good investment or dud investment?

Hello everyone

I have just bought a first home( 2 months ago) and luckily have managed to undershoot by budget by about 30K. Upon reading the articles in the news about the slow down of the property market i am not able to resist my temptation of buying an investment property.

The catch though is i need to accomodate 5% downpayment, stamp duty, Mortgage insurance and other charges in under 30K. This leaves me with an option of buying a 240K property the breakdown would be about 12K deposit, 8K Stamp + Govt charges, 5K mortgage and 8K for my peace of mind and other unforseen expenses.

I stumbled upon this 1 bed room apartment ( about 15 to 20yrs old) advertised for 240K about 8Kms from CBD, 4Kms from the Uni close to bus stop and about 1km walk to the nearest station and currently rented for 330 per week.

Can someone advise whether it would be a good investment or should i wait to increase my equity and buy something new to increase depreciation allowances?
 
SF has a good point. Hasten slowly.

Also, which CBD is this 1 bedder in? Let me assume it is in Sydney. Whilst face yield is 7 % gross, what is it's size? How many in the block/complex?
Will a bank fund it? For those bucks (or marginally more), you could look only slightly further afield and pick up a 2 bedder and a better rent.

Anyhow, wait a while and let the meal digest as Mr. Fish has suggested.
 
Hasten slowly.

I agree. Festina Lente. It's worked for me.
Instead of limiting yourself with a 1 bedder, better to either wait until you have more savings or equity to go for a 2 bedder, or move further afield if you feel you must do something now.
Not sure why people react to what the media are saying. After all, if those journos really were that good at predicting market peaks and troughs or the next boom suburb or up coming flat spots in the market, then surely they would all be making a fortune out of their investment portolios and not earning an average wage writing this rubbish.
 
I have just bought a first home( 2 months ago) and luckily have managed to undershoot by budget by about 30K. Upon reading the articles in the news about the slow down of the property market i am not able to resist my temptation of buying an investment property.
Why would you listen to the news?

I stumbled upon this 1 bed room apartment ( about 15 to 20yrs old) advertised for 240K about 8Kms from CBD, 4Kms from the Uni close to bus stop and about 1km walk to the nearest station and currently rented for 330 per week.

Can someone advise whether it would be a good investment or should i wait to increase my equity and buy something new to increase depreciation allowances?

Seriously? How long is a piece of string? What size is it? Which CBD? How much have others in the same complex sold for? What is the market price for a similar unit? Is it a serviced appartment? How much is the Strata? Are there lifts & pools in the complex?

Why not park the funds in an offset against your mortgage until you have a little more equity. Instead of rushing in, spend the time researching the market and learning from the forum, so that you know if/when something is a good investment.
 
Thank you all for your advise

While i do agree with all of you that i should wait and get my equity up i wanted to get an opinion of experienced investors like you guys to evaluate whether ther is any benefit from going ahead with this purchase.

regarding some of your questions about the property. It is about 8Km away from Brisbane CBD and should be around 50sqmts area.


The reasons i feel i should act now are as follows.

1] the place has been on a market for quite a while and i was hoping to get a good bargain incase the seller is desperate to sell it (somewhere in the range of 210K to 215K although i was thinking of a first offer of 175K to get the feel of what the sellers situation is like)
2] with the recent series of interest rate rises and more to come i dont see many people wanting to put money into something like this which means less chances of me facing any competition.
3] considering i do manage to acquire it for about 215K my interest payments would be about 13K which means i am potentially getting back all interest and 50% of the principal payment. Even in the scenario of having to pay an interest rate of around 8.5% i would be recovering the interest payments. please note that since im getting in early my main aim is to increase cash flow and not to gain high CG.
4] I am assuming from the pictures that the apartment does not have more
than 10 units and am pretty sure there is no pool, gym and other modern
amenities which means low body corp/strata fees
5] The area has a hot rental demand mainly from overseas University students and academics due to which budget apartments there have almost a 0% vacancy rate.
6] Incase things go wrong i can still afford to keep paying the mortgage on this property even if it remains vacant
7] It will help me gain some experience in managing an IP and dealing with somewhat challenging tenants.

Could you please advise where i am going wrong with my above scenarios.

