Melbourne - planning IP portfolio - houses or townhouses?

Discussion in 'What to buy' started by Cash Machine, 8th Nov, 2018.

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What property type is better for growing wealth for average income earners?

  1. Townhouse

    3 vote(s)
    21.4%

  2. House

    11 vote(s)
    78.6%
  1. Cash Machine

    Cash Machine New Member

    Joined:
    29th Jul, 2018
    Posts:
    1
    Location:
    Melbourne
    Hi all

    First time poster here.

    Would anyone who has experience buying townhouses and houses in Melbourne or Sydney please share their views about which is the preferred property type for growing a large property portfolio for investors who are slightly above-average wage earners: townhouses OR houses?

    My investment strategy for residential property is to buy and hold as many properties as possible between now and death (eg, holding these properties for the next 35-50 years).

    Our position: we are young, new to investment, 2 wage earners, own a small PPOR detached house in the middle suburban region of eastern Melbourne, paying off the mortgage attached to it, and plan to save the next property deposit in our offset account and shares.
    ​
    The reason why I am attracted to townhouses as an asset class is based on the premise that because they are cheaper, I could buy more of them over time, more quickly, and build my wealth more quickly on a relatively-limited income. Eg, if we can buy 2 investment townhouses at staggered points in the next 6 years vs 1 nice house after 6 years, it seems that the townhouse route is going make it easier to grow equity.

    I have seen some investors (eg Tim Gurner) grow a very large equity base by obtaining positively geared apartments. However, apartments are too land-sparse for me to want to choose them as an asset class, which is the factor that ultimately determines why I prefer houses to townhouses (at the moment).

    There appear to be some positives to townhouses as investments (eg depreciation deductions on newer townhouses, higher rent yields), but the capital growth is smaller than a house. Houses seem to be a safer investment, with that intrinsically valuable component: land.

    Has anyone tried these asset classes first hand in a similar position and found that townhouses are ideal for growing a portfolio or is it the other way around?

    Thanks


    Cash Machine
     
    Cash Machine, 8th Nov, 2018
    #1
  2. Brady

    Brady Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,567
    Location:
    Adelaide, SA
    I'm happy to invest in anything that I can
    1. understand
    2. make profit/add value
     
    Brady, 8th Nov, 2018
    #2
  3. jazzsidana

    jazzsidana Well-Known Member

    Joined:
    27th Jan, 2018
    Posts:
    459
    Location:
    Melbourne
    Great that you are dreaming big, but best to educate yourself and more importantly surround yourself with the right team!!...

    Your strategy will define this based on your personal circumstances and overall goal. Depending upon strategy/end goal, it will come down to city/suburb. And based on the suburb profile, you will decide if it's apartment, townhouse or house depending upon the streets of the burbs/neighbourhood demographics bla bla bla...

    "Alone you can go fast, together as a team you can go far"...
     
    jazzsidana, 8th Nov, 2018
    #3
  4. astonma

    astonma Well-Known Member

    Joined:
    20th Jun, 2018
    Posts:
    68
    Location:
    Melbourne
    Hiya Cash Machine , define the $ value of equity that you want to control, the number of properties is irrelevant. 1 quality property can put you in a better financial position than 5 poor ones sometimes,
     
    astonma, 8th Nov, 2018
    #4
  5. Eric Wu

    Eric Wu Well-Known Member

    Joined:
    8th Oct, 2016
    Posts:
    1,603
    Location:
    Australia
    Welcome to the forum @Cash Machine

    Good question, I guess you are more talking about in the same areas " house vs townhouse". Have you looked house in a different area/s (which could be in the same price bracket as the townhouses you are looking at).

    Townhouses ae cheaper to buy (relatively), but strata will eat into your cash flow. Houses, lower yield.

    If you are buy and hold investor, cash flow is a big thing o watch for.
     
    Eric Wu, 8th Nov, 2018
    #5
    Nuncasuficiente likes this.
  6. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,500
    Location:
    Melbourne
    As someone who started with apartments and then went on to units (as we call them in Melbourne - i.e. single level villa units) before "graduating" to houses, I can honestly say.... "I don't know" o_O

    It depends a lot on the market, and location.

    I agree starting on units will likely give you better serviceability (due to better yield), and ability to spread the risk (geographically and vacancy wise) - this was the prime reason we went for the small stuff first.

    What you do need to watch out for is that the newer devs we have seen are tiny (building wise). So called 2 BR units are what we would have in the past seen as a 1BR. On the other hand, if you can pick an older decent sized 3BR/2Bth with (preferably double) lock up garage, I reckon the cap growth will still be there ESPECIALLY if the area is getting developed with funky, tiny townhouses with a tiny astroturf mat out the back pretending to be a lawn.

    The Y-man
     
    The Y-man, 11th Nov, 2018
    #6