Out of my depth... What & Where to buy?

[Compleks]

My appologies for the recent outbreak of new threads...

I'm still no where near the actual buying process, so these concerns may be a little premature.
I'm still in the process of trying to figure out what size loan I am eligible for.

Anyway, I imagine my borrowing power is going to be relatively low.
I live in the south east of melbourne, and would like to purchase around the same area (inner east/bayside area). However I don't think I will be able to afford any houses in this area.

Do you think I should consider appartments/units in this area, or venture further out into a suburb where I can afford housing?
What about one of those sub divided half houses? (not sure on the proper name sorry)

I should also be eligible for the FHOG. However if I were to claim this then I really would prefer to stay as close to my area as possible (work/family reasons).

What do you think I should do?
What would you do?

This is all speculation, but I don't think I would be comfortable borowing more than $300,000 for my first purchase (probably unjustified fear). I'm not sure if I could even get that amount.

Thanks for putting up with all my nonsense.

 

[wylie]

No issues with "nonsense" at all. You are just asking advice, which is what we are here for.

I would firstly see a broker so you know how much you can borrow. Then you can decide if you want to borrow that much, and see what you could afford in your area. You may not be able to afford house, but a unit might be the way to go.

Then look a bit further out to see what you can get. Once you get a feel for both areas, you will start to get more comfortable with things.

Deciding if you will utilise the FHOG or not is something only you can decide. You will have to work out whether you want to move into the IP for six months. If not, it seems that you can use the grant for your first PPOR at a later date. I don't know whether that will change or not, and it seems that when people do the "sums" it works about even anyway. You live there, but lose the rent, but get the grant, but pay extra stamp duty etc etc.

First up though, is definitely see your borrowing limit, so you know what to look at. That is not to say you have to borrow to the limit, but at least you know the limit.

 

[Propertunity]

I live in the south east of melbourne, and would like to purchase around the same area (inner east/bayside area). However I don't think I will be able to afford any houses in this area.
Do you think I should consider appartments/units in this area,

Most people starting out on their investing journey, buy 1, 2 or 3 properties near where they live. It is easy to go visit them. It is easy to travel to them if you are doing a reno. You already know the suburb as you live there. You already know the market that you will be drawing a tenant from. You stay away from the area/s that concern you. You can recognize a bargain when it comes up. So buy near where you are. If you can't afford a house there - then get a unit - sure.

or venture further out into a suburb where I can afford housing?

No, not for your first one, with your risk profile

What about one of those sub divided half houses? (not sure on the proper name sorry)

Duplex? - sure if you can afford it.

I should also be eligible for the FHOG. However if I were to claim this then I really would prefer to stay as close to my area as possible (work/family reasons).

Yes, get the free cash handout. You are only committed to living there 6 months. Then you can decide to stay put or make it an IP. Hard to resist all that $ + stamp duty relief.

 

[Compleks]

Fantastic, thanks for the help guys.

I was reading somewhere on here this morning that 'land appreciates, property depreciates'. Or something to that effect.
This was in relation to the house/appartment debate.

What are your thoughts on this?
I can understand that a house is likely to out perform a unit or apartment when it comes to capital growth.
But is it enough to rule out an apartment as a first investment (probably all I could afford in my area)?

Thanks again.

 

[wylie]

If you can afford a house on a block that can be developed, I would go that way. If not, then a "normal" house would be my next choice. I don't like units, but that is purely a personal thing, and I don't like having to deal with bodies corporate. But plenty of people do very well from units and/or townhouses. It all comes down to price and preference.

 

[The Y-man]

What are your thoughts on this?
I can understand that a house is likely to out perform a unit or apartment when it comes to capital growth.
But is it enough to rule out an apartment as a first investment (probably all I could afford in my area)?

Thanks again.

Argued to the nth degree in many threads, but my view is that yield (rent compared to cost of propoerty) is often better on units/aprtments than houses.

I've owned both, and I have a feeling it all evens out in the end. Found units/apartments easier to sell in an emergency - probably because of the lower price tag in a given area - so this argument won't hold if you went to buy a house in a different area at the same price as an apartment in another.

