Thoughts about inner city 1bdr flats V 2bdr

Hi there,

What would you do & what are your thoughts.

Im in Melbourne and am currently looking at buying a 1bdr flat in inner city melb as an investment property......caulfield/glen huntly sort of area.

My first question is would you buy a 1bdr now because its all you can afford? or would you wait until you are able to get enough finance to get a 2bdr?

Other question is.......whats your experience with 1bdr in regards to let ability (ie vacancy rates)? What are the rental returns like? What is your capital gain experiences (long term)? This is compared to other options like 2bdr flats or even houses.

Your advise is appreciated

Rob.

 

Your best bet is to do a bit of research in your area and compare how much more per week you would actually return on a 1br compared to a 2br vs the extra cost it is to buy a 2br place. - i.e; will you get the return on the extra investment you need to make?

Also take into consideration the amount of time it may take you raise the extra finance needed.. with a still rising property market, can you raise enough cash in enough time to be able to afford the 2br you want or will you forever be chasing the mark.

It also depends what your long term strategy is, do you intend to rent it out to pay off the mortgage and have it as an asset, or you do you plan on selling in 5-10 years time, or even gear it to buy more property?

I currently let out a 1br flat in Melbourne and it lets almost as well as 2brs in the area and gets almost the equivalent rents. ($280pw), vacancy has been very low and was only vacant for about 2 weeks in total over the 2 years its been rented.

So I guess it really is up to you, good 1br's can attract a better tenant and almost the same amount in rental yield as a 2br in some areas.. do some research in your area and look at the figures, the figures will tell you what to do.

 

I personally like house with land, and as much land as possible.

I had flats, and found their capital growth lacked compared to the house I had. I bought in Stkilda and South Yarra.

Flats also attract body corporate and can have special levys as well which houses dont.

 

10yrs ago I would have recommended only buying 2bedders but with changing demographics and increasing numbers of single person households now in Australia, I'd consider 1bedders in particular locations- inner city suburbs fitting this category.

As per Brendan's post, research the demand/supply factor in the areas you're interested in, speak to some PM's about likely returns and try to find something that isn't going to cost you a small fortune in strata fees and special levvies etc. I'd personally only buy a place with parking and aim for something a little different than everything else in the immediate area (view, extra parking, corner balcony, courtyard space etc).

Also be aware that some lenders are funny with smaller units (under 50sqm) so check sizes as well.

 

Also, on the back of Jaque's comment, some lenders are also reluctant to lend on high rise type apartments or apartments that are in large blocks due to their perceived risk. So it may be best to find a broker that can source a lender that lends against this type of property.

 

you might also want to think to yourself 'if a bank considers such a investment higher risk, prehap's I should as well?'

something to think about!