one unit/apartment.......or the whole block?

[Big Tone]

As a general guide due to land ratio/value, houses "should" have higher capital gain (in the long term) than units, right.........?

So what is the better strategy allowing for vacancy rates,CG etc etc!

Purchasing a complete set of 24 units on 3600m2 worth approx 2mill in Sydneys west, or a 2mill single house on Sydneys eastern seabord on about 1200m2.

Your thoughts and reasonings are much appreciated.

Big T

 

[The Y-man]

From a vacancy perspective:

Single house = single lot of tenants. One vacancy = 100% vacancy

Block of 24 with one vacancy = 1/24 vacancy......

Cheers,

The Y-man

 

[feihong]

As a general guide due to land ratio/value, houses "should" have higher capital gain (in the long term) than units, right.........?

So what is the better strategy allowing for vacancy rates,CG etc etc!

Purchasing a complete set of 24 units on 3600m2 worth approx 2mill in Sydneys west, or a 2mill single house on Sydneys eastern seabord on about 1200m2.

Your thoughts and reasonings are much appreciated.

Big T

Personally I would go for the former, should have a much better yield, and longterm CG not necessarily inferior, particularly that the land is 3 times larger than the latter case. This is of course a generalised comment

 

[Big Tone]

From a vacancy perspective:

Single house = single lot of tenants. One vacancy = 100% vacancy

Block of 24 with one vacancy = 1/24 vacancy......

Cheers,

The Y-man

What about a capital growth point of view?
Alternatively, what would be YOUR preferable strategy on this scenario?

Big Tone

 

[The Y-man]

What about a capital growth point of view?
Alternatively, what would be YOUR preferable strategy on this scenario?

Big Tone

Depends on the suburbs, but given the same location, the house is likely to grow better.

We went down the path of buying many small (1BR, 2BR) units instead of houses for "diversificaiton" of tenant and locations.

I am not sure that this strategy performed any better than buying fewer houses in the same locations, or more houses in an area further out - I know people who have done well out of any of those strategies. I think it comes back to how you perceive risk at the time.

Cheers,

The Y-man

 

[Player]

I'm jealous Big Tone,

I bought a "four-pack" in Parramatta and you're talking about a "slab".

Seriously though, having 24 tenants is like having 24 employees (or mini income streams). If one or two don't show up for work occasionally, no big deal. So from an income perspective, I'd go with the slab.

From a growth perspective as feihong pointed out above, long term capital growth may not necessarily be inferior. Also (whilst I'm not from Sydney) haven't the eastern suburbs had "too good a run" with growth and some sort of resistance may soon manifest to their bull-run.

IF the 2mill on 1200 sq m can have value adding surgery performed (depends upon zoning) to increase its use, then do the sums, bearing in mind that the yield is likely to be lower on one expensive house than on 24 units/flats.

I already own properties that fit the high growth (low yield) formula and whilst I wouldn't get rid of them (both pre-CGT) that's what made me look for a "block" in the gateway to Sydney's west. Sometimes better to be a small fish in a big pond. Affordable rents and affordable to buy/sell if liquidation is needed.

 

[Big Tone]

I'm jealous Big Tone,

I bought a "four-pack" in Parramatta and you're talking about a "slab".


I already own properties that fit the high growth (low yield) formula and whilst I wouldn't get rid of them (both pre-CGT) that's what made me look for a "block" in the gateway to Sydney's west. Sometimes better to be a small fish in a big pond. Affordable rents and affordable to buy/sell if liquidation is needed.

No need to be jealous...........Talk is cheap!

 

[Player]

No need to be jealous...........Talk is cheap!

LOL

Big Tone at least you're active in gaining knowledge/opinion as a prelude to a potential purchase. Great numbers by the way. I've never spent 7 figures on anything......YET!

Let us know what you decide to do, and your reasoning.....we're all here to learn.

 

[Superstitionist]

LOL

Big Tone at least you're active in gaining knowledge/opinion as a prelude to a potential purchase. Great numbers by the way. I've never spent 7 figures on anything......YET!

Make a trip to Zimbabwe, you definately can spend more than that...

Super.

 

[Big Tone]

Zimbabwe..............?

Please explain?

Big T

 

[feihong]

A loaf of bread costs 30k zimbabwe currency.. So properties would be at least 7 figures

 

[handyandy]

duplicate longer

 

[handyandy]

Hi Big-t

Its a bit like asking 'how long is a piece of string'.

24 units = 24 tenants with many problems

1 unit = 1 tenant with maybe no problems

I have a fair few units and there is not a week when there is not a problem/issue somewhere.

With the stalled market out west the cap gain could be a while coming but I would imagine that with an average purchase price of $83k per unit it would be close to cash flow positive - so very little holding costs.

Also with 24 units the problems can be way bigger. Had to upgrade fire rating of 9 unit block cost about $16k (included having to move electrical switch board out of the hall way). Guttering at least $6k etc

Also with 24 units you will have 24+ people on the premises with the related wear and tear and wanton damage to common property.

Personally I would be interested but it would depend on the location the type of tenants in the area and the state of the repair of the building and internal units.

Cheers

PS personally trying to pick up a block of 15 at the moment (at the right price) which requires a lot of work as has never had anything done to it in 30 odd years. 30 year old kitchens /bathrooms, guttering just about gone associated damage to brick work from leaking gutters, will need upgrade to fire controll systems upgrade to security including intercoms.

 

[Big Tone]

so far I have to agree with every response, but I am thinking down the path of the block of units, maintenance is not too much of an issue for me as I am an refrig/air con tech, my brother is an electrician (who specialises in fire protection), my other brother is a plumber, my best mate is a builder,another mate is a chippie, my cousin is in kitchens, my sister in law has an uncle who is a gyprocker, my neighbour is a brickie...................etc etc.

Is it true .........its not what you know, but who you know?

Big T