Advice on buying a rental property please

[Libby]

We are thinking of buying a rental property but our budget only goes up to $400,000.

We have never rented out a property before or owned a second house but I recently inherited some money and thought this might be a good way to invest it.

 

I have heard it is not the best idea to buy an apartment in the city to rent out as the market is saturated at the moment with apartments in the city.

 

What are the thoughts on buying a house to rent out in Frankston... There are other areas we have looked at units but the cheaper housing in the more affordable areas seem to rent very cheap in comparison to the mortgage payments. I know the property prices are currently still on the up so the idea is that we are looking at buying a house that we can keep for 20 years and rent out so we really want to make sure it is in an area with lots of potential.

 

We have also been looking at house and land packages in Casey/Cardinia area but I again we know nothing about buying land and having a house built on it. I have heard stories of people ending up having to fork out thousands if the land need flattened or there are issues before the house is even started and then again there is the whole fences/driveways/gardens to be established at extra expense and the house/land packages aren't as cheap an option as they were a couple of years ago when we were looking at buying our first home.

 

Thanks for any advice from those of you who own a rental property and any ideas on where might be a good suburb to buy a cheaper investment property.

[newjez]

We are thinking of buying a rental property but our budget only goes up to $400,000.

We have never rented out a property before or owned a second house but I recently inherited some money and thought this might be a good way to invest it.

 

I have heard it is not the best idea to buy an apartment in the city to rent out as the market is saturated at the moment with apartments in the city.

 

What are the thoughts on buying a house to rent out in Frankston... There are other areas we have looked at units but the cheaper housing in the more affordable areas seem to rent very cheap in comparison to the mortgage payments. I know the property prices are currently still on the up so the idea is that we are looking at buying a house that we can keep for 20 years and rent out so we really want to make sure it is in an area with lots of potential.

 

We have also been looking at house and land packages in Casey/Cardinia area but I again we know nothing about buying land and having a house built on it. I have heard stories of people ending up having to fork out thousands if the land need flattened or there are issues before the house is even started and then again there is the whole fences/driveways/gardens to be established at extra expense and the house/land packages aren't as cheap an option as they were a couple of years ago when we were looking at buying our first home.

 

Thanks for any advice from those of you who own a rental property and any ideas on where might be a good suburb to buy a cheaper investment property.

 

 

If you are looking long term, it's always nice to have a plot with an option of knocking down and subdivision at a later date. This can add an awful lot of value. No guarantee that the suburb will be rezoned though, so a portion of luck as well. I've never bought a house specifically for leasing though. I've only leased my ppor when I've been working away.

[Melbpom]

I don't know much about Frankston but if you can afford to buy a house they try to buy one on a corner plot. In the future it's likely the house will be pulled down and rebuilt and a corner block is favour for dual road frontage.

 

I'd avoid buying in new estates, the block sizes tend to be small. I have had a house built by a big volume builder and would not recommend it.

 

If you go down the flat/unit route then try to pick an established area such a Ivanhoe. IMHO better to buy an older solid property than a new build.

[Eera]

Research. Research. Research. Find areas that are desirable to rent - on a train line, commutable to town etc. Zoom in on a couple of potentials and keep an eye on rental listings to see how fast they turn around.

 

Think with your head, not your heart; because you don't like a property doesn't mean others won't.

 

Also know the market you're after; busy professionals may not want to have a large lot to maintain, whereas a family will.

 

Newer properties have more return from depreciation.

 

And firstly talk to a financial adviser. If you have an existing mortgage you may be best off using the windfall to pay off the non-deductible debt and the getting a mortgage against the equity which is deductible. You circumstances will dictate what works best for you.

[Guest The Pom Queen]

Hi Libby.

To be honest the Casey/Frankston area is the only time we have made a profit when selling houses. In fact we purchased an investment property in Carrum Downs, it wasn't an area I would personally live but we did make a profit when we sold it. Lyndhurst or Lynbrook would be a good area as would Cranbourne because of the rail links in to the city. I don't really like Hampton Park but it could be somewhere else to look.

[Guest The Pom Queen]

Forgot to say have a chat with @Adam from Vista Financial and Andrew. We just used them for our new property and they found us a lender when most of them said no.

[Adam from Vista Financial]

Hi Libby,

 

Happy to assist where we can.

 

As Mortgage Brokers we do have access to a range of lenders.

 

Feel free to send me a p.m with any queries.

 

Regards

 

Adam

 

We are thinking of buying a rental property but our budget only goes up to $400,000.

We have never rented out a property before or owned a second house but I recently inherited some money and thought this might be a good way to invest it.

 

I have heard it is not the best idea to buy an apartment in the city to rent out as the market is saturated at the moment with apartments in the city.

 

What are the thoughts on buying a house to rent out in Frankston... There are other areas we have looked at units but the cheaper housing in the more affordable areas seem to rent very cheap in comparison to the mortgage payments. I know the property prices are currently still on the up so the idea is that we are looking at buying a house that we can keep for 20 years and rent out so we really want to make sure it is in an area with lots of potential.

 

We have also been looking at house and land packages in Casey/Cardinia area but I again we know nothing about buying land and having a house built on it. I have heard stories of people ending up having to fork out thousands if the land need flattened or there are issues before the house is even started and then again there is the whole fences/driveways/gardens to be established at extra expense and the house/land packages aren't as cheap an option as they were a couple of years ago when we were looking at buying our first home.

 

Thanks for any advice from those of you who own a rental property and any ideas on where might be a good suburb to buy a cheaper investment property.

[Diane]

Also you need to think about what sort of investment works for your particular circumstances. If you are earning enough to benefit from tax discounts from negative gearing, then maybe a new place will give you more in terms of depreciation, but if you are looking to get an income from rent over and above the costs of servicing a mortgage (if you need one - again, may work out more tax effective to take one out, even if you have the cash to not need to), then maybe look for an older property that you can spend some time and effort (and maybe money) on, to improve and raise potential rent you could charge. Older properties also tend to be on larger plots, with subdivision potential down the line. Some real estate friends of ours bought a plot, subdivided, and built two properties - but actually overall they didn't make very much money on the deal because of all the costs involved. I have friends in Sydney who invested in properties in other towns (Melbourne and Adelaide for instance) as prices were cheaper. I think they even were able to claim the costs of travelling to maintain them against tax too (not sure though, that was a few years ago) - if you have a place near a Uni, you could probably rent to two or three students, instead of one family, thus increasing your potential rent. Consider also if you will have the property managed by an agent, or do it yourself (again, I've friends that do both for various reasons).

 

As said above, do your research thoroughly, and speak to a financial advisor (see above) for some advice. You could go along to one of the seminars that are held by companies like Ironfish to get some ideas, but don't get sucked in by the hype and remember, they are in the game to make money too, not for your benefit!