Over investing - Paralowie

[jonnofoot]

Hi All

I have posted this exact same topic on another forum and it was suggested I get some thoughts from this community. Just so you know, I am a complete noob to property and this will be my first potential purchase.

My wife and I are looking at buying a house and land package in Paralowie, SA. I am originally from South Africa and from what I understand and this is purely hear say, it is not the best suburb in Adelaide, but has everything you would need. From what I could find it seems to be the cheapest land ($/m2) within a 20km radius of the city.

We looking at house and land for about $400000. That will be 4 bed, 2 bath, 2 garage on a 580m2 block in a brand new development. This will be owner occupied for about 3 - 8 years and the plan is to use the equity in this house to purchase another property which will become our prime residence and this house will become a rental.

My question is the following:

How do you work out if you?re over spending in a specific area?

The reason I am asking this is that I have done a quick search on realestate_com_au and there are very few existing houses that are around the $400000 mark. On the other hand, I think well it is a brand new house in a brand new estate so maybe I can spend that amount of money and in 5 - 8 years have decent equity?

I would love to hear your thoughts!

 

[Aaron_C]

You have to work out what it's worth after completion relative to other properties in the area. If you are way beyond even newish houses then you run the risk of overcapitalisation.

 

[atti]

for short to medium term gains i say stay with in 7-10 kms radius especially if you are after Capitals Gains. Dont worry about living in luxury out in the sticks as far as media is concern adelaide prices is about to take off. i think i already missed the boat last 6 months really is a best time to buy as you have more negotiation powers.

 

[pully]

agree with aaron, certainly look at existing similar properties in the area for the same price.

many choices out there at present in that price range, so plenty of options. will there be good infrastructure in this new area, for your needs? transport, schools etc. not sure if that area is your choice for other reasons, beside investment?

might have better cap growth elsewhere? an existing property might be better value than a new build. good luck.

 

[jonnofoot]

Thanks all for the replies!

My reasoning for looking at this purchase are as follows:

Cheapest land ($/m2) that could find within a 20km radius of the city
Future development of the area
Improvement of suburb profile
Area demographics - appealing to young families (rentals)

Personal reasons would be that it is closer to family and friends. My wife runs a business from home and here clientele are all in and around this area.

With property, would I be correct in saying that 8 years is medium term? As I have said my previous post, capital gains is not a huge thing for me right now as this will become a rental and will be holding onto the property long term.

 

[Erica]

For researching comparitive market sales my favorite free web site is:

http://house.ksou.cn/p.php?q=Paralo...agent=0&minprice=&maxprice=&minbed=4&maxbed=4

This site shows there have been some 4 bed 2 bath new homes selling around the $400,000 mark, so at a quick glance it doesnt seem to me like an overcapatalisation to spend that sort of money.

Just my personal oppinion

 

[Corey Batt]

400k is about right if a higher end build, 230sqm+ build, raised ceilings etc.

Is this the development next to the BP? Or running off kings Rd?

 

[jonnofoot]

Cheers for the link to that site! As said before, it seems I might be in the ball park here with a complete build of a bout $400000.

@CJay, it is off Kings Rd. Greentree walk is the developments name. I am hoping to secure a block of over 500m2 and then build a house 200m2+

Cheers for all the opinions, good to know that I am possible on the right track.

 

[Corey Batt]

Ah, I drove past Greentree Walk the other evening, work has already commenced on the site? It seems be a large enough estate to help the values hold.

Older properties (1980s-1990s) do come in significantly cheaper than the 400k new build mark, however they are generally only around the 130-140sqm mark and largely dated. A property substantially renovated will catch the low to mid 300's - but these properties generally have outdoor living areas, large sheds, pools etc.

I have a client looking to build in Paralowie at this time and has been looking at costings, his experience has been to keep the build/land costs in line to <375k, to allow for the finishing costs such as pitched pergolas, shed etc.

As to the living in Paralowie, it's generally fine. Pt Wakefield Rd gets you to the CBD in reasonable time, and the main bus service to the Mawson exchange runs along Kings Rd. The area has improved from what it was, so it should be fairly comfortable living for an owner occ.

 

[jonnofoot]

Cheers for your input on this. I got my first quote back for the build and was way more expensive that what I had orginally thought it might be. I am going to have to sit down and redesign the house a little smaller I reckon - $395000 for house and land without finishings.

Total area was as follows:

Living - 210m2
Garage - 36m2
Alfresco - 36m2

Might have to sclae it down a little to come in on budget

 

[Aaron_C]

Jonno just make sure you don't overcapitalise at those high LVRs. It will just set you back quite a bit.

