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First IP, Unit or house?

Discussion in 'Where to Buy' started by Dan Donoghue, 24th Jun, 2015.

  1. Dan Donoghue

    Dan Donoghue Well-Known Member

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    Hi, I have been reading a fair bit on here and I saw that Adelaide may be a savvy choice for an IP at this time.

    My question is (obviously I understand that this is all in general and personal opinions) Is a Unit IN the city a better choice or a house in the skirts of the city or the other way around? I know nothing about Adelaide but I would imagine there are good and bad suburbs which I can research later but is anyone aware of particular suburbs to gravitate towards or to avoid?

    Also considering Brisbane but I am not sure if I will have enough equity to buy up there. I think I need to talk to a good broker about structuring loans and unlocking the potential of my house.

    I currently pay $1200 a month extra on my mortgage, I can stretch this further if need be so there is plenty of room for me to absorb costs of places being unrented temporarily.
     
  2. Michael_X

    Michael_X Mortgage Broker Business Member

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    I would say both can work - there are pros and cons.

    My suggestion is

    - Make sure your product fits the target market. Check with forumites, rental agents, etc if there is demand for this particularly product from a renters perspective

    - Do the numbers. Units tend to have better yields but factor in strata costs etc. Houses have more potential to add value

    Comes down to the deal too. If average two bedroom unit were selling for $300,000 and you managed to find a distressed sell for $250,000 - would I buy it? Of course....same goes for houses.

    Cheers,
    Michael
     
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  3. Big Will

    Big Will Well-Known Member

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    I am more of a fan of houses personally.

    As land appreciates and buildings depreciate.

    With units it comes with additional expenses and you can be apart of a great owners corp where everyone gets along well and all think the same way. However I feel most of the time you will have some owners not wanting to spend anything and other owners wanting to keep their unit block the best it can.

    The bigger the block the harder it is to get anything done or less influence you might have in changing peoples choices.
     
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  4. Leo2413

    Leo2413 Well-Known Member Premium Member

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    IMO no matter where you are buying its really important to buy a dwelling that meets the needs of the majority demographic in that particular area. Units and houses both have their place. Depends on the demographic, your strategy, goals etc. They both have their place and its impossible to categorically say 1 is superior to the other in every case.
     
  5. sash

    sash Well-Known Member

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    Here is my take on things....

    If it is a house...then anywhere in Brissie or outer Melbourne (25-60 klms) or even Geelong is good at the moment.

    For units 5-10 klms in Brissie..for older stock is good. Selected areas in Melbourne for units is also ok.

    At the moment I prefer houses over units...maybe townhouses...but that is my preference.
     
  6. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Buying 25-60km from Brisbane, how soon are you expecting to see decent CG?
     
  7. htopg

    htopg Well-Known Member

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    From land tax perspective, you can buy 1-2 houses in most states before you reach your land tax threshold, but for units, you can buy heaps more.
    From strata perspective, you pay strata for townhouses and units whereas you pay none for houses.
    From potential perspective, you have more potential with houses (subdivision, knock down & rebuilt, granny flat, extension, etc) whereas there is virtually none with units.
     
  8. sash

    sash Well-Known Member

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    Well in some suburbs it has already moved 25 klms out...not all...about 10-15% since early last year.

     
  9. Rixter

    Rixter Well-Known Member

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    As mentioned previously what you purchase depends on one's investment strategy preferences.
     
  10. HomeMinister

    HomeMinister Well-Known Member

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    privacy, low cost, open space low maintenance. anything that fits all these attributes is a good buy. if you trade any of these you narrow your market and loose.
     
  11. Lisa Parker- Buyers Agent

    Lisa Parker- Buyers Agent Well-Known Member Business Member

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    Hi Dan,
    I think the best way to start is to determine your overall purchasing strategy and then do an analysis on the options you mentioned to see which one better fits your strategy.
    Things you might consider in the analysis is rental return, outgoings, age or the properties, depreciation benefits etc so you can determine holding costs. You may also benefit from purchasing Residex reports for SA and Brisbane to see what the projected growth rates are for both units and houses in each state.
    It is very possible to get a unit close to the city with a projected growth rate of 9% and also a house in the outer suburbs of the same projected growth rate.
    It becomes less of a blanket question of "inner city apartments vs outer area houses" when you have good data and a strategy.

    Best wishes in finding the right way for you.
     
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  12. Pistonbroke

    Pistonbroke Well-Known Member

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    How about 'buy what you can afford' rather than relying on whimsy that you need development potential incase the property is rezoned.

    If you buy a house you're reliant on cg as the rent is for the house and garage (& an obligation to mow lawns/maintain gardens etc) whereas a unit you get rent for what you own.
     
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  13. Tekoz

    Tekoz Well-Known Member

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    Go get a house if you can.
    because land will always appreciates.

    One last thing when .. when you are buying for PPoR, it doesn't matter the investment clock at the top or at the bottom, because you are living in it anyway.
     
  14. larrylarry

    larrylarry Well-Known Member

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    So when buying IP and looking at the clock, which would you focus on? Bottom of market, recovery or rising market? Buying at the bottom means you will have to wait out until it recovers. Rising market though, one has to act fast. Any comments?
     
  15. htopg

    htopg Well-Known Member

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    It still matters. It will dictate how fast you can access the increased equity so that you can buy more investment properties.
    If one does not want to buy investment properties, then it is another story...
     
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  16. wombat777

    wombat777 Well-Known Member Premium Member

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    JH, there is the entry cost to consider - particularly if at top of market. It ultimately depends on priorities. If the PPoR ticks all boxes and is still affordable based on available income then great, however if the cost is a big or barely affordable mortgage then the sacrifice may not be a great idea.
     
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  17. TyroneS

    TyroneS Well-Known Member

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    I agree with Michael as that way you go into the market based on what their needs and demands are. That way you are not limited in focusing on just one particular type of property.
     
  18. tess_

    tess_ Active Member

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    Sorry, just saw this and it threw up an instant red flag for me, are you paying this directly into your mortage ie. paying the principal off? Or do you have an offset account? Always place extra in your offset account rather than paying the principal off.
     
  19. Dan Donoghue

    Dan Donoghue Well-Known Member

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    Straight onto the mortgage.

    When I set up our mortgage I made sure it was set up to allow extra repayments and no fee redraw back to the schedule balance, I am using this in a similar way to an offset, it just feels less like "My money" if I do it this way so I am less inclined to see a new flat screen TV that I simply "have to have" :).

    I only set all this up about 3 months ago when I restructured the loan, prior to that I was just paying the normal amount.
     
  20. WattleIdo

    WattleIdo renovating Premium Member

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    There are many paths to the top of the mountain.