Investment Property - Buy an Older House on a Bigger Block or Newer House on a Small Block?

wudsapp on 11/02/2022 - 00:34
Last edited 11/02/2022 - 11:37 by 1 other user

Hi,

I'm in Brisbane and planning to get into the property market by buying my first investment property. The house prices are going up and i feel it will never go down. Interest rates may also go high and i am trying my best to get into the market now.

I have only lived in Brisbane for less than 5 years and don't have a very good understanding of the suburb profiles but I'm researching about it now.

The prime question which i have now is on finding a good suburb with the budget i have.

For a 4 bedroom house, in some areas the house prices are between $700k - $800k for a bigger block (say 450- 500m2). But if I move away from the city a bit I can find a house for $600k- $700k in a block ranging from 300 - 400 m2. The rental yield would probably be the same if not vary less than $30 per week.

Is it worth spending that extra $100K for the bigger block?

Financial

Comments

  • jatyap on 11/02/2022 - 01:21
    +2

    Which one is in the better suburb (or potential for growth or improvement)? If you hold on to it for > 10 years, you will probably do better with the one which is located in the better suburb.

    All things being equal, I would tend to go for the bigger block as it gives you the opportunity to subdivide in the future (not many 300m2 blocks being subdivided). Plus, both houses will age, and at some point, require a demolish and rebuild.

    • wudsapp on 11/02/2022 - 01:32

      I was looking at Forest Lake and Springfields.. not sure which one is better but looked at these two for a comparison..

      • Krankite on 11/02/2022 - 09:26
        +5

        Forest Lakes counts as Brisbane still but Springfield is Ipswich. Personally I'd look at getting closer to the CBD as your land is harder to get and that is what will be driving price growth. Both Springfield and Forest Lakes have a lot of land around to be developed reducing demand for your property. Personally I'd try to find somewhere the next band in e.g. Inala, Durack or Salisbury if you are looking out west.

        • wudsapp on 12/02/2022 - 23:43

          Inala, Durack, and Doolandella don't seem to be very popular among the locals.. not sure why though..
          I haven't even thought about Salisburry..

    • Almost Banned on 11/02/2022 - 11:18

      ^^^ This is the right answer.
      While comments indicating that generally the value in a property is in the land - which tends to be an appreciating asset - rather than the house - which tends to be depreciating - are broadly true, the reality is that the far more important aspect is the location.
      Small blocks in desirable neighbourhoods will almost always outperform large blocks in undesirable locations.

      • wudsapp on 13/02/2022 - 22:10

        Thanks.. The Brisbane property market is crazy at the moment, its impossible to find a property withing my budget (600 - 650K) in a good location. Was considering Forest lake and Springfield lakes

    • macrocephalic on 11/02/2022 - 11:52
      +1

      You're not going to see any subdivision on a 500m^2 block either. There's a table with the smallest lot sizes that BCC allows, and I'd already consider 400m^2 to be a small lot.

      I do agree that a bigger lot is normally more important though, houses don't really gain value, land does (for detached dwellings).

      • wudsapp on 12/02/2022 - 23:49

        That's true.. i'm not going to be able to subdivide even if it is a 600 block.

  • rektrading on 11/02/2022 - 02:36
    +7

    A house depreciates over time. Land on the other hand appreciate.

    Bigger is better in the long term.

  • Mechz on 11/02/2022 - 06:55
    -2

    Trying to get in before the interest rate rises, only smart if you can lock something in for 5+ years.

    • wudsapp on 13/02/2022 - 22:11

      when do you think it will rise.. I'm hearing that they will rise in the latter part of the year

  • akd on 11/02/2022 - 06:58

    Although bigger block is recommended, but if day to day finances are tight then you must consider rates also. Rates will be higher for bigger block. More gardening work and regular maintanance of the old house will be higher (depending on the age and your taste for renovations)

    • wudsapp on 13/02/2022 - 22:12

      Thats one of my biggest worries.. I don't think the rent will cover the mortgage itself therefore big maintenance cost will be definitely a struggle

  • Youfah Mizzum on 11/02/2022 - 08:18
    +9

    I'd go for the bigger block…but I puzzle when someone says 450-500m2 is a big block. To me that's damn small. And 300-400m2? Crikey. Defs go for a bigger block.

    • Cobber870 on 11/02/2022 - 10:41
      +1

      Must be a city thing. Regional city, current block is roughly 800m2 and I wouldn't consider it big.

      Depends what you do with it I guess, a lot of people like low-no maintenance yards. This makes more sense for an property you will be renting out.

  • slow on 11/02/2022 - 08:21
    +2

    In a few years they will both be older houses, but the blocks will still be the same size .

    Bigger block closer to the city

  • Ocker on 11/02/2022 - 09:05
    +1

    The intrinsic value in real estate is the land. The value of the building is like that of a car - it goes down from the day it is built.
    Perhaps you do some historical price analysis, viz what were similar properties in each category selling for 5-10 years ago vis-a-vis today

  • KaTst3R on 11/02/2022 - 09:42
    +4

    As big as you can afford, as close to the city as possible. The growth potential will be better. There will always be exceptions but this is the general guidance.

  • Porker on 11/02/2022 - 09:52
    +1

    What's your investment goal with the property, and after what period of time do you want that goal achieved?

    To use the rental as another source of income? To later sell and capitalise on the capital growth? To develop and sell? To use as a quasi savings account?

    When you know what you're trying to achieve with the investment, that'll help you decide on which to buy. Eg. Newer smaller home may have higher rental returns but less capital growth. Larger block will likely have greater capital growth, but if older house and further out, then then rental return will likely be less.

    Hence, my question about what time period as, using the above two examples, both may or may not return the same to you over X period.

    • wudsapp on 12/02/2022 - 23:47

      I haven't thought about the time period but would like to hold on to it for a reasonable time period.

      If the newer smaller home will produce the same rental income wouldn't it be wiser to go to that option as you are paying interest for extra 100,000 for that house with the bigger block.

      I'm a bit worried about the maintenance, maybe i'm overreacting. I don't have a lot of capital to invest in a big renovation if something goes bad in the old house.

  • Ghost47 on 11/02/2022 - 09:57

    Spend the 100k on a bigger block, it’ll definitely be worth it.

  • bemybubble on 11/02/2022 - 09:59

    Location Location Location

  • Seraphin7 on 11/02/2022 - 10:01

    Based on what you've described, it is likely that the bigger block will provide a lower rental yield, but may provide superior capital growth opportunities.

    As ever, it is impossible to predict, but assuming these two places aren't in entirely different locations (i.e. opposite sides of the city) it is more likely to go that way.

  • boomramada on 11/02/2022 - 10:14

    OP, if you want to live on, which one you would pick? go with that.

    • knasty on 11/02/2022 - 10:30
      +3

      This can turn out really badly. 'The worst house in the best street' will typically have much more room for appreciation than the best house in the worst street. In my area the complete dumps are the ones that have appreciated the most because they will just be knocked down in future anyway.

  • garetz on 11/02/2022 - 13:43

    The age old question, bigger blocks appreciate more over time depending on location of course.

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