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  1. #1
    Join Date
    Jan 2007
    Posts
    91

    Default 1 expensive investment property vs multiple cheaper ones?

    Is it better to buy 1 single expensive investment property or multiple cheaper investment properties with the same overall total value?

  2. #2
    Join Date
    Apr 2005
    Location
    Auckland / Cappadocia, Turkey
    Posts
    2,312

    Default

    It depends on what you are trying to achieve with your property investing?

    What are your goals?
    Lisa

  3. #3
    Join Date
    Jan 2007
    Posts
    91

    Default

    my goals are long-term financial independence and early retirement - but what difference does that make to the answer?

    - oh i see you mean cashflow?
    I guess I am not too bothered about cashflow at the beginning

    i though 1 property would be a lot easier to find/manage and might have more sustained longterm growth being in a better area rather than multiple properties in cheaper areas?
    Last edited by beginner; 13-02-2007 at 09:18 PM.

  4. #4
    Join Date
    Apr 2005
    Location
    Wellington
    Posts
    1,584

    Default

    Without a doubt, less properties of a higher value.

    I can't think of a single valid reason why 'cheap' properties would make a better investment. And before someone says 'less risk', I think that buying multiple cheaper properties is a far riskier proposition than buying dearer, better quality property.

    There is a reason why certain properties are 'cheap' - and that is poor town, poor location, poor tenants, poor capital growth, and management problems. You just have to weigh up whether it's worth it or not.

    And yes I am sure there are people out there who have invested successfully in 'cheap' properties. But I think in general, more expensive properties are better!

    Here is a semi-recent thread which may be of interest.

    Happy Investing!

  5. #5
    Join Date
    Jun 2004
    Location
    Kapiti
    Posts
    629

    Default

    Quality before quantity. Location, location, location.

    Or in the case of music or design, less is more. It's all the same principle.

    -Hound

  6. #6
    Join Date
    Dec 2004
    Location
    Sydney, Australia
    Posts
    413

    Default Its a good question, one you need to question yourself.

    That all depends of your definition of cheap! My 500K may be cheap to me, expensive to others. However my 1.5 Mill which is expensive to me will be cheap for some.

    To answer your question you do need to ask yourself what market you want to be in. Personally my target tenants are professional couples who pay me by direct debit, who never miss a payment but who want all the mod cons in their property, close to town, new or near new design, garage for their nice cars etc. Thus my target property is in the 500k mark.

    This was the reason that BusyLizzy posed the earlier question.

    LK

  7. #7
    Join Date
    Jan 2007
    Posts
    91

    Default

    I can potentially buy approx $1.2million worth of investment property (with maximal borrowing) and was wondering which of the following Auckland options would be best in the longterm

    -1 x million dollar property in the Eastern bays or
    -2 x $600k properties in the Eastern bays or
    -3 x 400 properties on the North Shore
    - 1 or 2 $400k on the North Shore + 1 or 2 400k quality central Auckland apartments

  8. #8
    Join Date
    Apr 2005
    Posts
    148

    Default

    personally I would go with the three $400k properties on the North Shore, but then as stated above your purchasing needs to fit in with your strategy/goals.
    No Regrets

  9. #9
    Join Date
    Jan 2005
    Posts
    1,129

    Default

    3 * $400k North Shore - based on the info/choices supplied.
    What rental returns would each option have?
    I might change my mind depending on yields.
    Do you need a minimum return to fund these purchases?

  10. #10
    Join Date
    Jan 2007
    Posts
    91

    Default

    they were only ideas - no specific properties in mind at the moment

    I wouldn't need much return to fund them at the moment due to excess disposable income and would be glad for the tax refund (yes I know I still have to fund the shortfall but thats ok with me)
    - at a guess, I think the yield on the million dollar property would be very low around 3-4%, for the north shore properties around 5%, for AKL quality apartments around 6%

    the only area i know fairly well is the eastern bays and it seems to me that higher end properties (>$900k) will always gain (as they have been) as cashed up foreigners coming to NZ will love the location which i feel is ideal and beats anywhere else in/around Auckland (10-20 mins drive to city centre, good schools, minutes walk to beaches, restarants, cafes, parks) - so a downturn in NZ property and NZ economy is almost irrelevant because the foreigners can afford them
    - one of the local RE agents who sells high end properties tells me she has sold numerous such properties over the last 4 years, over 90% of them to foreigners

    nearly every few weeks I have seen overpriced high end properties being sold to foreigners who are not really concerned if they are good value, but simply want a v.nice home in a v.nice place to live, particularly those middle - upper middle class UK foreigners moving to NZ for quality of life reasons.

    $1million for a beautiful home near the beach and city centre seems an unbeilevable bargain if you are a typical middle aged professional coming over from London or other big uk city - who cares if it is overpriced by kiwi standards?

    - i am theorising that the properties <$900k will be subject to the same local economy influences as other AKL properties so may not be such a good idea
    Last edited by beginner; 13-02-2007 at 11:35 PM.


 

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