Nothing fancy

[Mathiusj]

Exasperated.

The more I read the less I seem to know. I have been trawling this site and many others for weeks as well as going to several property seminars.

I am new to property investing and so was after a sanity check on my plan.

Happy to hear any comments or advice.

We want an investment property. We live in Brisbane’s northern suburbs. My wife wants our IP to be in Bris (so that locks down location).

I plan to get a unit or town house as close to the CBD as I can afford (budget around 450K). I plan to get something new for maximum depreciation to minimise our tax. Prefer pos geared but I just cannot find anything like that.

I am looking at 2bed, 1 car space as a minimum because I figure these will more popular than a single bed and cheaper than a 3 bed.

So – how does that sound ?

Nothing fancy. But should offer solid cap gains and with the shortage of rentals in and around the city should have no trouble renting (the place going empty for weeks is probably my biggest worry). Also as it is new there should be very little maintenance work needed for years to come.

?

 

[Propertunity]

The more I read the less I seem to know.

That happens to us oldies as well. "The more you know, the more you realise how little you know"

I plan to get something new for maximum depreciation to minimise our tax.

Two things: 1. Never buy an investment of any kind for the purpose of minimising tax. It should be the icing on the cake but not the cake itself. 2. Buying new often means little or no capital growth for the first few years. You generally pay a premium for buying new that goes to the developer's profit margin.

Prefer pos geared but I just cannot find anything like that.

You probably (read definitely) won't find pos geared when buying new and close to the CBD.

I am looking at 2bed, 1 car space as a minimum because I figure these will more popular than a single bed and cheaper than a 3 bed. So – how does that sound ?

Sounds fine

But should offer solid cap gains

Over the long term - yes. But probably not initially.

and with the shortage of rentals in and around the city should have no trouble renting (the place going empty for weeks is probably my biggest worry).

Make sure you don't buy then in a high rise where every other unit is the same as yours and make sure the area has high rental demand (not just now but into the future) and low rental vacancy.

Also as it is new there should be very little maintenance work needed for years to come.

Yep.

All the best with it

 

[Perp]

Never buy an investment of any kind for the purpose of minimising tax

Such good advice, it bears repeating.

I like your logic re 2 bedrooms, and being near the city. I'd add 1) no body corporate (ie not an apartment or townhouse, but a house), and 2) look near areas marked for becoming "neighbourhood centres". In that price range, I like Darra from a likely capital growth perspective. In fact, I just had a look to find an example, and I'm tempted to buy this one myself! Just on face value - character QLDer, able to be renovated and will be worth quite a lot when the area inevitably gentrifies, and able to be subdivided immediately. Couldn't go wrong, IMHO, but of course that's as far as my due diligence has extended.

I don't know the northside so well, but look around shopping and public transport hubs.

I prefer properties without a body corporate for several reasons. Firstly, it leaves you with more future development potential. If you're one of a block of units, you need everybody to agree to develop the site, and that's difficult to achieve. Body corporate fees can also be significant and my perception is that you end up with a lower net yield than you would on a house. Basically, if there's a body corporate, you necessarily surrender some control over your asset to the BC. Lots of people aren't bothered about that, but I prefer to avoid it if possible.

 

[Mathiusj]

Thanks for taking the time to respond guys.

If I can just ask a few follow up questions :

You said that buying new offers no/low cap gains “for the first few years”. I plan to buy and hold – slowly building equity and then borrowing against that to grow my portfolio. Is it crazy talk to “assume” a doubling of value in a 10 year time frame ? I know that historically this has been the case and my own house at Chermside for example has doubled in value since 2002 (and that is only 7 years).

Thanks for the advice re tax – I admit I have been skewing my entire approach towards a tax bias but now I will re asses.

Can I ask why buying a unit in a tower is a bad call ? I assume it is because there is no real product differentiation and you are just one of a crowd ? In this case could you perhaps escape that by getting the top floor apartment ? Or a car space (or two) ? Or do you think that nothing like this will help your break away from the pack ?

 

[Propertunity]

Is it crazy talk to “assume” a doubling of value in a 10 year time frame ?

No, not for 10 years. But a lot of investors like to wait only say 2 - 3 years to do an equity draw down to buy the next one. If you get no CG in those first few years it can delay your next purchases.

Can I ask why buying a unit in a tower is a bad call ?

Brand new in a high rise CONS:
1. Little CG for the first few years as it goes to the developer's margin
2. No uniqueness. What can you do to make your unit more desirable to tenants if there is a time where rental demand is less than it is today?....probably nothing except drop the asking rent
3. If econominc circumstances change, as they do, and a number of fellow owners have to sell at fire-sale prices to get out, what does that do to the value of your unit?.......comparable sales in the same building are how valuers value accurately
4. Strata levies are higher in buildings with lifts

In this case could you perhaps escape that by getting the top floor apartment ?

Well a penthouse becomes unique - so yes, that would fix the issue

 

[joanmc]

If you want to go new have you considered buying a block of land and building? If you do it local and organise floors, turf etc yourself you can give yourself a leg up equity-wise because you aren't paying the builders markup that is part of most house and land packages or spec homes.

We did this and got land for 150k (was a left over block in an estate that the owner had changed their mind about building on). Built the house for 150k (didn't include turf, letter box, carpets or fencing. did those things with a small paved area for under 10 k was revalued about 6 months later(last december) for 365K.

I would definitely consider doing it again.

 

[The Y-man]

So – how does that sound ?

Sounds fine. Do it (otherwise you'll be exhausted from thinking too much)- iron out any issues you come across for project #2.

Cheers,

The Y-man

 

[Minxdamanx]

... clearing throat ... or #3.

You learn more every time you do it.

Best piece of advice is just to do it.

 

[Rixter]

Best piece of advice is just to do it.

You dont have to get it right you just have to get it going!