Forums / Property Investing / Help Needed! / units versus house

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  • Profile photo of newandkeennewandkeen
    Participant
    @newandkeen
    Join Date: 2011
    Post Count: 16

    Hi! First time posting and also I am hoping to become a new investor.

    I am looking for a cash flow positive investment. I am not terribly concerned about the actual rate of growth for the house itself (am I wrong in this? I don't want it to fall… but I have a long term plan based on rent and ownership, not selling…).

    I am looking in a cheap town, stable enough, and have 2 options really. Buy a cheap house, or a small block of units. Obviously the units are much more expensive but within range for me, and still positive.

    I fear that with the 4 units, and the nature of the town, some of the people may be more transient than in a normal city, that I may have to look more frequently for tenents. On the other hand, chances are 3 out of 4 will be full and with a house the risk of course is all or nothing, someone is paying the rent or not, but are less likely to be transient.

    I also have less knowledge about units than houses and how what sort of things to look out for.

    In some ways I like the idea of the cheap house which will leave me more buffer if things should go wrong, and the quicker ability to buy another. But I also like the idea of the block of units, something I never thought I would be able to afford…

    And any advice on buying interstate? I certainly plan to fly there to visit before I buy anything, but will be unable to pop over there every now and then… risky?

    Any thoughts would be most welcome. This is all exciting and scary. I don't have any investors in my family or friends, I'd love someone to post.

    Profile photo of newandkeennewandkeen
    Participant
    @newandkeen
    Join Date: 2011
    Post Count: 16

    Oh… and I forgot. In the units favour, they are brick/slab, whereas the houses are weatherboard, and I just feel more comfortable with the brick… is this irrational though? Most of the town is weatherboard.

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404

    Do you have some figures for both?
    Cash flow IS king but without Cg you won't go anywhere in a hurry.

    How much CF are you talking? I like cash flow too but wouldn't buy in a town where I don't think there will be CG.

    It's ALL about numbers. You are right with the 4 rentals VS one risk. I like brick too. Less upkeep (normally).  Just be careful with towns that have lots of rentals. If places are empty they quickly burn up any CF especially if there is no CG to make up the difference.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    Catalyst wrote:
    Cash flow IS king but without Cg you won't go anywhere in a hurry.

    How much CF are you talking? I like cash flow too but wouldn't buy in a town where I don't think there will be CG.

    I was thinking the same thing. Unless the CF is through the roof – you really need CG (whether it be manufacture via improvements or over-time) to get ahead in this game.

    Some numbers would evoke more responses.

    Cheers

    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: [email protected]

    Profile photo of xdrewxdrew
    Participant
    @xdrew
    Join Date: 2010
    Post Count: 479

    hello newandkeen !

    As a newish investor .. you need to take the newish steps that keep you as an investor and not a mad punter.

    First … the simple one. It is possible to find the cash positive properties in regional areas. Some of the reasons they are cash positive may be genuine. There are some towns in Vic and Nsw that I just wont touch because the general feeling I get from the town is that the whole community is packing up and moving elsewhere. Which means when you want to realise in your 5-10 year timegap from purchase .. there may be NO buyers .. there may be NO renters .. there may be NO sale.

    At that point you realise your hardearned invest is now doggy doo. I dont know of a stockmarket investor that boasts about his losses or a property investor who admits to a failed invest. But they do happen, and more often than you'd like to think.

    Banks dont have any problems with dealing with up to 4 properties on the one residential loan. Over and above that and you will get treated differently .. as they will class it as a commercial buy. Non-bank lenders may keep that to a differnent level. Ask them. Get your best situation before you purchase anything.

    As to the idea of investing in small units rather than house .. a unit traditionally has less maintenance issues but also less land component. Vacancies depend on the type of employment available in the area. But a larger group of units allows for an offset of vacancy by a lesser risk component .. multiple tenants .. multiple sources of income. Either way .. you should still have a 2%-3% safety account. If it seems like I keep mentioning this in my posts .. its because the number of times I see people hit the wall because they didnt have the safety account  .. and they should have.

    Again .. the magic word for newbies in property is research .. knowledge .. and more of the same.

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