Cheers,

The Y-man

 

[Compleks]

"If you can afford a house on a block that can be developed, I would go that way."

I'm not sure I would be capable of building a home. Is that what you meant?
I'm struggling enough as it is, I don't think I would ever get my head around everything involved in a re-development.


Is there a difference between a unit and appartment?
What exactly is a town house?

 

[Compleks]

Thanks Y-man.

I can see how an appartment might be better in terms of cashflow. I guess it comes down to personal preference.

I guess I'll just have to find out my loan capacity and then search for the right deal once I have some figures.

 

[wylie]

What I meant was a house on a block that, sometime down the track could either be split and another house built or just sit there and become more valuable because of its land size.

You may never have to develop it, but if the land size is capable of developing "one day" it will be worth more than a block that cannot be developed. However, these blocks will generally cost more anyway, because the vendors probably know their value.

 

[Compleks]

Ah, okay. Cheers mate!

I guess the biggest problem would be lower rental yield (if any) while holding the property... ?

 

[jaycee]

What I meant was a house on a block that, sometime down the track could either be split and another house built or just sit there and become more valuable because of its land size.

You may never have to develop it, but if the land size is capable of developing "one day" it will be worth more than a block that cannot be developed. However, these blocks will generally cost more anyway, because the vendors probably know their value.

That's what I'm hoping on doing.!....

Compleks, sometimes rent is lower sometimes not... check a few places out, do a search on realestate.com for example.. then search rentals for the sme type of property in the same area.. this can let you compare say nunti and house prices and their yields, you can check what you think you could afford etc.. and develop a bit of an idea... my little bit of looking has found the same yield you might expect if the block was smaller in teh suburbs I've looked at

 

[rarkins]

Get some professional help

Hi,

It sounds like you need a financial planner to help you out a bit, and hook you up with someone who can guide you through other investments such as property.

In the past I've dealt with and been happy with a guy called Carlo Lorusso - 0404889663 - based in Melbourne who was recommended to me by my financial planner.

He basically will take you through all the inputs (how much finance do you have available, from where, banks, brokers etc, then the research on the suburbs, what's your goal, PPOR or IP, rental returns etc etc)... once he's got all the input he narrows the list down for you, and off you go on the journey knowing what you're seeing is what you can afford.

For the most part he does this free of charge to you, but will take a commission, anywhere from 1% - 5% depending if you choose an existing dwelling or something off the plan etc.

He has no sales targets with anyone, so he's not pushy for any particular project, just what is right for you.

Anyhow, his consultations are free, you get all the info you need (ie grants, tax, depreciation, etc etc) and I thought he was worth it.

I have no idea if I was meant to

 

[Alex P Keaton]

Ah, okay. Cheers mate!

I guess the biggest problem would be lower rental yield (if any) while holding the property... ?

and also you might be paying more in maintenance costs/expenses if it is an older house.

I think a unit can be a good first investment for a fhb and if its in a good area you can still enjoy good capital growth. You dont always have to have the house and land for CG, you can do well with a unit if you choose wisely.

 

[Alex P Keaton]

Anyway, I imagine my borrowing power is going to be relatively low.I live in the south east of melbourne, and would like to purchase around the same area (inner east/bayside area). However I don't think I will be able to afford any houses in this area.

Do you think I should consider appartments/units in this area, or venture further out into a suburb where I can afford housing?

I should also be eligible for the FHOG. However if I were to claim this then I really would prefer to stay as close to my area as possible (work/family reasons).


This is all speculation, but I don't think I would be comfortable borowing more than $300,000 for my first purchase (probably unjustified fear). I'm not sure if I could even get that amount.

I think you answered your question.

You would like to live in the inner city to be near family and work and you dont think you can afford a house in this area. Looks like you'll only be able to afford a unit in that area.

Its all about priorities. What is your main priority??

1. Location
2. Type of property

If you pick #1 then buy a unit.

If you dont mind moving further out then you could buy a house.


Last year I bought a unit in inner city Perth. Thats all I could afford if I wanted to buy something near my family, so thats what I did and have made a good start. To afford a house I would have had to go a lot further out, and was not prepared to do that because location was the most important thing for me.