If all other things were equal....

[Elke]

Hypotheticals we're looking at with approx. $550k to invest.

If all else being equal, which would be the most profitable:

1x IP @ 550k, rented for $600
or 2xIP @ 275k, rented for $300 each.

I know it doesn't exist in the real world, it's more about doing our sums, so stay with me. Let's say: CG is 5%, interest rates 5%, 10% deposits.

I added up and purchasing costs are very similar. What became more was if with two there's double the costs of everything (PM fees, lease fees, etc).

What have I forgotten to factor in?

 

[Peter_Tersteeg]

The most profitable would be in the suburb with the best capital growth. It's not going to be the same for both properties.

Based purely on the numbers you've provided, the single property would be more profitable because the combined holding costs such as maintenance, rates, water is going to be less for one property that it would be for two (even if they're of lower value).

On the other hand, two properties can be diversified across locations which can reduce certain risks. There's merit in this argument as well.

 

[spludgey]

Just one small annotation to what Peter said: The advantage of the two properties would be that you'd pay less stamp duty, but your overall purchase costs might work out to be the same.
This depends on the state that you're in a bit.

 

[marg4000]

Expenses will be higher with two properties, plus you will have two lots of tenants to deal with.

On the other hand, with two properties you have the option of selling one if you need to realise funds for any reason. This may be relevant depending on other assets and your general financial resources.

Marg

 

[Ace in the Hole]

Really depends on your situation, but my motto would be to keep it all simple as possible, go for 1.

 

[Elke]

To be honest, it's a 'risk profile' thing. We are from NSW and my DH wants to buy locally (stats for past 10 years average are cap growth 5.9%, 12 months - rental yield 6%). I on the other hand have been researching QLD - Logan in particular, and following and reading on SS about Logan.

However, for both of us, interstate seems more expensive and more stressful. Flights, trips, not knowing the areas AT ALL despite reading for months. If we had a wealth of experience and knowledge under our belts and didn't have a young family, then sure. But right now, it's like our 'risk profile' is quite limited at this stage of our lives. We do realise that returns may be lower, but it's also peace of mind.

DH wants 'a home we could live in' - ie if we like to live in it, others will. Or conversely, if we wouldn't want to live in it, then those are the reasons other quality tenants would not. He does not like the idea AT ALL of buying in a lower socio economic area he doesn't even know or has ever seen, buying two properties with tenants who may or may not be desirable. Risk, risk, risk...is how he is seeing that. He already deals with difficult and complex, high needs, lower socio income clients all day every day at work and does not want more in his investing life.

He wants quality homes, quality tenants and no stress. So his view is: buy the most we can afford in a good socio economic 'stable' suburb with continuous strong demand and buy a home we can add value to over time through cosmetic reno, subdivision, create extra rooms etc.

So his vote is buy one. My research in Logan is more along buy two for that price. But I also love his arguments of a stress free approach even if it is slower. Both our existing IPs are the 'quality area, quality home' even if slower growing.

I'm thinking: we'll miss out on the Brissy boat though. "everyone" is saying to invest in Brissy. The returns. etc. Oh well...

But it's more important to have a happy family, go with a risk profile we are ALL happy with, any choice we make we will learn along the way, and be in it all for the long term. Plus we will be choosing something that is cash flow neutral or close to and we are buy and hold, so it should all be sweet over time!!

 

[Elke]

And if my sweetie ain't happy, I ain't happy!!

 

[jpcashflow]

I am a person who chooses quality over quantity.
I only have a few investment properties and most properties have an LVR under 50% and only one at 90%.

All properties are in areas that are still growing.

So what I am trying to say is this. Could you use funds to purchase one really strong property? Because with the numbers you have provided buying the two properties might = two under performing properties