I am planning to buy my first investment property. I don’t have a lot of money. My budget is around $350k. I am based at Sydney and I know there is nothing you buy with this amount of budget here. Therefore, I am thinking if I should invest in the other states such as Brisbane. However, after seeking advise from my friends and colleagues. They suggested I should not invest in Brisbane since I am not familiar with the areas. And properties don’t really go up in value there. I know it is always better to stay closed to home since I know the areas. And if something goes wrong, I can just drive down the road and sort it out. However, I can’t really do much with this small budget in Sydney. I don’t want to be sitting on the bench and doing nothing. Shall I take a risk and search for opportunities in the other states or hold the cash to earn the interest in bank?
Welcome to propertyinvesting.com – and good work for seeking to understand a bit more by ASKING. One major thing that we need to develop is the ability to separate opinion from fact. And, right off the bat, I can put the lie to these guys:-
However, after seeking advise from my friends and colleagues. They suggested I should not invest in Brisbane since I am not familiar with the areas. And properties don’t really go up in value there.
….. and on both counts. By that, I mean that I can show you PROOF of Brisbane’s values going up in value. They have an opinion that Bne’s values don’t go up. Maybe they mean “don’t go up as much” and they could be quite right with that – but wait….
By buying where houses are cheaper you can afford MORE of them. And rent returns are typically higher, thus, while you might stretch to buy one $600k house in Sydney (and lose money as the yield is lower, so rents don’t cover all costs), you might be able to buy THREE in Brisbane at $300k each.
Re “you don’t know the area”, that can be learned quite quickly – internet, phoning agents, and maybe a quick trip or two to suss things out. There is a “big picture” topic around (I’ll send it to you) and in there, one bloke goes out and buys all around the country – cheap, needing renos, and positive geared. Then he gives them a quick reno and lifts the rents. Perhaps you can look at what he does and ask yourself IF you might be able to make that work. Maybe you can meet up with the bloke and buy him dinner to chat. I dunno – but, there are ways !!
And to get a look at the growth in values over time, go searching for “australian median house price history” and check out a couple of the earliest searches (by that, I mean Google – not a Search of this site). One of them will show you how Sydney nearly always leads the charge, with Melbourne next. Brisbane comes well after the first two have surged. And a current point of interest from the median price table I found:-
In 1992, values in Bne were about 90% of Mel’s values. Values then tanked for a while until 1997 when Syd and Mel took off – Bne lagged. By 2001, Bne values were just 55% of Mel’s values.
Then, in 2002, Bne started catching up in a helluva rush – so much so, by 2004, Bne was back to 86% of Mel values. But here’s the point – today, Bne is back to about 55% of Mel’s values. And Mel remains growing in value. At some stage, Bne will get another kick along, and, like from 2001-2004, it will likely near double in values in a very quick timeframe. (Now Asou, that is another OPINION – mine – so take it as a point to ponder, then draw your own conclusions).
The facts remain though – Bne has typically higher yields with lower prices, so you can afford to hold more properties. If Bne goes up in values by 10% in a year, and you hold $900k in property, you just made $90k. If a $600k Sydney property goes up 12%, you just made $72k in equity. Bne is $18k ahead in that scenario. As well as that, if you have one tenant vacate, you still have 66% of your income coming in. If a tenant left your single Sydney property, you have lost all income till you get another tenant.
As you can see, there as MANY twists and turns, opinions and facts, cities and towns, cockroaches and cane toads (sorry, couldn’t resist!!) From weighing up all of those things, you will settle on a way that should work best FOR YOU. You may have skills that I don’t have, so you can choose to do things that I can’t – e.g. you might be a tiler and can renovate kitchens and bathrooms cheaply – that can give you an “edge” when considering which houses to buy. Kapich?
Stick around, Asou – learn a bunch, meet up with other investors, chat with them, learn from them, save up, then strike when the time is right for you to do so. Again, welcome !
In that post is the link I was going to provide you, thinking you were new here. You might have read it back then, but may I suggest you trawl through it once more, for several reasons. First, with a couple more years of thinking about (and even doing?) property investing, a re-read may make far more sense to you now than it did back then. Second, the topic I linked you to has grown since you first received it, so that there are later posts that go on to discuss a whole heap more subjects, some of which might be new to you.
So do take a look – I hope some of it provides you with some more clues,
It all comes down to your strategy and what you want to achieve. Half of my portfolio is interstate and as long as you do some thorough research and have a good interstate team(Buyers Agent, property managers, tradies) behind you, you can avoid a lot of headaches and sleepless nights.
A lot of people priced out of Sydney are investing in other capital cities or regional areas at the moment. When Sydney drops back they can come back later with equity created in other markets.
Thank you so much for your info. After reading your replied, I don’t feel as worry as before to invest in the other states. I was really concerned before since almost everyone I spoke to was telling me don’t do it because it is too risky. I didn’t want to follow their path and run into cash flow problems. And also dealing with difficult tenants because of bad property managers. This seems like a very common problem just like dealing with the Strata.