ACT IP in Canberra

Discussion in 'Where to Buy' started by TimeToBuy, 17th Mar, 2020.

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  1. TimeToBuy

    TimeToBuy Member

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    hi,

    From Sydney looking to buy a long term IP in Canberra.

    Budget $750k

    Ideally house and land.

    Will be looking to make it positively geared ASAP as I have paid off my PPoR in Sydney, was then going to look at investing in the share market, but we all know how well that’s going at present.

    Cheers

    TTB
     
  2. BuyersAgent

    BuyersAgent Well-Known Member Business Member

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    Howdy @TimeToBuy If you are buying in ACT Claire Corby is great if you want a BA to help. Have you factored the land tax and rates in Canberra? It impacts cash flow on a significant basis. If you want access to that market without the hefty fees and want positive cf you might consider buying a house in Queanbeyan (NSW rates and laws) and building a GF to double up the income. Just be careful of which streets you buy in but the strategy can work.
     
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  3. Billa

    Billa Well-Known Member

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    do you know how much building a GF can cost on average?
     
  4. BuyersAgent

    BuyersAgent Well-Known Member Business Member

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    Between $100k and $150k depending on location, size, finish quality etc. If that results in rental of $250-350pw then could be 10-12% return on that capital. When added back onto the existing home it is quite common to take a 4% yield to around 6% overall.
     
  5. bunkai

    bunkai Well-Known Member

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    The cashflow side of things is positive. What do you think about the total value add - would you get your capital investment back if you sold the next day after building a GF?

    E.g. do they sell for 100-150k more than comparable without a GF
     
  6. BuyersAgent

    BuyersAgent Well-Known Member Business Member

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    Would you get all your capital back out if you sold next day??? Maybe.

    Very dependent on the local market, the price you paid for the house at the front and a number of other micro factors. In many cases yes but in some no not quite.

    But remember it is a cash flow play.

    Generally this isn't regarded as "for profit developing" in the same way a subdivision or medium density building would be (which is designed to make instant equity). If you want to develop for profit then you will choose different sites, spend more on the dwellings and split titles so a whole nuther ballgame in terms of cost and risk etc.

    Most investors don't build GFs intending to sell immediately. They build them because they work best as a long term cash flow investments to hold and generate a yeild.

    If you wait a cycle, sure the value is built into the asset so you will get it back eventually.

    In many cases if you did sell you would get all or most back your money but not really make much profit from the build. But why would you do that?