Buying A House vs. Apartment: The Battle Continues!

house apartment

Buying A House vs. Apartment: The Battle Continues!

This week we’re talking about buying a house verse an apartment.

In this episode we cover:

  • What to buy
  • How to avoid capital losses.
  • Some of the fundamentals that you need to look out for both internal and external
  • Your personal circumstances and your personal cash flow
  • Looking at the product that you’re buying

Let’s do this.

Say there’s been a lot of news that’s come out recently just about a buying, which is often fake news. Anyway as news around buying apartments at the moment where a lot of apartments especially around Darwin, Perth and Brisbane have been selling for losses at the moment. So there’s been a few stories about people who bought apartments. One in Canberra in 2010 they’ve just recently sold at a loss. If you think about how much you put in there a huge loss is about $30,000 but then yeah if you look at stamp you and everything, the net loss and how much you put in as a deposit. If you put $50-60k as a deposit and walk away with a $30k loss on your original capital you’ve lost 50%.

Sometimes stories that aren’t shared are the types of properties they’re buying and the types of things they’re losing money on because then equally in that time there haves been people that have double triple their money. Think about who you are selling to next.

RP data has found in Sydney on 1.8% units are selling at a loss

  • Melbourne is 11%
  • Canberra is 22%
  • Perth is 36%
  • Brisbane is 25%
  • Darwin is 52%

However this data didn’t give us timeframes or how big the data set is, which is be important.

Right now in the Brisbane market its expected there will be an additional supply of 20% above what we’ve already got. But some of that data is waiting on development approvals not commenced yet.

Overdevelopment is probably the biggest issue for the whole – are you going to make money on apartments.

 

What are some of the identifiers of that?

Number one it’s actually getting there and going on the ground. As easy as it might be to buy something off the plan, buying something unseen is a risk. You actually have to go there and pound the pavement get a feel for the suburb and just make sure there’s not too many cranes in the sky and all look at the council in Brisbane.

 

Things to look out for

Your circumstances changing

You don’t want to be in a position where you buy a property and then you have to sell it very shortly after. Property is a long term game, 7 to 10 years minimum.

Look out for the cash flow

The long term cash flow is going to be a major deterrant as to whether you have to sell or not. If you don’t have much spare cash flow to start with, you’re going to have to just sell the property. So making sure you have those numbers in place. The biggest thing to try and work out in the short term is don’t bank on any capital growth or don’t expect any capital growth because it is a long term thing and markets are cyclical. Anything can happen in the short term so if you’re buying an apartment in Sydney now might go up might not in the next 12 months.

Don’t try and speculate

If you live by the crystal ball you end up eating a lot of glass.

Look out for the boutique and the really well located apartments

Michael Matusik went through with us on what to look for in a suburb, where to buy you know, what’s the transport like, is it near traffic corridors and is it one of 500 in a building that has nothing really to set itself apart from the other 10000 that suburb or is it quite unique?

 

In summary

  • Take the time understand your own situation and understand what you’re getting in to. Know your own situation your own circumstances. If you’re a contractor on your six month rolling contracts should you be putting yourself heavily into debt if they don’t renew that contract?
  • So there might be short bursts of large growth but it’s kind of like Michael Matusik actually has a good saying, explaining about how you know property growth isn’t a smooth line it’s all jagged, to go up in different spaces and go down and up and down. It’s just not consistent.
  • Don’t account for capital growth.
  • Look for boutique properties, don’t go for the cookie cutter mass market stock.
  • Try not to throw your capital in a property because if something goes wrong there’s a short term emergency of cash flow.
Jayden Vecchio
[email protected]

Jayden Vecchio is the Director of Red & Co Finance, awarded Vow National Broker of the Year in 2015, 2016 and FBAA Commercial Broker of the Year 2016. Red & Co Finance (recently rebranded from Discovery Finance) is a Finance Brokerage that begins with the end in mind specialising in Investment Properties. They have settled over $450M in lending over the past 3 years alone helping property investors with building and growing portfolios, reducing their risk and increasing their overall profitability.

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