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  • Profile photo of mathyland12mathyland12
    Join Date: 2011
    Post Count: 14

    Hello there
    I have two IP's and have enough deposit to buy another property.  However I am in two minds.  My options are as follows;
    1. I have found a vacant block to build my dream home at just below market value.  We've fallen in love with it.  We dont plan to build for another 2 years.

    2. Buy another invesment property now, then sell one in 2 years to fund a new house and land.

    Your thoughts would be appreciated.


    Profile photo of sapphire101sapphire101
    Join Date: 2006
    Post Count: 203

    If you buy the land now at below market value, factor in 2 years of holding costs before you build. Will a similar block, if you can find it, be less or more than that figure to buy, 2 years from now? What is the difference estimate?

    If you buy another IP, will you be better off financially in 2 years considering possible capital growth, if any, of each property and any positive cashflow during that time? What is that figure?

    If you sell one IP in 2 years, after sales costs and the capital gain tax you will need to pay, where do you stand?  What is that figure? What also is the drop in income and positive cashflow, if any?

    At a rough guess because it's only 2 years between your strategy, you may be better off buying the land now.

    Free Property Investment Information, Tools & Resources for Investors.

    Profile photo of garrymacgarrymac
    Join Date: 2010
    Post Count: 11

    Hi Mat

    This is clearly a decision between ’emotion’ and investment’. If you’re goal is to ‘invest’ you need to remove the ’emotion’ from your decision. If not then make your decision based on lifestyle. Without knowing your personal situation, I would be taking the investment option BUT that’s based on my goals!

    Remember any normal (ie buy existing property and simply hold onto it), property investment should be for the longer-term.

    Good luck.

    Profile photo of mathyland12mathyland12
    Join Date: 2011
    Post Count: 14

    Thanks for those that replied

    I've decided to invest and keep my emotions out of my strategy.  Some simple number crunching helped me to realise that.  For those interested these are the sums i did when making my decision..  Hope they make sense

    The table below compares two propeties. 1. is a hypothetical investment property. 2. is the block of land i fell in love with.  Note: I have the cash flow to afford the block.

    Investment PropertyBuying Land
    Loan amount $ 305,000.00  $ 305,000.00
    Monthly Repayments $ 1,779.19  $ 2,029.17
    Rental Income @ 5% $ 1,270.00  $ 0  
    Personal Contribution $ 509.19  $ 2,029.17
    Contribution over 12 months $ 6,110.28  $ 24,350.04
    Savings $ 18,239.76  $ 0  
    Approx Tax Benefit $ 6,000.00  $ 0  
    Overall Benefit $ 24,239.76 $ 3,000.00

    For this to actually be a saving I need to put it away in a bank account somewhere. And dont spend it on toys.  Otherwise we will have nothing to show for it and it would have been better off buying a block of land

    This is how much I would have paid off the loan principal by the end of 12 months

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