what to buy

Hi,

i am planning to buy my 1st IP in SA. i am trying to max my tax return.

i have around 50k equity. looking at just servicing the interest from the IO loan.

should i be getting a

1. 2 bedroom unit for around 200k near CBD and rent it for around 220 pw for a long long time (not much capital growth but max rental to price ratio) or

2. a landed 2 bedrm property for 350k and rent it for around 220 pw (since its far from CBD, cant get much rent from it) wait til the land price rise then sell it off (may have the highest capital growth but lowest rental to price ratio) or

3. a 3 bedrm unit in a high priced area rent it for around 300 pw and hopefully renovate it and sell it in the future (some capital growth and ok rental return)- 350k

what will you do/get for a 1st IP?
Scott
 
i am planning to buy my 1st IP........ i am trying to max my tax return.

To meet this criteria, I would go for highest CG, lowest (but NOT zero) rent (doesn't mean you rent it out cheaper than market!! :eek:)

Hold for at least 12 month (muuuuch longer if possible :)) to get CGT discount, and try to sell in a year when you have no income :D

Cheers,

The Y-man
 
3. a 3 bedrm unit in a high priced area rent it for around 300 pw and hopefully renovate it and sell it in the future (some capital growth and ok rental return)- 350k

This option is the best in terms of managing risk. Why? Because option 1 has least potential for good capital growth. Option 2 has the maximum potential for capital growth but it's hard to time when you will get that CG. In the mean time due to the -ve gearing your cash flow is hampered affecting future purchases due to reduced servicibility. Option 3 gives you a balance of good rental return as well as potential for good CG. Allowing you to keep purchasing at regular intervals.

My 2 cents.

Cheers,
Oracle.
 
Scott, I'd be taking option No.2 but certainly not the area you seem to be looking at.

I am currently building in Windsor Gardens so have been researching pretty heavily there for the last 18 months or so. There have been a lot of new 3,2,1 (bedroom, bathroom, garage) houses sold for $340k to $360k in that time and certainly at present. They rent for anywhere from $320-$350/week.

Ticks all the boxes as far as I am concerned.
Great depreciation - brand new house.
Great rent return for a house.
In your price range by the sounds of it.
Close to the CBD - 8km.

I'm sure if that's what they are selling for in Windsor Gardens then there will be other suburbs near by that have similar prices at the moment. I had no idea up till 18 months ago that you could get property that close to the CBD for that sort of money and they seem to be pretty good suburbs too and getting better all the time.

Gools
 
thanks for all your advice.
Gools, you seems to open me to alot more options . thanks.

oracle, yes you are right. it is about risk management as well.

Y-man, that's a good option too.

cheers,
Scott
 
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