What is considered too small for an investment property?
By | 2nd May 17

More people are trying to make money through property investment – and with many struggling to get their feet on the property ladder they are looking at smaller investments such as apartments and units as a feasible option. But how small is too small for a sound investment?

Firstly, when it comes to banks, size does matter to them. Most of them have lending restrictions for properties less than 50sqm excluding balconies. If you’re looking to invest in a property that size or smaller, you may want to keep in mind that you will typically require at least 20% of the loan plus costs associated with buying property, such as stamp duty, to meet approval.

The reason for this is that typically a smaller property from a capital growth perspective usually performs slower. If one bedroom apartments are only in your budget, there are always exceptions to the rule. It’s all about being able to select the right type of property.

 

RENTAL YIELD IN ONE BEDROOM APARTMENTS – If capital growth is not your long term goal and cash flow from rental returns is more favourable for you, one bedroom apartments or studios can generate high rental yields, which may compensate for the slower capital growth.

LOOK IN SMALLER BOUTIQUE BLOCKS – Supply and demand is something to keep in mind if you are looking for a smaller investment. The area of land that an apartment is built on is what appreciates, so if the density is lower, your share of land is greater than if you were one of 100 apartments.

PRACTICAL FLOOPLAN DESIGNS – There are always ways to make your investment work for you if you do your due diligence correctly. One bedroom apartments are going to be more attractive than a studio apartment so keep that in mind. A good sized bedroom, good sized kitchen and living are a given, but don’t forget that a carpark is important as well!

 

Are you a first time investor or looking to make your second investment choice? Speak to one of our Advantage experts today to help you heading in the right direction. Call 1300 697 356