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House or Unit? City or Regional?

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Dans | 13 Feb 2020, 10:04 AM Agree 0
New to the forum here :)

I'm a little on the wrong side of my thirties and very late to the property investing scene. I own an apartment in West Melbourne (which I currently live in with my spouse) with about 25% equity. Its current market value is probably around $560-580k. It was bought off the plan for $600k so on hindsight its a pretty bad investment. Other than that I've got around 25k in life insurance (accumulated cash value), 30k in equities, and around 25k in cash. About 280k locked away in my super account. 

No debt other than the mortgage. I did my sums and I could probably save up another 30k or so by the end of 2020, which gives me a total of 55k to play with. I know its not much, but its what I've got. My main goal is to retire early (or semi-retire), preferably no later than 50. I just want financial flexibility to do what I love to do and not worry about paying off mortgage or the strata fees. 
I could either put that 55k towards another apartment in Melbourne or a house in a regional area, or in Adelaide where house prices are still affordable. I'm inclined to go for properties that are cashflow positive from day one. Negative gearing seems risky as I don't see another repeat of the 2012-2017 housing boom that was primarily fueled by several rounds of quantitative easing.  

Pros and cons as i see it:

1. Apartment in Melbourne - basically I live here, so its easy to drive by and check in on the apartment or deal with maintenance issues. Can expect zero to negative capital growth given the over-supply.

2. House in regional area VIC - I have no intention to live in a regional area. I could look at it solely as an investment property, but regional properties tend to be more risky, especially the ones primarily driven by one or two economic activities such as mining or tourism.

3. House in Adelaide - seems like the best option but only if u buy it in the right places with some capital growth.

Thoughts appreciated. 
  • Propertyology | 14 Feb 2020, 02:10 PM Agree 0
    Hi. My name is Simon Pressley. The primary role of my company, Propertyology, is to study property markets nationally (capitals and regions) for our buyer's agents to help people in making more informed property investment decisions in locations all over Australia. Two very general tips I can offer upfront are 1) one must always be careful to not mix up hometown bias and where one might personally want to live with investment decisions, and 2) major changes within the fabric of Australian apartment markets over the last 15-20 years have left a plethora of evidence showing the financial performance of apartment assets is (significantly) below detach houses in the same location, plus the structural integrity and reputation risks are growing daily. I'd be happy to elaborate and provide further guidance if you see value reaching out to Propertyology.

    Refer here https://www.propertyology.com.au/our-services/
  • Jason from AllianceCorp | 14 Feb 2020, 07:41 PM Agree 0
    Hi Dans, normally we don't provide advice without a proper assessment but some things you may want to consider include:

    As you only have approx 10yrs until retirement you want to target strategies will enable you to accumulate some property quickly
    To do this you require capital gains but also strong rental income to support servicing of further purchases
    Considerations

    You may want to consider also releasing a portion of equity from your home - approx 40k (some LMI costs) to top up deposits to access better investment options

    Regional properties can provide low entry price and strong yields but you need to pick your regions as capital gains can be hit and miss
    Adelaide offers great value due to low price points but the economic fundamentals are not as strong as cities on our eastern seaboard
    Without knowing your borrowing capacity you could consider dual income or dual occ properties as negative cash flow properties could prevent you from growing your portfolio. With a higher deposit a dual occ once subdivided in the future will enable you to generate instant equity which can be put towards future purchases

    You may also want to speak with your financial planner to discuss purchasing a property through a SMSF
    Depending on when you retire you really only have approx 5-7 year to accumulate property as its not recommended you purchase just before you retire due to limited tax deductions to offset negative cash flows

    Most importantly I recommend you speak with a professional to design a well thought out strategy taking into account your financing capacity

    Jason
    AllianceCorp
    1300 728 838
  • Income2Wealth | 15 Feb 2020, 08:07 PM Agree 0
    Hi Dans, this is Paul Wilson from the Income2Wealth Group. It’s important that the ultimate decision you make is based on your time line, budget, purpose of the investment and your risk profile. Please be reassured that you’ve got plenty of time to make this work, and while I wouldn’t encourage you to rush this decision, you just don’t want to delay the process any longer either.

    This is not about getting rich quick, it’s more about meeting your financial needs both now and in your retirement, ideally without compromising your lifestyle or draining you either financially or requiring a lot of time investment from you to manage this.

    You’re very clear on your goals and you also have good clarity around your financials which is a fantastic foundation for your wealth creation goals. You should focus on developing a clear plan of what you ultimately want to achieve and how best to reach your goals within your time frame. It’s better to do this from the outset rather than ad-hoc throughout the next few decades.

    Ultimately it is growth that will build your wealth and the key is to identify pathways that will grow your capital without draining your precious after tax dollars. If you have 10-15 years left to reach your retirement goal at the age of 50, the expectations of what you want your lifestyle to be at this time should be your first consideration to ensure that the goal, the timeline and your financial structuring are aligned for optimal performance.

    Please feel free to book a, obligation free time for us to chat further using my personal calendar link. (https://app.acuityscheduling.com/schedule.php?owner=12643690&appointmentType=1737211)
    Kind regards
    Paul
  • pushforthebush | 28 May 2020, 03:32 PM Agree 0
    Sorry for a late reply on this but it seems all you did was trigger the sales people rather then getting a straight answer!

    I've been working with local councils in regional Victoria to promote regional living so I've been researching people's reservations about regional living and I understand and appreciate you're only talking about investing in regional Victoria but like a comment reported in last month's YIP Mag you have both made the comment "driven by one or two economic activities." This has obviously been reported in an article by someone discussing regional investment so I may delve in to back issues and find the writer of the article.

    During my research I found plenty of Victorian towns and regional cities had far more to offer far from the tourism and none that I were aware of had any mining resources so obviously the report was irrelevant to Victoria whatsoever.

    There were aspects as a previous property researcher, that I found important for investing in to residential properties: employment, yields, some growth, affordability, education, transport and obviously the industry around the area. Several areas in Victoria met this requirement with Melbourne & Geelong being totally knocked out on affordability alone but I soon discovered that if you worked out which towns/cities had the employment then you would continue from there. One of the aspects that YIP and the RP Data neglect is looking at the industries around these areas and when you can piece it together you will find they're solid investment areas that have a lower barrier to entry and even offer higher depreciation as your housing construction costs are higher in regional areas! So if you go back to the "houses depreciate / land appreciates" theory you can work out quickly the regional areas make for great opportunity at half the price for similar product in the capital cities.

    In my research I found one perfect city in Victoria that met all of the above plus added Military which made it absolutely blue chip when you consider the growth figures were also well above most Melbourne suburbs and then consider the land prices were at least a third if not a quarter of the price of much smaller blocks in the crappy outer suburbs the home of the crappy volume builders.
    • Brian | 29 May 2020, 07:23 PM Agree 0
      Hi I found your argument interesting. Over the years one of the main arguments advanced against regional housing investment was that there is usually no barrier to the continual development of surrounding land and that aspect mitigated against a sustained increase in land values which is enhanced if available land has a scarcity attribute. I would appreciate tour view on this.
    • RachelS | 11 Jul 2020, 03:49 PM Agree 0
      I’m just googling and came across your post. I’m looking at an investment property around 500k around mid-next year. I’m keen on regional Victoria especially as I think now a lot of people will realize they can work at home at least part-time. I know a bit about Ballarat but would be interested in other suggestions. Geelong seems too expensive but maybe smaller towns in that direction or Mornington?
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