What type do you prefer?

[want2bewealthy]

which type are you and why?
units? are usually associated with lower capital growth but higher yields and cheaper entry costs

houses? higher CG, etc etc

 

[want2bewealthy]

I 'like' houses with more land content but the problem is. . I cant currently afford to purchase one where Id like to, my servicability is stuck to another unit at this point in time, Im torn between purchasing a good unit with a yield to match now, or hold off until I can afford to purchase a house.

What are your thoughts? Im not sure what to do because I do want to get in again soon but also would 'prefer' the potential for higher capital growth a house and land can offer.

 

[BayView]

It's a bit of a generalisation - the unit V house cap growth thing.

We went units early on for the affordability aspect.

We have a unit and a house in the same town, and both have gone up by the same % over the same period of time.

The unit has had the biggest rent increases as you say, so the unit is the winner there.

And we have another unit that has not gone up as much as another house within 20 mins of each other, but the rents have had about the same % increases, so I think the whole thing is on a localised basis.

My preference now is now to go for property that has land content that will be used for subdivision and redevelopment.

We've done enough of the cheapies now. Time to change gears.

I want to build 4, sell 3 and keep one very pos geared buy and holder, then repeat, and repeat.

This'll get the cashflow going.

No more slow boats to China with piddly cashflows for me.

 

[Player]

Voted:

House with more land content.

I don't mind units as long as I can own all of them

I always aim to buy as much dirt as possible/affordable with a box for rental on it and in future add value by subdividing and developing.

Marc's strategy above is also one I'm looking at to end up with wholesale IP's. Build four (sell three) and keep one is a 25 % return. Not too shabby in my eyes. Then repeat the process and let the growth begin.

 

[The Wild One]

I have a mixture of both and one duplex.

I have to say I like my town houses for the simple reason they attract singles.

Less wear and tear and all my single occupants have stayed on, even with the rent hikes. My experience is that houses attract families who move on as soon as you put the rent up from, say $290 to $315.

And my units have also increased in value just as much as the properties with larger land content !!!

John.

 

[ianvestor]

I prefer houses on developable land.

With respect to other posts saying build 4 and sell 3, I'd prefer to build 4 and refinance 4, and repeat.

I am actually in the process of developing 5 townhouses at the moment, and am not planning to sell any of them, depending on my cashflow situation at completion.

I have a couple of units already and am over the body corp thing, so as Player says I don't mind units as long as I own all of them.

 

[Nathan]

anything with potential within cbd city borders...

units dont get slugged with high land tax in larger blocs... can be a winner from that angle when u get hit with the land tax lady.

 

[Player]

That's what I like ianvestor, to also keep them all, however at some point (even with depreciation and higher rents from brand new boxes) servicibility will catch up. This of course depends on everyones income level and other cashflow constraints.

I have IP's that I will scrap and do duplex builds on that I will keep for the portfolio and double income stream for the future, however the build and sell strategy is one I will do for all new purchases and projects.

Building 4 or 5 and selling all but one, should leave the profit as a free unencumbered (or with only tiny debt) town house or unit. That way your profit is locked in to the new asset.

Another variation is to sell less and keep more than one and still be positive (or at least neutral) cashflow and then have those growing for you into the future and re-fi and go again.

Plenty of strategies.....horses for courses really. People need to do what suits their circumstances/pockets and level of involvement (passive v's active).

 

[Sunfish]

What type do you prefer? Blondes, redheads, long legs or short? I'm easy.

 

[lizzie]

high density zoning run down houses with large land content!

after dabbling in every form of property investing over the last 10 years i've finally found my niche - like ian investor - buy, build 4, refinance 4, repeat.

however, right now it's looking more like buy, buy, buy, build 4, refinance, build 4, refinance, build 4, buy ... i'm kinda landbanking atm.

 

[our obsession]

A little bit of diversification never hurt anyone, bit of this, bit of that...we have a bit of everything.

Majority is house and good size land though. In fact we liked one of the blocks so much we bought the one next door. Might even do that again if I can wrangle the figures to suit us.

Married a redhead, and yes they are fun.

