Better to buy 2 CHEAP Houses or 1 EXPENSIVE House in 2024? Quantity vs Quality myth exposed!

Summary

In this video, the speaker discusses the merits of investing in two more affordable properties versus one expensive investment property, given a $150,000 deposit. They argue for diversification, growth potential, higher yields, better borrowing capacity, and improved rentability of cheaper properties. The speaker emphasizes the importance of quality over quantity and suggests that investing in properties under $500k-$600k can lead to a more profitable and stress-free portfolio.

Takeaways

• 🏡 Diversification is a key advantage of buying two properties instead of one, as it allows for investment in different states and reduces the impact of regional changes in legislation or rental laws.
• 📈 Smaller, more affordable properties have the potential for greater growth compared to expensive properties, especially considering the last 3-5 years' trends where lower quartile properties have risen more.
• 💰 High-yield properties, typically found in the cheaper price range, are more likely to cover their costs through rental income, making them more financially viable in the long term.
• 🏢 Buying cheaper properties can help preserve borrowing capacity, as banks are more likely to lend to investments with higher yields, allowing for the scaling of the investment portfolio.
• 📊 The demand for renting affordable properties is generally higher, which can lead to faster and more consistent rental occupancy, reducing the risk of vacancy.
• 🌐 Investing in properties under $500k to $700k can provide a better rental yield, making them almost self-sustaining and more attractive to banks for future loans.
• 🏘️ The speaker suggests that cheaper properties do not equate to lower quality, but rather, they should be chosen for their affordability and potential for high yield.
• 📉 Expensive properties, particularly in high-end markets like Melbourne and Sydney, often have lower yields, making them less attractive for investors looking for immediate returns.
• 💼 The speaker emphasizes the importance of maximizing portfolio value over vanity, focusing on the quality and quantity of properties to achieve growth.
• 📈 By purchasing two properties with a higher yield, investors can potentially increase their total investment value beyond the initial budget, thanks to better borrowing conditions.
• 📚 The script highlights the importance of due diligence when choosing properties, considering factors like rental market demand, potential for growth, and the impact of regional legislation changes.

Q & A

What is the main topic of the video script?

The main topic of the video script is discussing whether one should buy one expensive investment property or two cheaper ones, and the pros and cons of each approach.

What is the first pro mentioned for buying two investment properties instead of one?

The first pro mentioned is diversification, which allows the investor to spread risk by owning properties in different states and being less affected by changes in local legislation or rental laws.

Why does the video suggest that cheaper properties might grow more than expensive ones?

The video suggests that cheaper properties might grow more because, over the last 3 to 5 years, properties in the lowest quartile of property values have risen more than those in the higher percentiles.

What is the second pro of buying two cheaper properties according to the script?

The second pro is growth, as cheaper properties have the potential to grow just as much as expensive ones and are more appealing to a larger pool of buyers due to current interest rates and borrowing capacities.

Why are cheaper properties considered to have better yield?

Cheaper properties are considered to have better yield because as property prices increase, especially above 600-700k, the rental yield tends to decrease, making cheaper properties more attractive in terms of rental returns.

What is the impact of high yield on borrowing capacity according to the script?

High yield properties are more attractive to banks, which means they are more likely to lend more money to investors, thus preserving and enhancing the investor's borrowing capacity.

What is the fourth reason given for buying cheaper properties?

The fourth reason is that buying cheaper properties with higher yields can help maximize an investor's portfolio value by allowing them to borrow more and invest in a larger market.

Why are cheaper properties considered more rentable?

Cheaper properties are more rentable because they are more affordable to a larger pool of potential renters, which can lead to faster and more consistent rental occupancy.

What is the speaker's opinion on the rentability of cheaper properties in the current rental crisis?

The speaker believes that cheaper properties have the capacity for higher rentability, as they are more likely to be rented out quickly and consistently due to the high demand for affordable housing.

What advice does the speaker give for property investors in Sydney or Melbourne with a large budget?

The speaker advises against investing the entire budget into one expensive property in Sydney or Melbourne. Instead, they recommend diversifying into other states and buying properties in the 400-600k bracket for better yield and growth potential.

What is the speaker's final recommendation for property investors?

The speaker's final recommendation is to buy inexpensive but high-quality properties, not 'cheap and nasty' ones, to ensure a stress-free portfolio with good rental demand and potential for growth.