 

[atti]

935 sqm land with 120 sqm old house ferryden park just sold for 380k heaps heaps heaps of potential, why would people look up at salisbury area ? here is 2 mins walk to asian shops 2 mins to regency park to study easy to rent out 7 mins drive to city or beach with no traffic.

 

[Corey Batt]

Cheers for your input on this. I got my first quote back for the build and was way more expensive that what I had orginally thought it might be. I am going to have to sit down and redesign the house a little smaller I reckon - $395000 for house and land without finishings.

Total area was as follows:

Living - 210m2
Garage - 36m2
Alfresco - 36m2

Might have to sclae it down a little to come in on budget

What's the breakdown of the land + build price?

 

[strongy1986]

935 sqm land with 120 sqm old house ferryden park just sold for 380k heaps heaps heaps of potential, why would people look up at salisbury area ? here is 2 mins walk to asian shops 2 mins to regency park to study easy to rent out 7 mins drive to city or beach with no traffic.

Not sure mate, I have asked this question before and the same one about Logan in Brisbane

 

[Corey Batt]

Not sure mate, I have asked this question before and the same one about Logan in Brisbane

Because a old bucket of crap house in Salisbury on a similar size block have sold for low 200's? Completely different comparisons.

Theres a market for everyone - e.g a client of mine is looking in the area, as he works directly north in Edinburgh. 'Close' to the city is not relevant to him at all. Same can be said for people living in Gawler, Sellicks Beach, Mt Barker etc.

Some people are looking for larger blocks, or smaller, close to city or country, close to a certain locn (work, family, cultural groups). To assume that every purchaser is looking for the one and only attribute of proximity to CBD GPO leaves out a large % of the market and many opportunities.

 

[strongy1986]

Because a old bucket of crap house in Salisbury on a similar size block have sold for low 200's? Completely different comparisons.

Theres a market for everyone - e.g a client of mine is looking in the area, as he works directly north in Edinburgh. 'Close' to the city is not relevant to him at all. Same can be said for people living in Gawler, Sellicks Beach, Mt Barker etc.

Some people are looking for larger blocks, or smaller, close to city or country, close to a certain locn (work, family, cultural groups). To assume that every purchaser is looking for the one and only attribute of proximity to CBD GPO leaves out a large % of the market and many opportunities.

I was looking from an investment perspective not from the perspective of joe blogs who wants to live close to work

Can't remember reading all the posts above so might of missed something

 

[pully]

it certainly is very different to consider requirements for a ppor to those that apply to an investment. a ppor is a very personal choice about lifestyle. for many the outer suburbs are ok but others like to be able to walk to cafes, shops or have good public transport to get about.

again as has been discussed before it depends on the target market too, for rentals. it can be attractive to have particular schools near by and that feature is often included in marketing a property. sadly many outer suburbs are car dependent and lack good facilities. its the old saying location, location so important.
so easy to overcap in some of these new housing areas, but of course shiny new is attractive. good luck with your choice.

 

[jonnofoot]

Just to clarify my situation.

This will be a PPOR and my first house. The plan is to live in it for the medium term and then hold it as a rental.

The breakdown of land + build is as follow:

$185000 + $235000

Slightly more than what I want to spend so hoping to get the total purchase around the 385k - 390k mark to be relatively in line with the market.

From my limited knowledge, the area I want to buy in will hopefully increase in value over the next 5-10 years. You have developments in Parafield Gardens which are selling for around $450000 and that would the standard house and land without any finishing?s. I could be very wrong with this comparison, please correct me if I am.

 

[Spades]

Some people are looking for larger blocks, or smaller, close to city or country, close to a certain locn (work, family, cultural groups). To assume that every purchaser is looking for the one and only attribute of proximity to CBD GPO leaves out a large % of the market and many opportunities.

+1..I agree.

 

[Corey Batt]

Just to clarify my situation.

This will be a PPOR and my first house. The plan is to live in it for the medium term and then hold it as a rental.

The breakdown of land + build is as follow:

$185000 + $235000

Slightly more than what I want to spend so hoping to get the total purchase around the 385k - 390k mark to be relatively in line with the market.

From my limited knowledge, the area I want to buy in will hopefully increase in value over the next 5-10 years. You have developments in Parafield Gardens which are selling for around $450000 and that would the standard house and land without any finishing?s. I could be very wrong with this comparison, please correct me if I am.

$235k is an absolute rip off for 210sqm in Northern suburbs - I'd be very concerned with over cap. I've had three 230-240sqm designs go over my desk at $160-170k.

Best practice would be to get three quotes from three different builders, that way you can see the variance.

If you are intending to make this an IP in the future, you don't want to invest too heavily in the build (which will depreciate, slowing CG potential IMHO).

Building to live in as a PPOR and then using as an investment can cause mixed signals, as you generally would like a higher quality than an IP generally would.