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How Much Should I Spend on a Property?
When buying property, many people can be guided by how much they can borrow as to how much they will spend. I recently saw a 22sqm studio apartment, (incorrectly advertised as a 1 bedroom, 1 bathroom unit!) sell for $150,000. It got me thinking, many buyers perceive that buying a low value property (circa $150,000) can be considered a bargain.
If that’s the case and you have $150,000 to spend (assuming you are borrowing 2/3 of that), is buying a property like that and putting ‘all your eggs in one basket’ a good investment? Alternatively, you could spend the same amount (assuming identical borrowing), taking a more conservative approach, spread your risk and invest in a portfolio of ‘blue chip’ shares?
Buying the Right Property
Don’t get me wrong, I am obviously an advocate of investing in property, but I am also (first and foremost), an advocate of buying the right thing. If you find yourself with $50,000 burning a hole in your pocket and your borrowing capacity will not allow you to buy a good quality investment, consider investing in something else. Unfortunately, our countries fascination with property investing means that there will always be a buyer somewhere for a property like the one mentioned above. However, spending $150,000 on a 22sqm studio apartment which can be considered similar to a master bedroom walk-in robe and en-suite in many homes these days, is not what I would consider a good investment!
A property like the above can be compared to a high risk share, its cheap to buy and provides a high return to offset that risk, but the price growth over the long term will more than likely be poor. You are better off investing your money somewhere else where it can work harder for you. Therein lies the value of paying for good advice from a professional.
If you would like to talk with us about what to buy? where to buy it? and why? Please don’t hesitate to call or email.
