremely affordable compared to the southern states I have serious concerns about oversupply of new units in Brisbane’s inner-city.

    Lucky we never recommend buying new off-the-plan units at Metropole, isn’t it?

    However established townhouses can still make very solid investments in Brisbane, especially in those middle-ring suburbs that are starting to gentrify.

    Suburbs that sit within that five to 12 kilometre radius of the CBD that may be worthwhile considering including Morningside, Mount Gravatt East, Taringa and Wishart .

    The bottom line…

    If you’re a frustrated investor because of high prices in Sydney and Melbourne, then you should consider other locations that may offer better good long term investment opportunities.

    You can do this by investing in another capital city such as Brisbane while continuing to live wherever your heart desires.

    The days of having to own the house you live in are on the wane as more and more people, especially the younger demographic, recognize that they need to look outside their Sydney or Melbourne suburbs to buy property.

    By saying “no” to investing in their own backyards, many are finding they can afford to invest in property that can achieve solid returns from afar.
     

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  11. Anthony Brew

    Anthony Brew Well-Known Member

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    Nice (and incredibly long) post @MWI

    How do you get 20 years of data for an area?
    I only know of re.com which has 8 years, but that is barely half a cycle, so doesn't actually help.

    I've just started reading a book on the property cycle, and it explains a lot. I am trying to apply it to the current markets in Australia, but I've just started the book so I'm probably missing a lot of info.

    I am wondering if Brisbane is in recovery, or if he has started to boom yet.
    I have heard that some parts of Brisbane have been growing for 3-4 years, which makes me wonder if it is already in the boom yet or not, and if not, is it normal for the recovery to be so many years to get to the boom phase?
    The other question I have is - can parts of Brisbane be in their boom phase while other parts are slower to start and are still just starting their recovery? Some areas seem to have had very little growth over the past few years, while others have had ok growth, so I'm a bit confused on how you will know which part of the cycle Brisbane is in.
     
  12. RPI

    RPI SDA Provider, Town Planner, Former Property Lawyer

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    I have been through 3 cycles. Brisbane has been different this time from my perspective. Previously it was Sydney went, then Melbourne, people couldn't believe the prices being paid down there, southerners starting migrating north in search of more affordable housing and then Brisbane prices took off. After Brisbane went Ipswich would finally get back to the prices at the last peak and price growth would spread through the rest of the state.

    The difference this time (at least IMHO) is that, although the medians might be different, the inner suburb house prices are not something your average Sydney wage earner buys as an investment. Nor is it something that people can move to on an average wage without a very large deposit from the sale of their southern property and then the sales commission on their southern house and the stamp duty on the Brisbane one constitute a decent percentage of any equity built up down south.

    You need $1m in the inner south east of Brisbane to get a nice house on a 405m2 block. $1.2-1.3m is entirely normal for something modern with a pool on that sized block. So although you will move much closer to the CBD then you were in Sydney, if you have to pay $30k to sell your $1.2m ish house and then $45k in duty to buy back in, it is a lot less attractive than last time around.
     
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  13. MWI

    MWI Well-Known Member

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    I agree, no property cycle is the same or uniform, no one has a crystal ball, and yes not all states follow booms and busts to same degree, we talk generalisation, and IMHO, nobody will choose the perfect investment and the perfect time!
    Hence you need to think what drives there property prices, in the past, more had migrated from southern states, economic situation was much better in QLD (mining, jobs), now we know around 29K of new jobs were created in public sector in QLD, mining came off, Japan's tourism declined on Gold Coast and investments, and so on and on.
    What does QLD derive its income from, mainly tourism, some mining, in comparison to finance hubs of Sydney, etc... How much land is available for development in BRI outer suburbs, to inner and middle rings, as compared say to SYD and MEL?
    Now who controls the affordability, IMHO, the banks/financiers. I look at this way,say in any suburb 100 people earn above state average earnings, the banks are willing to lend them $600K yet the median property in this suburb that they live costs $500K, what do you think will the property prices increase or decrease? More likely to increase, especially if it is close say to 60% of jobs in the state, if there is limited land supply for development, if there are lifestyle aspects present, etc.... What if the bankers will only lend $400K and the median is $500K? Do you see what I mean, hence yes, property is about supply and demand, but what does it mean?
    Hence, why population growth, income/wage (economy) growth, interest rates, are very vital, as there are macro/micro markets within QLD, within suburbs, even within streets, and same in SYD and MEL and other states. So we cannot generalise, we need to understand what will make property grow? I have just mentioned few yet there are so many aspects, so I choose an investment strategy that suits me, and my stage in life. Also, I actually prefer steady growth than the ups and downs, that's personal choice, as I don't try to find the top and bottoms, but I like to invest in say those 3 states now (SYD, MEL, QLD) and against the trends. Hence I had been accumulating more IPs in QLD in the last 3 years (as IMHO, SYD and parts of MEL grew too much). However, I had acquired in SYD too as a renovation project permitted me to add value, to increase the cashflow and capital appreciation. So I prefer to buy in markets when there is doom and gloom, against the mentality herd, as the plan is never to sell!
    I like houses in QLD only, as most of my growth for the last 17 years, has been in land, hence I pay so much now in land tax!
    In SYD, I don't mind units, in great locations with potential to renovate, to add value, as the city's diversity makes it so attractive.
    You see people assume there was no growth in BRI (they generalise but remember there are markets within markets!), really, well the growth has not been as in comparison to SYD and MEL, sporadic, but believe me I had many increases by OSR in my land. Just last year one block increased from $750K to $850K...
    So I agree with RPI, most investors will not pay for a premium property (unless they will redevelop it), most will buy further out to diversify or to afford. However there are few of us who are not like the most. Just to give you an example, I was buying in BRI in year 2000, after where there was hardly any growth in BRI in the last 8 years (as a general comment), my close friends from BRI even suggested not to invest there and they sold their New Farm unit, but after my 3 IPs investments, three years later BRI boomed by around 50% (don't expect such growth now..) So you see I had no crystal ball, I was scarred when buying against the trend, but all I knew and understand then is that I never wanted to sell...
    So it will all come down to your research and knowledge and action and you will learn, the longer you play in real life the property game! I play Monopoly in real life, buy few I can afford at first, then upgrade to my next purchase to a hotel (meaning a more premium property - not so much cash flow but greater than say average CG+)... I also like to buy larger corner blocks too that may permit redevelopment one day (in QLD)...This is what works for me!
     
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