(VIC) 2-bed unit in established suburb or 4-bed house in further suburb?

Discussion in 'Where to Buy' started by Hamlet5, 14th Jan, 2021.

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  1. Hamlet5

    Hamlet5 Active Member

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    Hi all,

    Hope everyone has started the new year well.

    I'm a first home buyer looking for a place between the 600-700k budget range. My intention is to take advantage of the First-Home Stamp Duty Concession (especially with the additional discount that is in place until June this year) to get a place that can have great potential capital gains.

    My current conundrum is choosing between a 2-bed unit (~200sqm) in an established suburb versus a 4-bed house (500-700sqm) in a less established suburb further out.

    For the former, I'm looking at suburbs such as Mount Waverley, Blackburn, Mitcham, Ringwood.

    For the latter, I'm looking at Narre Warren South, Berwick, Beaconsfield.

    As deducible from the suburbs listed, I've narrowed my options based on the following criteria:
    1. Location: Eastern suburbs mainly because I grew up in the Whitehorse area and currently work in Berwick. I'm also not the biggest risk-taker so given that the East is more established than the West.
    2. Public Transport: Being close to train lines is more conducive for capital growth.
    3. Schools: Most of the inner suburbs have average to above average schooling zones; outer suburbs have a few private school options (Narre Warren South P-12 College achieved fantastic results in 2020 too!)
    4. Parks and Recreation: Most of the suburbs are relatively green (Mt. Waverley, Blackburn, Mitcham, Berwick, Beaconsfield) OR have easy access to shopping centres (Ringwood, Narre Warren South)
    Having chosen the suburbs that fulfil these criteria, the location/land question remains:
    Will a small land (that can't be subdivided or knocked down) in a prime location gain more than A larger land in an outer suburb? Or do you think the opposite is true? Will the eastern outer suburb ever grow to be as established as those closer to the CBD?

    Thanks all in advance. Looking forward to any suggestion, tips, insights, analyses, advice to a newcomer in the property scene. Thank you!

    H.
     
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  2. The Y-man

    The Y-man Moderator Staff Member

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    What sort of 2br units have you found in these subs in that price range? Would have thought they'd be apartments in Mitch/Ring?

    The Y-man
     
  3. Shogun

    Shogun Well-Known Member

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    Light, strong and cheap. Pick any two.

    So maybe location, building size and cost

    If cost is one then location is more important to me (to live) if the smaller property is big enough for my needs. However YMMV
     
    Last edited: 14th Jan, 2021
  4. tedjamvor

    tedjamvor Well-Known Member

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    For that price you can get a low rise flat much closer to the city (Elwood/Malvern/Caulfield North). Why live so far out of the city?
     
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  5. Hamlet5

    Hamlet5 Active Member

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    Some examples here:
    I would think these units would have some capital gains over apartments right? Although definitely not to the extent of full-sized houses which can be knocked down for future development, not to mention no body Corp fees.


    Sure, I get that it’s a compromise especially with my budget; but what’s your opinion on capital growth? Will the small units in a better location grow more than a big land in a further out location? I think Narre Warren area has some potential too but of course the Mitcham area will likely be popular for years to come.


    A flat as in an apartment? Those don’t really have capital gains do they? Do you have examples from RE.com?

    I looked further out because it’s a little closer to home/family.


    Thanks all
    8
     
  6. The Y-man

    The Y-man Moderator Staff Member

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    That RWD looks good - good transport etc. Def better than apartments.

    The Y-man
     
  7. tedjamvor

    tedjamvor Well-Known Member

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    If you want to live closer to family, that's a good a reason as any to live further out of the city.

    This is what I mean by a flat

    Example 1 2 3

    Older style, history of capital growth. Good land component (ideally above 125m2 per unit). 3 storeys max, no lifts, no pools, no gyms.

    Well maintained gardens and exterior, low body corp fees, 50/50 ratio of tenants and owner occupiers.
     
