Unit vs house as first property investment? URGENT help needed!!!

[Propertunity]

Oh I see... well I actually have a 10% deposit only, the 20% was a typo. In that I guess the deposit would be pushing 110k... which probably isn't really worth it, right?

No, no.......

You have 10% deposit OK = $40K
You are borrowing (or trying to) 90% x $400K = $360K

Example again, if valuer says worth = $380K then bank lends 90% of $380K = $342K

You need deposit = $400K - $342K = $58K
Same Q: Do you have that? (in the event valuer says its is worth $380K AND you still wish to proceed.

 

[reality_22]

No, no.......

You have 10% deposit OK = $40K
You are borrowing (or trying to) 90% x $400K = $360K

Example again, if valuer says worth = $380K then bank lends 90% of $380K = $342K

You need deposit = $400K - $342K = $58K
Same Q: Do you have that? (in the event valuer says its is worth $380K AND you still wish to proceed.

Definitely not, it's pretty much all my savings paying the deposit.

 

[Propertunity]

Definitely not, it's pretty much all my savings paying the deposit.

OK - so I take it you only have $40K available? + some left over for legals. No stamp duty payable. You also using the FHB grant?

edit: maybe can you make it simplier for me? how much cash saved by you? how much from Vic state govt giving you? how much from feds? = how much cash available for the deposit & legals

 

[reality_22]

OK - so I take it you only have $40K available? + some left over for legals. No stamp duty payable. You also using the FHB grant?

Yep, that covers everything. My loan has already been approved and I figure that I can rent out the unit at $320 - $340 per week once I polish up the floorboards (there are two other units for rent in the same street and they are advertised at $340 per week).

Would it be better buying something that will be positively geared? I'm looking at Fawkner right now on re.com.au and the prices are 100k cheaper for a house on 600m land, with the rental in the $300s.

I'm conflicted now! Perhaps this is just buyer's remorse...

 

[Propertunity]

Yep, that covers everything. My loan has already been approved

By approved. I take it to mean pre-approved subject to valuation being done on the property you want to purchase?

Would it be better buying something that will be positively geared? I'm looking at Fawkner right now on re.com.au and the prices are 100k cheaper for a house on 600m land, with the rental in the $300s. I'm conflicted now! Perhaps this is just buyer's remorse...

You might be getting a bit 'conflicted' as you put it. Perhaps this is because you did not actually do enough research into what you wanted to buy, how much cash out of your own pocket you had to put in each week, etc etc.??
Or is it because you just found this forum and your eyes have been opened to a lot of things you had not known/seen before?

 

[sparky23]

If you like Ivanhoe and also wonder whether you should be buying a house how about this one: http://www.realestate.com.au/cgi-bi...mt=&header=&cc=&c=6087848&s=vic&tm=1232708387 it comes in a bit cheaper, has 3 bedrooms and a price range of $360,000 - $390,000.

Rental income should be good ask whether they have a rental appraisal, might be worth checking out.

 

[Propertunity]

Would it be better buying something that will be positively geared? I'm looking at Fawkner right now on re.com.au and the prices are 100k cheaper for a house on 600m land, with the rental in the $300s.

Well only you know your own financial ability / income etc.

Fawker is 30 minutes away from where you are purchasing in Ivanhoe. Completely different demographic etc.

It is tru that as interest rates approach 5 - 6% and rental yield 5 - 6% with depreciation you can have a cash flow neutral or slightly positively geared property.

Capital growth then is the other consideration - whole 'nother topic

 

[reality_22]

You might be getting a bit 'conflicted' as you put it. Perhaps this is because you did not actually do enough research into what you wanted to buy, how much cash out of your own pocket you had to put in each week, etc etc.??
Or is it because you just found this forum and your eyes have been opened to a lot of things you had not known/seen before?

I had researched and know the market price for the area, but I think the thing is I was thinking purely in terms of purchasing a unit in a well established area and now suddenly I'm realizing that I can buy a house with land in a more outer location with alot more options to renovate etc. I wasn't really considering it before as I really wanted to buy in a good area, but now I'm thinking that as a rental who cares where it is as long as it covers a good percentage or the repayments and has room to make profit in the long run.

I just feel that with units there's not a lot you can do to improve its value after a certain point, and since this one went from 300k (vendor brought it in 2005) to 400k in 3 years time I'm worried there's not much higher it can go.

 

[reality_22]

Well only you know your own financial ability / income etc.

Fawker is 30 minutes away from where you are purchasing in Ivanhoe. Completely different demographic etc.

It is tru that as interest rates approach 5 - 6% and rental yield 5 - 6% with depreciation you can have a cash flow neutral or slightly positively geared property.

Capital growth then is the other consideration - whole 'nother topic

In your opinion would the unit have the same capital growth as houses in Fawkner/Glenroy? I thought that with houses when a boom period comes along they can jump high and far, whereas units still plod along quite steadily.

Sorry to bombard you with questions! I'm just a bit nervous about the whole thing, plus I definitely didn't discover this forums until today!

 

[Propertunity]

I had researched and know the market price for the area,

Excellent

but I think the thing is I was thinking purely in terms of purchasing a unit in a well established area

No issues with that at all

and now suddenly I'm realizing that I can buy a house with land in a more outer location with alot more options to renovate etc. I wasn't really considering it before as I really wanted to buy in a good area,

Well this is 'buyers remorse' settin in.

but now I'm thinking that as a rental who cares where it is as long as it covers a good percentage or the repayments and has room to make profit in the long run.

