Invest Property in South East Melbourne - Established v. New (Land and House)

oliman on 23/08/2019 - 14:40
Last edited 23/08/2019 - 15:21 by 1 other user

Would appreciate if some can share thoughts/or opinions on this.

I am ready to buy an investment property and I was pretty much looking for a 3/4 bedroom house with decent land size (600 sqm+) in Noble Park North/Dandenong areas (as they are closer to city) with a budget of 600k. My aim is to keep that investment property for 5/10 years and sell it off on my retirement to pay off my home loan.

My work colleague, who is a part time property agent, suggested me to buy a land in Clyde (400 sqm) instead and build a 4 bedroom house on it. He pointed out the depreciation/tax deduction I can have in first 5 years and also noted that the Clyde area has good potential in net 2 years as some stores like Bunnings etc are building up there.He also pointed out the stamp duty will be on land only and will be low. He said that I can get it done in 550k.

In my position, what option is suited more for me?

I know this public forum is not meant for financial advice but I would really appreciate if someone can share their thoughts/experiences as I have got really valuable advice before on this forum.

Financial

Comments

  • GG57 on 23/08/2019 - 14:54

    You appear to have some of the info, but haven't shared any differences in rental incomes between the two location options.
    Also factor in the lead time to rent out the property from date of purchase, compared to the lead time for building a new dwelling (you won't have an initial income for the new build for a period of time).

    Things like those could provide a different but more comprehensive financial picture for comparison purposes.

  • 87percent on 23/08/2019 - 15:00
    +5

    first of all, can you even find a decent house in Noble Park North/Dandenong for $600k?

  • qwerty on 23/08/2019 - 15:02

    20ks difference to cbd

    established area vs new area

    Can probably get renters in asap vs waiting for house to be built

  • [Deactivated] on 23/08/2019 - 15:23
    +1

    Clyde is nice. I've prospected through the area a few times.

    The artery road has been adjusted from 100kmph to 80kmph along a long stretch and that's fairly indicative of intention to increase density.

    I would caution that rezoning can be a double edged sword. If you're looking at small blocks do subdivvy and build, you could be competing with large estates and a potential housing glut.

  • jjjaar on 23/08/2019 - 15:24
    +1

    Clyde probably won’t see as much growth in property value.

  • caramellokoala on 23/08/2019 - 16:00
    +2

    What is with this stupidity on buying property being the default investment class Australia? Of course your work colleague/part time property agent wants you to buy a property, that's his (Part-time) job!

    Ask the people who bought at the recent peak if they're going to pay off their mortgages of in 5 Years? Most are well underwater. Buying investment properties is not free money.

    Yeah depreciate the house its free money right? woooooooooooo! except you have now lowered the houses' capital value you have to pay CGT on Waaaaaay more than the actual capital gain value of the house, what fun that bill will be when you're trying to dispose of the property!

    There are better investment classes than leveraged property speculation. Do yourself a favour and do some actual research instead of being a sheep.

  • Ocker on 23/08/2019 - 16:08
    +3

    Once upon a time it was the great Aussie dream to own your own home - now it is to own someone else's.

    • orangetrain on 23/08/2019 - 16:57
      -1

      It is a dream to own multiple properties. Fantastic incentives by government.

      Don't like it? Vote for minor parties.

      • Ocker on 23/08/2019 - 17:46
        -1

        I love it - have a nice little portfolio of properties!

  • Baysew on 23/08/2019 - 16:42

    Some advice I got from somewhere - Either be a developer or a landlord, don't try to be both. I can't recall why that was so, but it sounded like good advice.

    • 87percent on 23/08/2019 - 17:04

      Cos unless your pockets are lined with cash, you're never going to get ahead?

  • ihbh on 23/08/2019 - 20:58

    My work colleague, who is a part time property agent

    Is your colleague a salesperson or a property manager? Their advice might be conflicted: do they have any land to sell you by the way?

    Correct re lower stamp duty and more depreciation benefits building new. Negatives are smaller land size and lower growth potential (especially as new properties come off being new, and high supply - there is a lot of sale stock in the area from investors).

    what option is suited more for me?

    The one you think will generate the highest after tax return (rental income and expected capital growth).

    Do some scenario analysis: what happens if returns are low when you sell it in 10 years time (could well be 0 or negative in 5 years), especially after transaction costs?

  • lovetodiscuss on 03/09/2019 - 19:38

    You should ask the question at this website: www.propertychat.com.au. There are some serious investors there and their advice are quite genuine.

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