 

[peastman]

The beauty is that they all work.
So it just comes down to personal strategy. I like units because as Wild One said, they attract singles. Children are very destructive (or at least mine were). By buying a unit you get a nicer place in a better location for the same money, less headaches, good return and still get growth. The only thing you dont get is an opportunity to subdivide. This makes units perfect for my stategy of being lazy.

 

[ianvestor]

Building 4 or 5 and selling all but one, should leave the profit as a free unencumbered (or with only tiny debt) town house or unit.
...
People need to do what suits their circumstances/pockets and level of involvement (passive v's active).

Exactly. The thought of having a property with no loan against it horrifies me. I'd much rather 'own' a tiny piece of multiple properties than own any outright. In my personal circumstance, the serviceability will come from more debt (I couldn't service 5 townhouses from my income).

 

[Rixter]

I prefer to purchase Townhouses & Villas (over houses) with a 30% or greater land component thereby eliminating multi story units or high rise apartments, for several reasons.

The mains ones being (in no particular order) -

1/ Lower maintenance for me & upkeep for the tenant

2/ Lower purchase or entry level into a Higher capital growth suburb area

3/ Rapidly growing marketplace (starting both now & into the future) wanting these type properties. This is due the largest group of people to ever be born (being the Babyboomers and Empty nesters) starting to come into their retirement years. They will be wanting to downsize for the following main reasons - lifestyle & economic.

4/ Greater tax advantages & effectiveness thus maximises cashflow.

5/ Able to hold more individual properties spread across your portfolio - thereby minimising area over exposure risks by not holding all your eggs in only a few baskets, so to speak.

 

[GoAnna!]

I like the ones that make me money in the 12 months after purchase. Not the slightest bit interested in holding and hoping and paying out in the meantime. If I can't see the immediate money in it I don't like it. I am a sucker for multiples as it gives me higher yields but still leaves me with full control and the ability to improve.

No idea how to vote.

 

[sash]

I started with units (all in NSW) due to bloody land tax....I would buy houses but land tax in this state is a killer.

Have gone with houses in SA and VIC....land tax there is more reasonable.

As a observation....it is not a question whether to purchase a unit or house but as to whether it is the right type of property for the demograhic in that particular suburb!

 

[Rixter]

As a observation....it is not a question whether to purchase a unit or house but as to whether it is the right type of property for the demographic in that particular suburb!

And an astute observation it is too!

 

[Peter Parker]

As a observation....it is not a question whether to purchase a unit or house but as to whether it is the right type of property for the demograhic in that particular suburb!

I wonder about this, given that price is claimed to be a function of demand, and the highest demand is for properties are for the 'right' demographic in an area.

Compare cheap outer suburbs like Melton, Hoppers or Werribee, an inner-ish suburb like Reservoir and a bayside suburb like Chelsea.

Hoppers, Melton or Werribee are considered popular first homebuyers areas. Hence a house that's affordable would be a reasonable fit to the market. A small unit might not be so good.

In contrast somewhere like Reservoir or Chelsea has smaller households and a high retired population. And maybe a sprinkling of young singles or couples who can't afford closer in but still want convenience. And their housing stock has more units and villas. So a small unit or villa might be quite fine and do well (given there's other compensating factors such as proximity to beach and/or CBD).

However let's compare prices.

Houses in Hoppers start in (say) the low 200s. A villa unit might be around $180 - 200k. So there's almost no price difference between the villa and the house.

Chelsea and Reservoir are quite different. Units there can be picked up starting from the low 200s. Houses might be $350k, $400k or more.

Now if the logic about demand and housing stock held up, units in Hoppers wouldn't be so expensive compared to houses. But they are!

Conversely entry level units in the inner or bayside areas wouldn't be only slightly dearer than ones in Hoppers or Melton if demand for them was so high. But compared to houses they're relatively cheaper.

Maybe 'land value component' is why, but I regard this as theoretical and probably the last consideration for most owner occupiers, which for houses at least, is most of the market.

It just doesn't make sense that supposedly low demand properties (eg units) are so expensive in outer areas (compared to houses).

Or maybe we're wrong about demand. Does the lack of housing diversity in outer areas (ie >90% houses) creates a demand for units that exceeds supply, so though rare, and with apparently low land component, units in outer areas might still be a good deal?

Peter

 

[Alex P Keaton]

Units within 2-5 kms of the cbd.