House with development potential or Unit with cosmetic enhancement?

[Mushu Eddie]

Hi somersofters. I'm looking at an investment property around the mid 300k range & weighing up 2 completely different options. Please help steer me in the right direction, I'm a Melbournian & looking outer state to buy & hold for equity gains so I can re-purchase again in the future, I'd look to Melbourne but the yields are terrible!

One is Perth but within reach to the city for property on bigger land 700sq+ & ideally long term (3-5 years) development potential with yields around the 6% therefore taking care of itself. Looking at areas surrounding Armadale & Rockingham but wondering if the high yield is relative to the risk associated with the areas. The areas do show a good history of steady growth, low av. days on market etc.

The other is as close to the Brisbane cbd as possible but id be restricted to an older unit that leaves me likely a few grand out of pocket in ongoing expenses taking into account body corp, rates etc. The thought would be a unit that needs cosmetic work to add value & increase rental.

I also need to take into account serviceability going forward due to my salary so cash flow is important but everyone keep pushing Brisbane as undervalued & set for the next big market increase so I'm very interested to know if the majority of investors believe the potential for capital gain outweighs the out of pocket holding expenses.
Thanks everyone!

 

[A Jeremy]

I would always back development potential over market growth as long as that potential is dependent on you undertaking the development and not waiting for rezoning to occur. This way the equity creation is completely up to you. The size, timing and gains are all your responsibility. And you seem to have found neutral or positively geared properties which is a minimum for me.

The alternative is to pay out of your pocket for ongoing expenses and cross your fingers really hard that the market moves in your favour.

 

[Beanie Girl]

If your budget is mid 300k, there might be opportunities for development closer into the city in Melbourne like St Albans in Brimbank City Council. Houses with fairly sizeable blocks. There is new residential zoning proposed by Brimbank City Council that has not been approved by the Planning Minister Matthew Guy yet so you'd have to check with the Council or their website for their proposed zoning plan for NRZ, GRZ and RGZ. Same goes for Frankston. What gets approved by Matthew Guy is another story altogether but because planning is in a state of flux for these Councils, there might be good opportunities that will not have factored in these changes into their prices yet.

In Brisbane, you can check out the areas of Logan, Ipswich and the Redcliffe Peninsula for houses with development potential. You don't necessarily have to limit yourself to a unit in Brisbane CBD or close to it.

This is just my opinion only, cheers.

 

[Mushu Eddie]

Thanks for the replies Jeremy & Beanie Girl! I'm definitely swayed towards looking into property that takes care of itself & has development potential, id just have to be patient if it's in area that's not set for near term price increases such as Brisbane, but developing in a few years would likely reap me better rewards anyway. Outer Perth seems to have cooled off a bit, maybe due to the population growth slowing down so may be a good time to look around.

Beanie Girl I'll definitely look into those suburbs within the Brimbank city council, thanks. main concern though is the holding costs / low yields & high buy in costs such as the stamp duty which seems to be almost double over other states, might affect me buying again in the near term. if i looked towards logan & ipswich I'd be worried I'm up against every buyer currently doing to the same thing not to mention those who get access to off market properties.. seems like that market is too hot! I'd probably have to get the services of a buyers agent?

Let the property research & hunting continue