Investing in Apartment/units

Hey there.

Well first of all, this will be my first time investing in this area.

I am hoping to have between 110-150k for the investment after selling a house i bought as an investment.

So first things first, i initially was looking at the student accom apartments which seemed to, on the surface, offer good rental income for the price, considering most of these were between the 110 and 150k range, but I did a bit of searching and the student market seems a bit sketchy for rental income, I am aware they do not bode well for increases in resale value or, are not good for investors to buy.


So I need a bit of help in where I should be looking as far as apartment/units go.

Things I would be after in order from most to least important would be

1- Rental income; I would like it to fetch 170+pw including expenses like body corp, landlord insurance rates and etc

2- Prospects of it been in an area likely to see a development boom or in an area that bodes better for developers

3- Resale value

Given the amount i'd have to invest, I'd likely be looking outside of city areas like Dandenong ballarat etc.

Also, I am not sure what laws/regulations there are for non residents in purchasing investment properties, I live in Tasmania but I want to keep as many options open as possible.

Any help would be appreciated as I am new to the whole apartment/unit investment area.

 

Is the 110 to 150k the cash you have available (for a deposit), or the total amount you have or want to spend?

 

Total amount I have to spend. But depending on the amount of the deposit I could look at dipping into the savings and etc.

 

So what size deposit do you actually have? The problem is 150k is a bit low and restricts your options quite significantly. For example, to those student apartments which almost certainly would be a terrible investment.

 

When does it make sense to buy an apartment?

 

Yeah I get 150k is a bit low.

Lets say take 10k from the 110-150k figure for deposit so its a 100-140k investment, that leaves 10k for deposit.

So essentially be very selective in Brisbane and Melbourne and avoid off the plan apartments/units and avoid 12+ apartment blocks ?

 

I think in general yes, clearly be selective. Look for some kind of "uniqueness", that distinguishes the apartment from the masses, be it a special outlook, location, etc.

And in general, although not always (buy second hand rather than off the plan - many good reasons for taking this approach).

And yes, in general, smaller apartment blocks in my view are better, again for a range of reasons, but in particular those who have longer term development potential.

On the Gold Coast, for example, I would be looking at older style brick apartments, (eg 12 apartments spread across 3 standard house blocks), in prime locations (ie as close to the beach as possible), where the overall building is well maintained (ensuring a great "holding yield") until eventual "payoff" when the land is ultimately sold to a developer.

 

that sounds like a fair assessment.

what's the market like in the gold cost/queensland for apartments/units in such areas ?

 

Market on Gold Coast is very surprisingly strong given all the supply in the pipeline. Locals and experienced investors are eagerly snapping up older lowrises. Interstate buyers more focussed on highrises. Foreign investors and interstate main buyers of the off the plan stuff being developed.

 

If you are after Gold Coast apartments I would be going for older lowrises close to the beach. High demand. Good yield on rental. And strong capital gains ahead.

 

I'll certainly keep that in mind.

What are body corp and rates like in the gold cost?

Also, what do you think about the Cairns area? I had a peak on realestate.com and there seemed to be a lot of stuff in my range, just not sure how strong the market is there.

 

Are you considering buying something in the 110-150 range without any borrowing? Or do you have some borrowing capacity? Eg, use $100k as a 20% deposit on something up to $500k and borrow the rest.

 

For older low rises body corp fees should typically be very low. For the highrises they may we'll be higher.

I'm not overly keen on cairns. Can't see the potential compare to Gold Coast in terms of population and economic growth. Also not so sure about tenant quality.

 

Sounds like gold coast might be the way to go. Will avoid high rises and will only look at lowrises/unit complexes.


Any other areas I should consider?

The 110-150 range will be the money I have from the sale of the investment house I have, so it will be without any borrowing.

 

I don't want to dishearten you but I doubt there is anything suitable on the Gold Coast in terms of a unit priced in the 110-150 range. For the the type of unit I'm suggesting you would be looking at the 400-500k range.

 

With the sort of sum you've got, I'd do one of two things.

1. Buy a quality detached house - possibly with renovation potential - as an asset in a good suburb in a city other than Melbourne or Sydney (which are just too pricey relative to median incomes).

Recently, apartments (and new fringe suburban developments, which can be just as bad) have been the target of an awful lot of development, to the point where many suburbs are simply flooded with them. There are probably still many gems to be found if you know what to look for, but there are also an increasing number of identical assets competing for a dwindling pool of buyers and tenants. These assets have also primarily been targeted by investors, including high numbers of recent and foreign investors, and if profits ever stall these groups aren't as likely to hold and could also be competing with aggressive developer discounting.

Meanwhile if you buy a quality detached home in a sought after, middle income, thightly held suburb you'll be in an owner dominated area. There are many great options out there for which $150,000 could serve as a good deposit. If a correction happens owners holding onto their PPORs in these suburbs are less likely to sell in a slump (unlike investors they tend to hold) and even if a correction happens you'll still attract buyers and tenants. If there's no correction, awesome, you should see decent growth and will attract tenants - and if you pick an older asset in the right area, you can often renovate to add a lot of value. This of course would be a longer term strategy and you wouldn't simply be able to buy without borrowing.

2. Put your money into some quality shares. For the sum of money you have, if you don'y want to borrow further, this is probably the better choice. $150,000 won't get you much these days, and student apartments for reasons you seem aware of aren't great assets - particularly when you account for the fact students have seen little income growth recently. If rents increase, that market seems fragile enough to look elsewhere (you may also have strong competition from other apartments and houses in oversupplied markets, where some developers are discounting to attract tenants - student group homes have become very popular). This would also give you much quicker access to your money if you do decide the time is right to invest in something more substantial.

 

I did have a peak and there's at least a few things there that might suit, they were unit/motel typed complex.

Are detached houses like units you see where they are often two bedrooms 1 bath and a garage?

I haven't thought of the detached house market as i assumed apartment typed investment would offer better rental yield.

What do detached houses come under on realestate.com.au?


I never thought about investing in the share market. I wouldn't know where to invest it for maximum return.

 

Sharemarkets for you should be very simple. Buy Vanguard asx index fund and hold. You need nothing more than that.

 

what exactly is that and what does it do?

How much profit could i make from it in say a year if i put in 100k and is it easy to get the money out?

 

I wrote an article on this that you can find on our site. I'm not allowed to link to it unfortunately but it contains my thoughts without having to rewrite them all here

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