The debate about whether to invest in expensive blue chip properties or cheaper affordable housing has raged on for years. In this short video, I try to explain the pros and cons of each and which part of the property market I prefer.
So I’ve got a lot of questions from clients over the last sort of two three four years asking the question of which sector of the market when you’re looking at styles of properties should you be considering, should you be looking at the high end of the market trying to pursue only blue chip or should be looking at the affordable housing scheme and some of the tax incentives that revolve around that and what I’d actually say is obviously there is no right or wrong and certainly there are people who’ve made a success of investing at both ends of the market.
Now if you’re investing if you imagine a bell curve at one end of the bell curve you might have what you consider blue-chip properties and at the other end you might have what you consider lower socioeconomic more affordable housing I think the reality is that the reason it’s shown as a bell curve is because there are fewer properties in that blue chip and there are fewer properties in that affordable housing market in.
Now the thing to consider is that when you’re looking at either end of that bell curve what you’re actually noticing straight away is that there are fewer prospective tenants that can afford the blue chip for example and probably fewer that are really going to be interested in your lower sort of more affordable housing from a rental point of view.
Now at the high end with those blue chips obviously because of the fact that there are such high-value assets you’re not going to be able to achieve as higher yield and at the lower end while the yield might be good you might not be attracting the caliber of tenant that you feel comfortable with so there’s a sort of considerations that either end.
Obviously with the blue-chip if you’re buying for capital growth and you’re not that concerned about your day-to-day cash flow then that could be an ideal asset for you and similarly at the lower end if you’re not really concerned about capital growth and maybe cash flow is keen for you and then again that might be the right style of asset.
Personally where I like to fit is just before the midline that median curve primarily because I love that there’s a huge number of prospective buyers in that space so in the event god forbid that I should ever have to liquidate an asset quickly there’s going to be plenty of people who want to buy in that space.
Second of all from a rental perspective I’m going to find my greatest pool of investors around that midline so for me it’s a numbers game but I also want to take into consideration that I don’t want to be buying too many properties at either end of the spectrum so really it’s about you going what am I comfortable with, where do I want to take my portfolio in the future, and what feels most comfortable.
I hope you found this really useful if there are other ideas around the property that you want to hear about please let me know and as always please jump onto our webinars we’re running a whole series of really exciting webinars over the coming year and love you to be involved. Signing off, Salina Kulkarni from Phoenix Wealth Group.