Which would you pick? Secondary location/top suburb or better location/2ndary suburb?

[Wishlist]

Trying to decide if buying within a very good suburb but in a secondary location is worth considering in preference to buying in an average suburb with a much better location, if the overall cash flow is a about the same.

Property
Positives - close to everything (transport, shops, schools); high proportion of price in the land value; desirable suburb; good yield; very rentable
Negatives - on busy road; next to power lines; possible flood area; probably hard to sell;

Looking at it as a long term hold, and not so concerned about on-selling, but still assume that it will achieve similar growth to the rest of the suburb though from a lower starting price.

The other option is a property in an average suburb but without the negatives of busy road, flooding and powerlines.

 

[Propertunity]

Look most properties in the better & poorer locations of a suburb ALL tend to move in line with the suburb from a CG perspective.

One of the MAJOR reasons we do so much DD then is what?
It is so we can unload the property (and quickly), if we need to for some unforeseen reason (i.e. a health issue, a need for cash, a change of circumstance).

Therefore, avoid buying any IP with these

Negatives - on busy road; next to power lines; possible flood area; probably hard to sell

They are the last to sell. You might not be able to wait 6-12 months for a sale.

Also even if the worst does not befall you (and I hope it never does), then you will need to tenant this property over many years through all parts of the cycle. Sure it may be easy now when vacancy rates are so tight. But it wasn't that many years ago - OK it was 8 years ago - that you saw adverts for 2 weeks rent free to attract a tenant.

 

[marg4000]

If you buy a property with problems you cannot eradicate like those you mention, particularly the power lines and flood area, then these will be with you forever. The busy road is more debatable as there may be commercial possibilities in the future.

You don't know what is ahead of you, so always consider resale before you purchase.
Marg

 

[RogerRabbit]

Look most properties in the better & poorer locations of a suburb ALL tend to move in line with the suburb from a CG perspective.

One of the MAJOR reasons we do so much DD then is what?
It is so we can unload the property (and quickly), if we need to for some unforeseen reason (i.e. a health issue, a need for cash, a change of circumstance).

Therefore, avoid buying any IP with these They are the last to sell. You might not be able to wait 6-12 months for a sale.

Also even if the worst does not befall you (and I hope it never does), then you will need to tenant this property over many years through all parts of the cycle. Sure it may be easy now when vacancy rates are so tight. But it wasn't that many years ago - OK it was 8 years ago - that you saw adverts for 2 weeks rent free to attract a tenant.

I disagree, a neighbouring suburbs growth rate may not necessarily grow at the same rate of the higher value suburb and this should not be used as a general rule of thumb. There are many variable which could determine a different rate of growth between the two; eg the cheaper suburb may have a higher rate of growth as more purchasers seeking to live in the more expensive suburb who cannot afford there choose to buy the the cheaper suburb, thereby increasing demand in the cheaper suburb and pushing up prices. This could be dependent on the economical cycle as well and if lower socio-economic groups are purchasing or higher socio-economic groups are purchasing.

I do agree that the positioning of the property should be taken into account (distance to amenities, negative factors etc) but this is separate from the values of the suburb.

 

[james_w]

Honestly the choice is optimily yours I have bought in outskirt areas, of place like rockhampton,maryborough,hervey bay,gladstone,caboolture

There is less properties for sale in these types of markets and the growth of the properties have far outwieghed, oh and thier is not 100 spruikers as they skip these markets.

 

[cadence]

based on the very limited info you have provided ...

I would pick the other option (the one without the negatives) ...

 

[Propertunity]

I disagree, a neighbouring suburbs growth rate may not necessarily grow at the same rate of the higher value suburb and this should not be used as a general rule of thumb.

Welcome to your first post on the forum

You have not read / understood correctly what I actually said in my post. Just to clarify, I said

most properties in the better & poorer locations of a suburb

So I was referring to the one suburb.

You are quite correct about neighbouring suburbs growth rate being different - absolutely.

Cheers,
Alan

 

[Andrew_A]

Everything will make sense at a certain price, are the problems well enough discounted in the price is an important question.

A few ideas about properties on 'the ways'.

* They might get better yield, higher land content and be reliable rentals
* Might be twists such as home business and signage income
* Glazing on windows, solid construction, fences and plants and recessed from the road helps a lot, also nice to have a safe driveway or 2nd street access.

 

[Paul Do]

Wouldn't you make your decision based on comparable sales in the suburbs (e.g. A is at 2% discount vs B is at 7% premium)?

The only exception is if you had some inside information (e.g. the decision to build a train line through one of the suburbs was going to be announced next month), and made your decision on the basis of that.

 

[WinstonWolfe]

I agree with most above and add that even in a top suburb, you will struggle to get a respectable tenant who is ok living on in a gulley on a main road....so you may find you have 7 weeks of vacancy pa rather than 2, and will have to discount rent significantly. As an extra piece of research, why not count the number of houses for rent and sale in each suburb.

further, if the property in the better suburb requires capital expenditure (renovation), you might more easily overcapitalize.

don't know where you are looking but suggest you look at another 20 houses before committing, and exclude busy roads.

 

[Wishlist]

Good advice everyone. Even if the deal is good, I have decided not to buy where there are already obvious negatives that can't be mitigated.

If you buy a property with problems you cannot eradicate like those you mention, particularly the power lines and flood area, then these will be with you forever.
Marg

Forever.... Now, that's a scary thought.