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  • Avatar of propertymistropropertymistro
    Member
    @propertymistro
    Post count: 64

    Hi all,
    Great forum.  I would like experienced peoples' opinions on the following scenario.  I am looking to buy my first property; either a duplex, villa, unit/apartment or townhouse.  I am wondering if there are major problems with buying a 1 bedroom property.  I have no children and do not plan to start a family in the short term and therefore a 1 bedroom property is big enough for my current needs.  However I worried about it being a bad investment for capital growth or for being able to rent it out down the track.  However by buying a 1 bedroom I can avoid mortgage insurance and obviously my repayments will be significantly less.

    Scenario 1:
    Buy a 1 bedroom, 1 bathroom property
    20% deposit
    Therefore no mortgage insurance needed
    1 bedroom is currently sufficient for my living requirements.

    Scenario 2:
    Buy a 2 bedroom, 1 bathroom, seperate toilet property
    Have less than 20% deposit
    Therefore have to pay mortgage insurance.

    Thank you for your replies…

    Avatar of propertunitypropertunity
    Participant
    @propertunity
    Post count: 136

    If your 1brm unit is greater than 50m2, then sure buy it – no problems.
    There are problems trying to finance smaller than that.

    2brms are probably in better demand but good 1brm in the right location are fine too.

    Avatar of quickchickquickchick
    Member
    @quickchick
    Post count: 168

    Or buy a 2 bed apartment, in a suburb a bit further out. ie similar price.
    Ask your bank about their policy on lending for 1 bed apartments.
    Banks are geneally conservative about lending for 1 bed apartments esp if less than 50 sq m.
    Which caps your eventual sales price, and hence may limit your eventual capital gain. 

    Avatar of propertymistropropertymistro
    Member
    @propertymistro
    Post count: 64

    Thank you guys for your posts.  Great!!

    Avatar of Jamie MooreJamie Moore
    Participant
    @Jamie-M
    Post count: 4,603

    Personally, I wouldn't get too concerned about mortgage insurance and therefore wouldn't allow it to be the main factor that determines my decision.

    It's a borrowing cost that can be depreciated over 5 years, and without it, we would all have to save 20% deposits to purchase a property :(

    Like prop said as well, any 1 bedroom unit under 50m2 will be difficult to source finance for.

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: info@passgo.com.au

    Avatar of petronapetrona
    Member
    @petrona
    Post count: 35

    We have just divested ourselves of two 1-bedroom units and bought two 2-bedroom units instead.  We've found that one bedroom units are more difficult to rent and have lower capital gain, hence the swap.

    Avatar of Greg ReidGreg Reid
    Member
    @Greg-Reid
    Post count: 91

    As a PPOR purchase, I would try to minimise the debt and certainly minimise any MI costs.
    If it was an investment property, I would do the opposite.

    If a 1 bed flat is in a good location, suits your needs and you can borrow < 80% then it should not be an issue obtaining finance, especially for an owner occupier. The real issue on small units <50m2 is when you want to borrow > 80%, the MI's do not like them nor do most lenders either. You can get 80% finance for as small as 38m2 but the lender selection is limited.

    For a PPOR, it is about lifestyle. If it suits you, more than likely it will suit similar tenants down the track.Good luck
    Greg

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