I recently had someone ask me about the merits of them buying a unit in West End (Brisbane) to live in.
While I don’t give advice on where people live, together we worked through the numbers so they could get better clarity about their steps forward.
During our conversation I discovered they had met with a gentlemen who was promoting units – a great guy (they described him as) who had shared with them all the pros of purchasing a unit in Brisbane and how they would benefit from a property boom.
While the guts of the pitch was right, massive projects are going to increase jobs and reasons why southerners will keep flocking to our city, the capital growth will be in houses in the burbs while the massive oversupply of apartments is only giving apartment owners more grief.
Why the Disparity?
Greed is usually the answer and is not far from the truth here.
Developers had a great ‘sell’ to buyers (particularly Chinese) just a few years back until overseas investor activity was smashed by bank lending changes in 2016. There is still an incentive for big wealth to buy their Aussie visas by bringing in $5m plus developments so development approvals for apartments keep rolling in.
Now, many overseas buyers for actual apartments can’t complete due to the lending rule changes so apartments are going at bargain basement prices and thousands are remaining empty as there simply aren’t (and won’t be) enough tenants to go around. BIS Oxford Economics state that nearly 20% of Brisbane’s apartments are empty amid oversupply. THOUSANDS of homes are lying empty in Brisbane’s most desirable neighbourhoods amid a chronic apartment oversupply.
Anyhoos, after I related the cut down version to my friend, I did some number comparisons and once we factored in body corp fees, sinking fund costs and the lack of depreciation benefits the comparison to a growth focussed 4 bedroom house with land, to the apartment (should they be lucky enough to get a tenant), the result was $150 per week difference. With houses set to grow in Brisbane by 40-70% over the next 4 years, it was a no brainer.
Lesson – if you really want to live in Brisbane city – RENTVESTING is a very good option.
What Is Rentvesting?
Instead of buying the property they want, people rent a home and then invest their leftover money elsewhere. For example, say you want to buy a four-bedroom home in Sydney’s inner west, but the sale prices in the area mean these homes are out of your reach. The rentvesting solution to the problem would be to rent the ideal four-bedroom house where you want to live (or City apartment for that matter), and then buy a property in a suburb where prices are more affordable.
The property you buy can then be rented out to help cover your own rental costs and later sold for a capital gain. This strategy lets you have the lifestyle you want now, while at the same time building a property portfolio for the future. Win win. And you would be surprised how many people are now using this very versatile concept, including a number of our own clients.
You could rent someone else’s BAD investment apartment and use your hard earned deposit dollars to buy a new house in the burbs where there is high demand, great growth and you will have full control over your asset.
If you’d like to learn more about this strategy, simply get in touch.