People's views as to this Canberra property for an IP?

Hi all,

Continuing on the process of educating myself in property investment (still a loooong way to go). I would be interested in people's views on this property as a potential IP? :)

http://www.allhomes.com.au/ah/ah0073?slid=167408613

Hypothetical at this stage... just committed to my PPOR and will need to wait for a little while before embarking on my first IP.

I'm really keen though to get a sense of the considerations that you would take into account when making this type of decision.

My pros for this place are:
- inner city suburb
- price is on the lower end for such a suburb
- some renovation done
- within walking distance to Tilley's (local cafe), shops and transport.
 
PROs:
Rental yield
Position
Renovated (but do something with those tiles in the bathroom)
CONS:
Only 1 brm
Communal laundry (I'm not a fan)
Also check the size is >50m2 for getting finance purposes
 
What Propertunity said.

I don't know, but being in O'Connor it's probably an older property. I'd be checking that out.

Having already been renovated takes away a chance for you to add value. You may well be able to get a cheaper run down unit and renovate for less money than buying a renovated unit. Do your sums.
 
Is the Canberra market really hot at the moment? Just surprising that property was listed on Wed and has already had 1700 views? Crikey.

I used to live in canberra, absolutely love that allhomes website shame it isn't Aus-wide.

I will reiterate what the others have said and that depending what your looking for you may get much better value out of buying a more run down unrenovated place, doing some quick cheap cosmetic things that the current owners were too silly/slack to do and reaping the rewards. that said you would need some extra capital time and patience to do that and be able to think outside the square.

To me that property is more in Lyneham than O'Connor. If your looking for a small 1 bedroom unit I am guessing you will be targeting possibly a student, if so it might pay to go closer to ANU or look half way between ANU and UC?

Im also not a fan of communal laundries, but each to their own.

Do you know what the body corporate/rates etc and outgoings are for the property?

Have you considered further out? Let me play devils advocate - this property is under offer but a good example, 6.2km further from the Canberra CBD, same price, extra bedroom and looks much bigger. Which would rent for more and have better capital growth? I don't know.

http://www.allhomes.com.au/ah/ah0073?slid=167395574

Doing a quick scour I can see that the listing you have found does seem good value because I can see a lot other places more expensive but in worse location and much worse condition than this so it looks like your on the right track. I guess it comes down to what your target market is and goal is (you looking for cap growth or yield or what mix) and how best to achieve it.
 
Thanks all. Very useful observations :)

Certainly take on board the suggestion that it might be better value to buy cheaper/poorer condition and fix it up minimally. Makes perfect sense. Ditto re communal laundry.

Dammit - are there different considerations for buying something for good capital gains vs high yield? So they don't necessarily come together?

Cheers!
 
....are there different considerations for buying something for good capital gains vs high yield? So they don't necessarily come together?

Yes, here's an example:

$1M house on the beach front will maybe only get a 2 - 3% rental yield but might in 10 years get capital growth that see the price triple.
Whereas a $350K house might get 5% rental yield and in the same 10 years might only get a doubling in sales price.

This is a broard sweeping generalisation and there are plenty of exceptions.
 
Hi Harold
Propertunity is right.

I don't want to generalise or stereotype any investments but usually its a case of if you want capital growth/negative gearing you would buy in a capital city, your rental income wont cover your property/mortgage expenses, but you can expect the property to increase in value significantly and double in value within around 7 -10 years time or sooner. You will also get tax savings as a benefit. So Canberra, Sydney, etc would usually be within this area (but don't forget there are always exceptions).

The other stance is a regional area, something like Orange NSW for instance I know a few years ago (dunno what the markets like now) you could by a 3brm house for 80k and rent it for 180-200 a week. Your rental income make it positive cash flow because its greater than your expense, but as a trade off your not going to get the same level of capital growth there as you would in a capital city usually. from year 2000 to 2009 a property in canberra would probably double in value but in orange for instance you might have paid 80k for your +cf property and now its worth 110k for instance?

This is all dependent on your financial circumstances etc but should expand a bit further for you. :)

The good thing is your thinking and learning so you can only improve and get ahead from this so well done.
 
One thing which might help the yield for this property would be to furnish it cheaply (freedom furniture) and to let it out as a furnished property. There are a lot of people who come to Canberra to work and who look for this sort of property. But research would be needed.

Don't forget that land increases in value and buildings decrease. The higher the land content, the higher the potential growth.

Allhomes.com.au is a great site, with a huge amount of information. I used it to loom at the growth in O'Connor for the last few years. The growth for houses has been strong. The growth for units has been almost flat for a number of years. (Though the percentage of units in the suburb is quite small).

I would be looking at going a bit further out, with a house on land. If the budget permits.
 
Thanks for considering so many newbie questions...

So for a new starter, considering a first IP, should there be a more dominant consideration - capital growth or rental yield?