  8. Ben JH

    Ben JH Well-Known Member

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    It seems a 2-bed unit will mean a very different living experience from a 4-bed house? Do you plan to live in the 2-bed for a few years and then upsize to a 4-bed later?

    Since it's going to be a PPOR, I think it's worth thinking through what lifestyle you want to have before considering potential capital growth IMO.
     
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  9. Trainee

    Trainee Well-Known Member

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    Say there were no grants or concessions.

    what would you buy for ppor?
    What would you buy for ip?
    Would you still go for the same price range?
     
  10. Hamlet5

    Hamlet5 Active Member

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    Thanks for your thoughts. Indeed, the experience of a 2-bed unit will be very different to a 4-bed house. I think part of the dilemma is that I'm not sure about my short-term future (2-5 years). If I were to get the 2-bed unit, then yes, the idea is to live in it for a few years and then upsize to a 4-bed once my future (partner, work, family) is more settled.

    Eventually, however, I'd still have to get a bigger home if I were to have a family, and so the idea to get a 4-bed house now means I won't have to re-buy another one in the future (that said, if work/partner/circumstances change, I may quite well have to move...).

    With all of this in light, it makes sense to go for the 2-bed unit since my circumstances are still uncertain. I suppose I could buy the 2-bedder now, and then upgrade to a 4-bedder when I have a family and either sell the 2-bedder or keep it as an IP?
     
  11. Hamlet5

    Hamlet5 Active Member

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    I think I'd go for a 4-bed house in a further suburb for both PPOR and IP. However, the problem is that I trade a more 'comfortable' lifestyle for less flexibility. For example, if I buy a 4-bed house in Narre Warren, I'd get a nice garden and lots of space. That's only a 15-minute drive to work but what if work changes? What if I get a job in the city? Then it'd make more sense to choose a 2-bed unit in a suburb closer to the city.

    So I suppose you could frame the question this way: Do I want comfort now or do I want flexibility? I know this will depend on my circumstances and how settled my job/partner/family will be in the next few years.

    I'm just afraid of the following scenario:
    -> I buy a 4-bed house in Narre Warren.
    -> I live in it and work in Berwick for the next 5 years.
    -> I get a new job in Box Hill.
    -> I have to sell the 4-bed house in Narre Warren for a 3-bed unit (if I have a family then) in Blackburn/Mitcham?
    -> Would the Narre Warren house have grown in capital gains enough for me to still afford a 3-bed unit in the Blackburn/Mitcham area?
     
  12. The Y-man

    The Y-man Moderator Staff Member

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    I know a guy in Narre that works in the CBD - trains it (well, WFH these days too).

    The Y-man
     
  13. The Y-man

    The Y-man Moderator Staff Member

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    ...or even rentvest.

    The Y-man
     
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  14. Ben JH

    Ben JH Well-Known Member

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    Yea, I reckon that makes sense. It will give you more control and flexibility. I'm pretty much doing the same.
     
  15. Hamlet5

    Hamlet5 Active Member

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    That could work in the future; will still have to stay in my first property as a PPOR for at least the first year to be eligible for the stamp duty concession and the cheaper buyer's interest rates...
     
  16. Trainee

    Trainee Well-Known Member

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    what if you dont claim the concessions? Seems like you are leaving money on the table, but work with me here.

    The interest rate difference is negligible, especially as it is deductible if used to buy an ip.

    Are the concessions worth it? Could you rent cheaper elsewhere? compare this to the non deductible interest, repairs, utilities, no depreciation? Would you rent the 4 bed house if you were solely looking for a rental?
     
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  17. jaybean

    jaybean Well-Known Member

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    I agree, I often tell people this. Don't let small amounts (LMI, concessions, maintenance items that can be fixed for 10-20k) drive your decision making too much..
     
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  18. pattoman

    pattoman Well-Known Member

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    If it is a PPOR your question should not be part of the consideration. Just buy the home that suits your lifestyle best.
     
  19. Hamlet5

    Hamlet5 Active Member

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    Thanks guys, this makes some sense after some calculations...