What Will $100k Buy You in Real Estate?

  • Posted 16 Sep

What Will $100k Buy You in Real Estate?

First home buyers and buyers with limited budgets may despair of finding reasonably priced real estate options in the hot Australian market. The mid-to-late-1980s represent the last time median home prices were in the $100,000 range in major cities like Sydney, Melbourne, and Canberra.

But does that mean that today’s buyers on a budget have no choices? You’ll find the best options if you want to buy vacant land with plans to build later or you are able to relocate to a remote area. Here’s what $100,000 can get you in various scenarios:

Remote properties

Areas with the most choices include Queensland, Tasmania, and South Australia. If you are willing and able to live in a small outback town 100 km outside of Launceston or Adelaide, you can get a three-bed home in modest condition for your $100k home loan. The same amount will get first home buyers a two-bedroom condo near the NSW border about 400 km southwest of Sydney.

Obviously this won’t be a viable option for everyone, but if you are able to work remotely or enjoy rural living you can really stretch your budget. If you are priced out of an urban market a remote property may be just the thing.

Location over size?

Another approach is to purchase a very small space in a more populated area. In some capital cities you may still find a studio unit in a high rise for not much more than $100k, but clearly this isn’t an option for everyone. You’ll probably end up with a tiny space in a not-too-great area of town, which can hurt your ability to rent or sell the property when you decide to move up.

Another difficultly may be in securing financing for a very small space. This is especially true if you are purchasing a tiny apartment as an investment. Banks are wary of being able to recoup their money in case of a mortgage default.

Investment potential?

Some investors are looking for super cheap real estate deals thinking they’ll make a lot of money in the long run. But keep in mind that profiting from property investment usually involves capital gains in addition to rental income. It may be easy to keep a cheap property rented, but you typically won’t get high quality tenants, and more importantly you are unlikely to see much in the way of capital growth. Cheap properties are often in undesirable areas so they’re not likely to increase in value much over the years.

The flipside is that remote properties may indeed rise in value if a nearby mine is opened, a new industry is introduced, or a rail link is extended to a distant suburb. As always, it’s important to do your research before investing because you may discover improvement plans that will make an area more valuable in the not-too-distant future.

Investing in low cost properties requires in-depth market knowledge and the ability to deal with fluctuations and potential loss in value. The most important consideration is your risk tolerance.

Are you planning to buy your first home or searching for an investment property? Let Australian Credit and Finance help you get a great loan at a low rate. Contact our home loan experts today!

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