Another thing - Some people I've spoken to about property investment has suggested that I get an interest only loan and don't bother paying off the principal. This sounds a bit reckless to me. Is this an appropriate strategy for an IP?

Learning a lot today :)
 
Capital growth or income?

P&I or interest only?

Questions which have been asked many times in the forums.

CG vs cashflow is a far bigger question IMHO. I like CG when I can afford to fund a shortfall. But that needs income.

There is a better chance of getting both on a property with multiple streams of income. Like two units, or a house with a granny flat.

Io vs repay. It depends. If you repay now you cut your total interest for the loan. But you also cut your income.

Many banks only allow io for the first x years and then demand io.

Lots of questions for you, not so many answers. You have lots of research to do.
 
somthing i noticed the other day, i used to look on the allhomes site every day , as in canberra its the only site to look for new home , i read the canberra times for the first time sat and there were a few listed in the paper that wernt on the web site ,
never searched through domain before and some were on this site too,

but there are latly some cheaper bargains available at the moment, might be early to call yet but the end of FHB looks like its slowed a bit, still massive shortage here though , last count 1688 homes available , and the rentals i think were 800 not many at all???
 
I think before you even go looking at particular properties you need to make personal decisions about what you are looking for and what you hope to get out of that property.

ie,
- Unit or house?
- land component
- rental yeild
- loan repayments
- price range
- etc

once you know the answer to all of that then you can start looking for a property to suit your investment needs. For example, neither DH or I have the time nor ability to do much (or any) handy work - so renovating, or any property that requires too much time and attention, is not a good idea for us. Also tax / depreciation benfits of buying new or newer free up alot of cashflow for us. We don't want the hasle or expense or lack of control of body corp / strata fees, so units are generally not an option (unless we could own the lot - which is what we are aiming for later on). All of this would vary depending on the person investing and comfort levels.

So once you know what you require, it is a matter of trawling through resources like allhomes, etc and finding out what is available and where. You need to thoughly investigate the where.

My BIG questions are always -
WHAT - unit, house, etc
WHERE - quality of suburb, proximity of location
WHEN - settlement, availability for rent
WHO - target market
HOW - old is it, how much work needs to be done.
WHY - would it be a good investment as opposed to everything else on the market.
 
What about the gungahlin area? Every time I look at it im swept away by the growth. May be too late but I know in Ngunnawal you could buy a freestanding house for under 350k not so long ago?

The others have raised some really good questions that when you work the answers out to you should be a bit more precise in what you can look for, where, how much etc.

Ive always wondered myself a bit about the canberra market, the high reliance on public service to drive up values, all of the land being on a 99 year crown lease, I don't know why but having land on a lease makes me a little uneasy..i could be completely wrong and there be no way the govt can ever take away ppls houses/land without huge compensation, but just something i always wondered (i have never looked into it in depth though maybe someone else here can comment).
 
What about the gungahlin area? Every time I look at it im swept away by the growth. May be too late but I know in Ngunnawal you could buy a freestanding house for under 350k not so long ago?

The others have raised some really good questions that when you work the answers out to you should be a bit more precise in what you can look for, where, how much etc.

Ive always wondered myself a bit about the canberra market, the high reliance on public service to drive up values, all of the land being on a 99 year crown lease, I don't know why but having land on a lease makes me a little uneasy..i could be completely wrong and there be no way the govt can ever take away ppls houses/land without huge compensation, but just something i always wondered (i have never looked into it in depth though maybe someone else here can comment).

Well the 99 year lease should make yo uneasy, so your now how old ??? and add 99 years to this , and after your dead! worry about it then, ?;)
 
I like the gungahlin area - I think this is where the major growth will be in canberra for many years to come. (the new tuggeranong if you will) - hence why I am building in the new development at casey. As for prices in that region, you 'might' be able to find something freestanding starting at 350k, but more likely you are looking at 400k and above for a basic 3bed on a small block.

TBH I have a few issues with a 99yr lease as well, but not enough of an issue to cause me not to buy.
 
Rugrat - thanks for the list of questions. Over the past year, in the search for my PPOR, I've learnt a lot about my risk profile etc as well. Will make sure I have some good answers before embarking on an IP search.

Those REAs can sniff out weakness in a millisecond!
 
There are some older suburbs where the 99 year lease started in the 1930s. There were rumours at one stage that these would be extended. I don't know if that happened.

The advantage of a 99 year lease is that the stamp duty can be claimed on tax in the purchase year for an investment property. Some people let out their PPOR in the first year for that reason.

I don't like Gungahlin as much as some of the older suburbs because the land area can be quite small in comparison to older suburbs. But that can be an advantage if you're like me and don't like gardening and mowing. You would need to have a good marriage though- you are quite close to some neighbours.
 
Top