I’m looking for professional advice that’s easily digestible by beginners in the property investment scene.
I’m a homeowner-to-be and I’m about to inherit a small apartment in the rear side of Sydney. The property is too small for me and my family to live in and I wish to use this one to purchase a bigger house in the suburban area. From what I see, I have two options. I either sell the apartment and use the money to buy another property and cover the exceeding price with a loan. My second option is to rent out the apartment and get a home loan for another property. The rented apartment will give me a steady income which I can invest in covering my monthly loan fees. I have a full-time job in the Sydney home cleaning business and my husband is currently employed on short-term contracts.
How would this affect our plans?
Also, do you think there’s a better way to invest?Looking forward to your responses.
Ary @ Paul’s Cleaning Sydney
My advice is definitely not professional! But it would come down to specifics – how much income will the apartment generate (net income, Ie less expenses and tax), what loan amount your income(s) will allow and whether you think the apartment is a ‘good investment’ – capital gain etc.
All I will add is the more property you own the greater the capital benefit. Ie. If you keep the apartment and property goes up 10% that year then you’re better off having more than less. Finally, there is a difference between making money (rent) and saving money (less home loan repayment).
That probably didn’t help!
No, in fact, it did help. I also think that having more is better than less, at least in the long term. I think at the current state of the real estate market in that area, renting out the small apartment will make just enough to cover my loan but I’m still considering a professional consultation in the near future.
Do you have any suggestions on effective ways on raising the rent? I might add more luxury furniture but what if there’s no search for more expensive properties in the region? Is there any way I could know for sure if a small renovation would be a good investment?
In regards to increasing rent there are a few threads on that already. Initially I would talk to a real estate in the area and get their opinions. But other than renovations, you could look at pets, group share (nearby uni), solar panels etc. None are without roan though.
The other option is to reduce your repayments. Interest only, lower rate etc.
By the sounds of it you don’t have a great deal of equity in the property? Do you have enough to get a deposit for you home? Could you afford your own home if you didn’t sell?
Have you heard about “Home Equity Release”? Iy is a loan that is backed by property you already own. It can provide the required funds to make a profitable investment (or just to buy a bigger house), but also if you need emergency capital for an unexpected situation.
I’ve heard about this type of loan but I’ve also heard a lot of stories about people losing both their properties due to uncertain loan fees and rules. Being adherent to safer deals, I never really considered this option. But I’ll look this through.
I’ll also head to the sections about increasing rent, thanks.And regarding your questions, I don’t have enough to afford purchasing a bigger property or any property at all. The property I’ll receive is in a bad location where rents are pretty low and the infrastructure is not well-developed yet. With time, though, I believe it may become a region with high demand due to the expansion of the city.
Thanks TheNewGuy and FredWisley!
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aripol.
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