New investor What to buy - House or 2 units...

[COLJP]

We are all ready to buy our 1st IP but not sure whether to buy a house or cheaper unit (which would enable us to buy another unit fairly quickly - probably within a year).

MB has organised a loan for $370k property without having to secure the loan against our PPOR as we have sufficient cash redraw for deposit. ($55k available but we are going with 10% deposit and wearing proportional LMI on the IP loan).

Question is: Would it be better to buy a unit for around $250k with a view to obtaining another one sooner than we would be able to if we bought a single property at up to $370k.

Planning on buying in an area experiencing decent capital growth in Brisbane region expecting around 5% gross yield.

(Probably a '6 of one half a dozen or the other' or 'how long is a piece of string' question?)

If any further info is required just let me know. Regards, Col.

 

[Jebb]

Im looking at doing something similar. I have completely paid off my first IP and it is bringing in about 300 a week now. I am planning to buy more in February, and was thinking of buying an older $600k 4x2 on a big block for the future (knock down, build a brand new house in 10 yrs time), but have pretty much decided on buying 2 smaller 2x1s at around $250k to $300k each.

Why?

- Smaller place will be less rent, but a larger pool of renters to choose from -> less potential vacancy

- Two smaller places should bring in more rent than a single larger place (eg, 2 x $250 per week vs 1 x $350 per week - all depends on area etc)

- Related to above, with more rent, they should be close to cash flow neutral from day one...whereas a single house may be negative - this depends on what you want tax wise

- Flexibility to sell one of two units if something should happen and you cant pay the loan off anymore - at least you still have one remaining.


Right now, Im leaning towards the two 2x1 townhouses as listed in my sig, however I am still open to options and suggestions, and will be interested in how this thread goes.

Cheers

J.

 

[Jebb]

Actually, similar advice is available on the somersoft main page:
http://www.somersoft.com.au/property_faqs.htm#one property for $200,000 or two for $100,000

And a similar question on another forum:
http://www.propertyinvesting.com/forums/property-investing/help-needed/4326755