Long term CG trend:
Units in Ivanhoe: 11.56%
Houses in Fawkner: 11.75% ...............coin toss
Rental yield:
Units in Ivanhoe: 4.1%
Houses in Fawkner: ?%
(APM)
Rental vacancy:
Ivanhoe: 4.8%
Fawkner: 1.5%
(SQM Research)

I just feel that with units there's not a lot you can do to improve its value after a certain point, and since this one went from 300k (vendor brought it in 2005) to 400k in 3 years time I'm worried there's not much higher it can go.

Well I think you are paying full tilt but disagree that there is no room to value add. Seems ripe for a reno to me from the pics. But you'd have to do more research on reno'd units to see if they value up post reno. It can go higher - as other have said.

 

[reality_22]

Hmmm okay this has been very very very helpful. I wish I discovered this forum earlier! I will definitely have a careful think about it, but I feel like I'm leaning towards cancelling the sale. I looked at a lovely edwardian, un-reno 2 bedroom house in seddon a month ago which was near Seddon train station which eventually sold for 410k. When I think about this in hindsight and also knowing the potential growth in the west at the moment, I think I should hang in there and hunt around some more.

Thanks for all the feedback guys!

 

[Propertunity]

In your opinion would the unit have the same capital growth as houses in Fawkner/Glenroy?

We crossed over in posting - but see my previous post - they are almost exactly the same.

I thought that with houses when a boom period comes along they can jump high and far, whereas units still plod along quite steadily.

Ain't necessarily so - as the song goes
See attached graph of CG for Ivanhoe - houses did better than unit last couple of years - but this is not always the case.

You just need to sit down over the week-end and have along think about the numbers - CG, yield, ability to value add, demographic of tenant, proximity to transport, hospitals & coffee.

Use some tools on the internet to get at the data you're after to help you make a decision.
Long term I don't think you'd go wrong with Ivanhoe..............but that listing Sparky turned up on re.com is interesting...........sorry I'm feeding your buyers remorse.

edit: But don't get stuck with the other disease either: analysis paralysis

 

[Propertunity]

Sorry here's the graph

 

[atti]

i have not read what others have said but, this is situation i was in.

Unit 320k 2 streets away from beach, about 200 meters. strata titled 2br 1bth homette on about 170 sqm of land.

House 330k 1.5 KM from beach next suburb, 19.5 meter frontage, 560 sqm of land + solid brick house basically 2 br 1 bth.

i chooose the house everytime. Unless the unit was beachfront waterviews, highly doubt it for that price. house on bigger land i think would have huge CG potential in future for 2x townhouses, unit will always be a unit u dont have full control of it if they decide to sell the lot i think u gotta go with the flow

 

[The Y-man]

If you like Ivanhoe and also wonder whether you should be buying a house how about this one: http://www.realestate.com.au/cgi-bi...mt=&header=&cc=&c=6087848&s=vic&tm=1232708387 it comes in a bit cheaper, has 3 bedrooms and a price range of $360,000 - $390,000.

Rental income should be good ask whether they have a rental appraisal, might be worth checking out.

Hi Sparky,

Ivanhoe near the station is (in my opinion) a vastly different demographic to the Ivanhoe west of Oriel St or North of Banksia St..... the latter being filled with post war housing commission concrete houses. Nothing wrong in having an IP in either area, but very different markets.


Cheers,

The Y-man

 

[sparky23]

Thanks y-man just thought it looked like a good compromise if atti was keen on staying within his preferred suburb.

 

[Gatoblanco]

My opinion is this:

You shouldnt be upset about backing out.

Why?

Because the way the market is going you have plenty of time to find a bargain. You have time to find a bargain that is very obviously a bargain and you wont be worried about it at all.
You can make crazy offers in this market and if they get rejected then make some more.

Time is on your side at the moment because we are in a falling (or at least not rising) market. You have time to do more research so you will know the market very well. You will know what can be value-added to for Capital Gains.

These comments were made without respect to your particular unit because i dont know Melbourne and I am not a fan of units if I could afford to buy a house instead.

Even if the unit was a good deal and you miss out, the fact that you have time (I assume) to check out other stock and be confident alleviates that potential situation.

If you are buying for an investment then it is all just about the hard facts of the property/location and general market which you can gather by research. If you have enough knowledge then you wont feel any jitters. There is always risk involved but if you have done enough research you wont have second thoughts.

 

[Lamingtons]

I think you're having some sort of buyers remorse as you did not expect to pay that much for the unit.
Perhaps the agent saw that you were a first time buyer who was anxious to get on the market and manipulated you by saying there were lots of interested parties. Did the 12 other parties put in offers? Or was it just what the agent told you?

 

[reality_22]

I think you're having some sort of buyers remorse as you did not expect to pay that much for the unit.
Perhaps the agent saw that you were a first time buyer who was anxious to get on the market and manipulated you by saying there were lots of interested parties. Did the 12 other parties put in offers? Or was it just what the agent told you?

No, we were told to bring our deposit and then had a mini auction so it was all very open and honest.

I'm still uncertain! I keep leaning towards canceling the sale but then I'll consider the great location and perhaps not getting the same sort of chance again...

 

[sparky23]

Poor old you - you must be getting even more confused since posting on here! How much time do you have left to make up your mind?