Breaking into the property market doesn’t have to be as difficult as you probably think it is. Cheap houses can be a great way to get into the market earlier because you need less of a deposit.
But where should you go looking for these cheap properties in Australia and where do we find these cheap houses for sale?
Tips for Finding Cheap Houses
#1: Use the 2-Hour Rule
This is a rule that I created and it’s not a rule that is definitive, but you will definitely find properties cheaper than where you live. The idea is that the majority of us live in capital cities and properties are very expensive in capital cities. If you want to find cheaper properties, then go two hours from where you live (in driving distance) and have a look around there and see what the property prices are.
I will use Cronulla in Sydney as an example because that’s where I used to live. If you go two hours north, you will go to the very north of the Central Coast. Properties around that area tend to go for around $300,000, but you can actually find properties for around the $200,000 or $250,000 mark and they are 3 bedroom houses.
If you go two hours south of Cronulla, you are looking around the Nowra area and properties are again around the $300,000 to $350,000 price range but if you go two hours west, then you are looking at places like Lithgow where properties are quite cheap.
So even though Sydney is going to be defined as one of the most expensive markets in Australia, if you go two hours outside of the area properties become extremely affordable which can be a great thing to do if you feel stuck. Use the 2-Hour Rule and see how it goes.
#2: Do a population search
A great place to look for cheaper properties is in regional centres and the way it tends to work is that the larger the regional centre, the more expensive those properties are going to be. Obviously though, if the centre is too small it is going to be hard to find lending.
I find that if you look for regional centres that have a population of around 10,000-20,000 people, you can find extremely affordable properties but with enough population there to support rental properties.
You can find a region’s population just by searching on Google maps or you can go to Wikipedia and type in the regional centers that you found and the website will give you the population.
#3: Look at units instead of houses
Units carry extra expenses such as strata costs (also known as body corporate fees), but they are obviously going to be much cheaper than houses. So rather than trying to enter the market in a house, you could look into investing in a smaller unit in order to get started in the market and then possibly work your way up to a house in the future.
#4: Look at studio units
Studio units are units where everything is in one room apart from your bathroom so they are pretty small. Lending for studios is a bit harder than lending for properties that are over 50 square meters, but they can be much cheaper and deliver a significant rental yield in some areas as well.
You do need to be careful with studios because they don’t appeal to as many people since they are so compact. So make sure that if you are buying a studio that when it comes time to sell it, it’s not going to be a hard sell.
#5: Look at “Over 55” Complexes
Basically these complexes deem that if you are over 55 you can live in a smaller house and, based on the regulations, the living areas are also smaller than in a normal house. I don’t know why you have to be over 55 to do it but because it has that restriction on it, the properties are generally much cheaper than surrounding properties in the area.
Again, you may have more lending difficulties with this because it’s not a standard property and you need to make sure that the resale is there if you decide you want to sell the property in the future.
#6: Look into buying land
For cheaper properties you can also look at land which obviously has no property on it. The chances of getting a rental income though is going to be very slim but you can pick up land for a really cheap price. Just for fun I did some research and found blocks of land for under $10,000 in Australia. Yes, they are in the middle of nowhere but $10,000 for a plot of land is incredibly cheap which is why land is another way to find cheap property.
#7: Look into holiday properties
You can actually purchase those stationery caravans and little cabins in holiday parts. If you are purchasing as an investment, you need to be very careful because often you can’t let them out otherwise you pay a lease fee and there are also fees associated with being in holiday complexes.
I haven’t done full research into this option so I suggest that you do the research if you think you are interested in buying that. I have seen little cabins in holiday areas, large suburbs and populated areas for $10,000-$40,000.
On realestate.com.au, if you are searching in the lower price range, chances are quite a few of these properties are going to come up but again be careful about all the regulations that surround it.