House & Land or Next Door Neighbour?

Good Morning...

I'm looking for some holistic advice for a novice investor. I would really appreciate any response.... kinda stuck

I have about $320,000 in equity.
Income around $140,000
Offset about $180,000

I want to obtain an investment property to receive passive income and lead to another IP in another 3 years.Obviously we all look for good yield and capital with less risks.

1.) Buy H&L in Melbourne ($650K)
2.) Buy H&L SE QLD ($580K)
3.) Buy next door neighbours place (selling 1980s home for 800K)

Best strategy?

 

Definitely not 1 and 2

 

Would I not be guaranteed a growth within 10 years and claim 10 years of depreciation? Also being new i would retrieve better yield than the 800K older property?

Or are all options not the best strategy?

I just don't want to go into apartments when there is no land component.

 

New houses and land can yield very good initial growth in new areas. But has the Melb and Bris market run its sprint race for now so this is less likely ? And yes depreciation can be a incentive but its shouldnt be the reason. But this new build strategy is better for OO since renters arent a great idea with brand new builds. OOs tend to get in and enhance the property etc where renters will let the grass die and not assist improvements, quite the opposite. If values plateau a recent build might not rise in value if another buyer can choose to also build in the same area. There can be a fine line between glut and well demanded.

If you buy new build H&L there wont be initial deductions until its fully completed. So this depends if you plan to wait for it to be constructed or if its ready to occupy.

A non-apartment is also a consideration eg townhouse, villa etc.

 

Assuming the possibility of amalgamating the sites and the ability to develop the site within the current zoning I would opt for Option 3.

 

Hard to give advice when limited information is provided eg. existing debts, expenses etc.
What's your preference, cashflow or capital growth?
What's your end goal?
More immediately, what's your borrowing capacity? Suggest speaking to a decent Mortgage broker to get clarity on this.

Then run the numbers based on the 3 scenario's and compare.
Also think of other options that you haven't considered, like buying existing property in SE QLD or other areas rather than just focusing on new builds.

 

Agree with this. In current market conditions the current cost of building, maybe unviable as prices of materials / labour are continuing to increase & supply chain issues remain unresolved. New builds are up about 20-30%, take a look at some recent forum threads on this topic. Navigating build contracts can be very tricky for people unfamiliar with the process aswell. Getting an established property in a good area / land compenent, that can cashflow immediately might be the way to go. Can still receive depreciation / tax deductible benefits that H & L provides.

 

Go for Option 3. The opportunity to have neighbouring blocks can be attractive to future developers.

 

Without more information, these honestly look like options towards the bottom end of the barrel. You can invest in nearly any sort of property - why would these even be above average options, let alone the top ones?