is upsizing in 10 years and buying now a good strategy?

Discussion in 'Investment Strategy' started by SarahAJ, 18th Jul, 2021.

Join Australia's most dynamic and respected property investment community
  1. SarahAJ

    SarahAJ Member

    Joined:
    15th Jul, 2021
    Posts:
    7
    Location:
    Collingwood Vic 3066
    I would really appreciate some advice on my property investment strategy. I am thinking of buying a property that is priced at about 90 % of the median 1 BR apartment price in Collingwood (median is 429K), VIC (3 km from the CBD).

    It is not the most glamourous place, but it is liveable and needs renovations to the kitchen, bathroom and flooring. I plan to use it as my PPOR for the next 5 - 10 years and then rent it out while using the equity built to upsize or buy a better apartment within a 10 km radius of the CBD. Alternatively, I could use the equity to purchase an IP.

    Although the capital growth on 1BR apartments in Collingwood has gone backwards - average capital growth of -0.5%, all the 9 apartments in this building has been above 5 % and up to 10 % per year on average over the past 10 years.

    It doesn't have a balcony and the view is poor to average, although there is a tree and some sky in the view.

    Does the strategy of upsizing/buying another IP in 5-10 years sound like a good strategy to you, even if this might be a less than glamourous property that I am considering buying now?

    I don't think I can afford a lot more than $420K - $460K right now, but the alternative is to let this deal fall through and go into temporary accommodation to search for something better in the spring.

    And yes, in the meantime, it will be a stable place to live that is a fair bit less than what I would pay in rent otherwise.

    Thanks so much in advance for your thoughts!
     
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,258
    Location:
    Australia
    IF the 1 bed unit goes up it might work.

    what are your alternatives? Can you buy an ip instead that might go up more than the unit?
     
  3. Shogun

    Shogun Well-Known Member

    Joined:
    26th May, 2018
    Posts:
    2,861
    Location:
    Perth
    What is rent in that area? You have to live somewhere.

    Looking at a few places in Perth near me. Even if you sold in 5 years with only a few percentage captial growth you probably would break even or be slightly ahead. With current interest rates
     
  4. SarahAJ

    SarahAJ Member

    Joined:
    15th Jul, 2021
    Posts:
    7
    Location:
    Collingwood Vic 3066
    Thanks @Trainee
    Yes, I guess it is pretty likely that the 1br will go up (especially eventually). Especially with some cosmetic renovations. All the other apartments in this building have had growth over the past 10 years.

    My alternatives are to wait to find a better PPOR, or yes, to buy an IP with better prospects for capital growth. I guess in that case, it would be better to wait until the market cools a bit, which means that I may not buy for another 12 + months. The only issue with this is that I would lose the time of equity building by a year.

    It is so good to step back and look at the alternatives.
     
  5. SarahAJ

    SarahAJ Member

    Joined:
    15th Jul, 2021
    Posts:
    7
    Location:
    Collingwood Vic 3066
    Thanks @Shogun

    The rent in this area is about $1750 a month for something decent, and I will be paying in total with all outgoings no more than $1550.

    It is true that I have to live somewhere, that is why it feels like it would be a good idea to put the money towards equity.

    And I guess I am hoping to hold the property and rent it out as something that is cash flow neutral/positive in the future.