澳洲Australia property If land appreciates... | Sydney


在澳大利亚 The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m


Why do so many investors have portfolios of mostly units?

Is it a beginners step due to their usually higher yields, and after some time they use the equity in the units to buy houses, or is it just a strategy some go by, and isnt what you would call gospel?  

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IFBB said: ↑
Why do so many investors have portfolios of mostly units?

Is it a beginners step due to their usually higher yields, and after some time they use the equity in the units to buy houses, or is it just a strategy some go by, and isnt what you would call gospel?Click to expand...
Buildings depreciate for tax and accounting purposes. However, from an investment point of view it's simply not true. How else can those 100+ year old terrace houses be worth anything if only land appreciates? Property is more than just a formula...  

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IFBB said: ↑
Why do so many investors have portfolios of mostly units?

Is it a beginners step due to their usually higher yields, and after some time they use the equity in the units to buy houses, or is it just a strategy some go by, and isnt what you would call gospel?Click to expand...
I wouldn't take it as gospel. I'd look at what's in demand for the area (whether it be houses or units) and consider what factors are going to drive future growth. I wouldn't dismiss a property simply because it's either a unit or a house - I'd be looking at other factors in determining whether or not it's a good deal for me.

Cheers

Jamie  

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IFBB said: ↑
Why do so many investors have portfolios of mostly units?Click to expand...
Because there are so many more of them, and houses are constantly being replaced with blocks of apartments.

At least I've never read about somebody buying up blocks of units and building a federation brick and tile house on it instead.  

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Aaron_C said: ↑
Buildings depreciate for tax and accounting purposes. However, from an investment point of view it's simply not true. How else can those 100+ year old terrace houses be worth anything if only land appreciates? Property is more than just a formula...Click to expand...
Beat me to it. The rule of 'land appreciates buildings depreciate' is for tax purposes, and does not necessarily represent the real world.

The function of a unit doesn't reduce if maintained properly, and renovated at sensible intervals, and that is what tenants and future buyers are really paying for.

My entire IP portfolio is units, and I'm very happy with their performance.  

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To play devil's advocate for a moment, houses get old and fall down unless money is spent on them (consider this depreciation). Land just sits there and does not need money poured into the keep its value.  

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vaughan said: ↑
To play devil's advocate for a moment, houses get old and fall down unless money is spent on them (consider this depreciation). Land just sits there and does not need money poured into the keep its value.Click to expand...
Absolutely correct. But how long does it take for this to happen? Also, maintenance is not depreciation.  

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Units are build when so many people want to live in one place (demand) pushes up price of that piece of land. Each unit can be seen as owning a little bit of the land underneath. Its just a higher density use than a freestanding house. Saying units can't grow is silly. Would you want to own a piece of real estate in central New York City, Tokyo or London? I would, but its all gonna be units because the land is way too valuable for somone to put a house and backyard on it. Hence we go up into the sky to get the location we want. The land underneath hasn't dissapeared.  

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VYBerlinaV8 said: ↑
Absolutely correct. But how long does it take for this to happen? Also, maintenance is not depreciation.Click to expand...

Time and weather will reduce all properties to a pile of dust (metaphorically at least). The land will still be the same.

Depreciation is an acknowledgement that after 40 years the house needs to be rebuilt. If that money was spent on maintenance...  

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vaughan said: ↑
Time and weather will reduce all properties to a pile of dust (metaphorically at least). The land will still be the same.

Depreciation is an acknowledgement that after 40 years the house needs to be rebuilt. If that money was spent on maintenance...Click to expand...
I suspect we're talking about slightly different things.

Yes, eventually time and weather will reduce a building to dust. But how long will this take? There are plenty of homes around that are older than 40 years, and many of these are worth more now than when they were new. Increasing cost of replacement holds up values, as does the function of the property itself.

If what you are saying is correct, then any home over 40 years old could be bought for land value alone.  

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We're talking about the generalisation "buildings depreciate, land appreciates".

Land does not weather or get old (unless possibly farming land or land on coastal regions that are eroding). At some age any property that has had no maintenance will be borderline for demolition because the cost to repair it will exceed the cost to build again.

Land never needs to be built again.  

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1. Unit prices, whatever their land content, move at about the same rate as house prices.

2. Buildings generally outlast your investing career.

No worries.  

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vaughan said: ↑
We're talking about the generalisation "buildings depreciate, land appreciates".

Land does not weather or get old (unless possibly farming land or land on coastal regions that are eroding). At some age any property that has had no maintenance will be borderline for demolition because the cost to repair it will exceed the cost to build again.

Land never needs to be built again.Click to expand...
Getting old is not the same as depreciating.  

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IFBB said: ↑
Why do so many investors have portfolios of mostly units?

Is it a beginners step due to their usually higher yields, and after some time they use the equity in the units to buy houses, or is it just a strategy some go by, and isnt what you would call gospel?Click to expand...
Generally, units are cheaper to buy, which means they are affordable to more people, more often.

The other thing is fear; many people feel comfortable taking on a smaller debt (per property) of, say; $250k with a 6% yield, rather than $600k with a 6% yield

Personally, I am like this to a degree. However, I would be happy to spend a million plus on one property, but the yield would need to be very, very high - 10% region for sure.  

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