we sold our house in nov and have been renting since then with the intention of buying an investment property.
we have found a reasonable house for 195k 3br 1 bath study on about 800sq block.
it is a complete stone home and it appears only need supperficial work to it. new paint some carpet (has floor boards in living areas) eventually will need new kitchen and bathroom but these can be done at a later date. the garden needs fair bit of work(has been let go) would probably have to put built ins in too.
do you think it sounds like a good idea? would you do it?
i think once the work is done we might get around the 200p/w mark
no we would remain renting.
the area it is in is a bit dodgy but the nicer part of dodge(iykwim) there are quite a few rentals in the area i think in the 200 price range it wouldnt be hard for us to fill it.
the rental market is fairly strong here(i get the emails from r/e . com so i see what is coming through in that price range)
we would also want to put in fencing as its on one of the main rds coming in to town
here comes the snob in me.... i wouldnt live in that area..shhh
but others would..
this is purely for investment only( we want to build up a portfolio for when we decide where we want tolive
My only problem with renting in a dodgy area is the people that might rent it IYKWIM. Please don't be offended anyone but you do see a lot of horror landlord stories on TV.
Sadly sometimes it can be hard to tell or you don't get that much choice, I had tennants years ago who had cats against the lease and stole the clothes dryer when they left!
LL insurance is the way to go though, and a goood real estate agent.
Good luck with it all.
In terms of investment for building a portfolio, you need to look at equity (in order to duplicate and increase your holdings) so the concern for you is two fold - how quickly can you increase the equity in the loan (how big will the mortgage be? Or will you be able to afford the house outright with the proceeds of sale form your previous house? And secondly, how quickly can you ADD to the value of the house, and therefore increase you equity by increasing the value of the property?
The fact that is a fairly sizeable block is an advantage, as the land and not the house it what is worth money. The land will increase, the buildings decrease in value.
so are you in a financial position to be able to add value to the house immediately?
How quickly are you looking at buying your second property? Which area is the house in? You value increases by a few mehods - 1) natural value increase, around 8% a year on average, 2)Value added by improvements you make and 3) By the houses surrounding it.
For this last reason a general rule of thumb is that you would rather own the worst house in the best street, than the best house in the worst street. Does that make sense? The better your house is when surrounded by lesser houses or area then the less room you have to move. The value of your property will be brought down by dodgy houses. whereas the dodgey houses will increase virtue of being in a 'nice area'.
If you are renting for rental income, as opposed to equity and duplication, you are better off looking at low maintenance properties that attract large rents, generally apartments or units. They are more likely to require less outlay for maintenance and are able to attract higher rents for their added feautres (city apartment blocks are great for this).
Anyway, I hope that makes sense, just some things to think about. If you want to build a portfolio you need to make sure you do your homework - maybe see if you can find out the sale price for similar houses in the similar area over the last 12-24 months, see if you can see how much the average sale price is increasing by.
Hope it all works out for you - it is such a huge decision, all the best.
we arent in any hurry. but we can see this house going fairly Quickly piced the way it is..
i deffinatly get the worst house best street mentality. but i think the houses are all very similar in this area.
we are tossing up about buying a flat which is 85k 2 br but i havent seen in them(only out side) and they look in poor condition form outside so i worry we would have to spend even more to fix them up to (what i call) a reasonable standard.
but i might look at a few more..
unfortunatley we didnt come out of our sale with as much as we were told as the bank decided to implement on of their maybe fees which cost us almost half of our "profit"
Last edited by Oorki Galoorki; February 21st, 2009 at 05:07 PM.
would a flat or a unit be better?
we could easily buy for 130k for a unit or less for a flat.
what are the extras that go with having units and flats in a bills sense?
You would have to pay body corporate fees, also you would have to check that they have enough in their funds to cover any major work that needed to be done to the building.
Have you looked at DHA ? That can be very good as the defence force guarantees your rent and will replace carpets etc at the end of the lease period (10 yrs I think)
DHA dont have houses where we are.. and would never need them here.
i also know they are very strict on what they accept. 4br +2 bath is the minimum now for them
A flat or unit is great for rental income, if you can charge a high rental for the property. Generally speaking a flat does not increase in value to any degree worth a damn, so it is bought solely for income generation. Obviously this is only helpful to you if that rent will cover the mortgage repayments or more than, leaving you in a position where you are again building equity, allowing you to duplicate the process and use that equity to buy your second investment. kwim?
So personally (and this is just me) I would be inclined to buy a house that will increase in value, even if that means lower rental return, then buy an income generating flat as perhaps house 4 or 5.
If the house is a good price, the area is growing (in population, infrastructure and property value), close to schools, PT shops, etc and is in a relatively safe area, sounds good to me.
The other aspect is looking at the local councils zoning for the property. You said it was an 800sqm block. Can it be subdivided? How easy is it for you to get approval to extend the house to 4 bdrms and 2 bathrooms? Or put a swimming pool in? Or a rumpus room on the back? Or a double garage?
If you are buying this as investment, then you are looking at long term ownership. However, when adding value to the house, you must think about what people would want if they bought the property. Or what you would want should you live in it.
I would still suggest living in the house. Paying rent elsewhere for yourself, whilst collecting rent to pay a mortgage is going to leave you in no better a financial place than simply living in it yourself to pay the mortgage. (Unless you cannot afford to pay a full mortgage repayment atm)
the area we are looking at for the original house is made up of housing trust houses which are being sold off..
so i could see that in the next 5/10 yrs the area would become not so dodgy as it will become more owner occupier then lower income rent assisted (iykwim)
so do you think that it would be a decent area to buy now?
Going by what you have said, I would certainly look into it further.
If the area is being newly inhabited by young families, or working couples, etc, then absolutely the area will become more valuable. The overall appearances of the houses will increase, new paint renos etc, thus improving the value of properties around them.
Friends bought a townhouse in a complex where the housing commission was doing that too, some are still hc, and the value has icreased over the years and they have always had a tenant despite fears from people when they bought.
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help me figure out if this is a good option..
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