Income vs. Equity

[monster24]

Hi there,

I am looking into buying another investment property. I have selected two options:

Option 1:
Student accomodation (unit), walking distance to Uni, 46 weeks guaranteed rent, that will at least yield $120 positive cash flow per week. It's considered more a commercial property than residential (20% deposit required is coming from our other IP).


Option 2:
Standalone 4bd house with medium size block. This would be neutral or slightly negatively geared.

So, what's the best option ? I want to expand my portfolio and equity is needed to buy another property down the track so I should go for option 2. On the other hand $120 a week is a great income source and could be seen positive by the banks as well. But I think Option 1 will restrict myself in buying new properties as the equity gain won't be great - especially in current times.

So what are you guys doing at the moment ?

Income or Equity ?

Thanks for your comments
Thomas

 

[want2bewealthy]

If, and 'if' the student accom really gives you $120 per week in positive income, you can buy another right away as long as you can come up with another deposit that soon, CG might not be there as much as you would like whearas the 4 bedder if bought in a good growth suburb will ride your income and servicability down a bit but the growth should offset this, personally if youre thinking long term (which you really should be doing) then Id go the house with land.

 

[Peter_Tersteeg]

Student accom will give you far more cash flow than a regular IP, but you'll also do a lot more work to earn it. These type of of properties are more difficult to finance and require a lot more investment of your time to make them work. You may have trouble finding a property manager and have to do it yourself.

Capital gains tends to be lower, but not always.

The few people who I've seen be successful with student accommodation tend to treat it more like a business than an investment. They also have excellent systems in place to manage it.

I don't have any objection to them, but if you're looking for a more passive investment, stick with straight rentals.

 

[GoAnna!]

Can the second property be furnished and let to students to improve your cashflow? This way you have the best of both worlds.

Regardless, I would go for the second.

 

[monster24]

thanks for that....yes, I think I agree...option 2 is better.
just met with onsite manager of the student. accom. 10 of those units are on the market. basically no real captial gain in the last years. the last sale goes back 2 years as investors seem to avoid. deposit is even 30% and should be a commercial loan. so, i think i go for option 2.
thanks for your comments
thomas

 

[Invest]

Can the second property be furnished and let to students to improve your cashflow? This way you have the best of both worlds.

Regardless, I would go for the second.

Exactly right.