Thanks for all your help and advise

Cheers
Iron
 
some more info

Skater

Similar apartments in the area are advertised about 275K - 300K with carport and pool although i did find 1 which was asking 249K
2 bedders start from 350K going to 500K but i again found 1 which was asking 295K
I found the sales report for the street and most of the latest sales have been between 350K-450K didnt mention how many beds

the last sale i found in the block which i am looking at was a 1 bedder in 2007which sold for $195K
And i was wrong the block has 25 units in it

Thanks
Iron
 
regarding some of your questions about the property. It is about 8Km away from Brisbane CBD and should be around 50sqmts area.

You will have trouble getting finance for such a small apartment - most lenders have a minimum sqm. That's not much bigger than a bedsitter. Even if you get finance, you may have trouble moving it in the future because others may also have trouble with finance.

1] the place has been on a market for quite a while and i was hoping to get a good bargain incase the seller is desperate to sell it (somewhere in the range of 210K to 215K although i was thinking of a first offer of 175K to get the feel of what the sellers situation is like)

Fair enough. However, that is true of many properties, often properties with fixable problems and potential gains. You can fix a tired old house with a bad kitchen - you can't fix floorspace in a unit. In your place, I'd tweak my strategy to find a stale listing with problems I could address as and when money becomes available.

2] with the recent series of interest rate rises and more to come i dont see many people wanting to put money into something like this which means less chances of me facing any competition.

True - but true of all properties.

3] ...Even in the scenario of having to pay an interest rate of around 8.5% i would be recovering the interest payments. please note that since im getting in early my main aim is to increase cash flow and not to gain high CG...
5] ...almost a 0% vacancy rate.
6] Incase things go wrong i can still afford to keep paying the mortgage on this property even if it remains vacant

Makes sense. From the picture emerging I'd be suggesting a $250K house in a large regional city - somewhere like Bathurst NSW for instance. You'll still get the close-to-amenities position, very low vacancy rate and high yield (maybe not paying down principal but at least cashflow neutral), and you won't have problems with floor area. Plus, you'll have more potential to achieve CG over time as your needs change.

7] It will help me gain some experience in managing an IP and dealing with somewhat challenging tenants.

Don't rush this one. You'll get that experience soon enough. :)
 
After all, if those journos really were that good at predicting market peaks and troughs or the next boom suburb or up coming flat spots in the market, then surely they would all be making a fortune out of their investment portolios and not earning an average wage writing this rubbish.

Hah yea people always forget about this with respect to journalists, economists and just about most people who get paid $55k to predict which way certain asset classes will go.
 
Hello everyone

I have just bought a first home( 2 months ago) and luckily have managed to undershoot by budget by about 30K. Upon reading the articles in the news about the slow down of the property market i am not able to resist my temptation of buying an investment property.

The catch though is i need to accomodate 5% downpayment, stamp duty, Mortgage insurance and other charges in under 30K. This leaves me with an option of buying a 240K property the breakdown would be about 12K deposit, 8K Stamp + Govt charges, 5K mortgage and 8K for my peace of mind and other unforseen expenses.

I stumbled upon this 1 bed room apartment ( about 15 to 20yrs old) advertised for 240K about 8Kms from CBD, 4Kms from the Uni close to bus stop and about 1km walk to the nearest station and currently rented for 330 per week.

Can someone advise whether it would be a good investment or should i wait to increase my equity and buy something new to increase depreciation allowances?
Maybe if you say the area,is this in Brisbane,the inner west student rental market is not that hot as some think,and if there is a 20 %dropoff
in os student numbers a one bedder in a block of 40 may not be a good investment..imho..willair..
 
You will have trouble getting finance for such a small apartment - most lenders have a minimum sqm. That's not much bigger than a bedsitter. Even if you get finance, you may have trouble moving it in the future because others may also have trouble with finance.

I would disagree that 50sqm is not much bigger than a bedsitter.

The tiny apartments marketed to overseas students are the real bedsitters - around 25m2.

In suburbs within 15km of Melbourne there are hundreds of 1br apartments in small blocks (up to 12 or so units) built about 40 years ago. These are around 35m2. Although they have a full kitchen (stove, fridge, microwave, sink, bench) these are very small, as is the bathroom (shower, basin, toilet but often no space for a washer). There's little storage but they are genuine 1 bedders - not studios. Some are owner-occupied but most would be rentals.

Up the size to 50m2 and things change again. You get a full sized kitchen, bathroom/laundry and more storage. The bedroom and lounge might still be a little small for some, but for a single person it is quite an acceptable size.

A handy suburb, a good position in a small block of single storey units, a private courtyard and a carport (or much better - a garage) makes for something that is very liveable, despite its 50m2.

Chalk and cheese compared to a studio of half the size.
 
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