1st IP in Newtown *Help*

[lancia]

Hi Guys.

I'm currently looking at a buying my first IP.

The objective is to have it close to paying itself off so i need a relatively high yield. I may be moving overseas in the next year so i don't want to worry about it much.

At present I have found a one bedroom, one bathroom, no carpark apartment in Newtown (Erskineville Rd; 2 min walk to King St). As it is for an investment, I understand that the the fact that it doesn't have parking may be a problem for some, but the majority of people living in that area do not have cars. So it shouldn't be a drama.

The apartment is about 59sqm with a decent kitchen and great balcony.

The return, based on the asking price is about 5% already taking into account the high strata.

On the face of it it looks like a great investment, however I am concerned about the apartment being only one bedroom, compared to 2 which is what I have been previously looking at in the Petersham and Stanmore area.

Can anymone familiar with that area please provide advice in regards to the general attractiveness of this property as well as the potential for Capital Gains of one bedders over a two bedder a little further out.

Thanks again for your help.

Kind regards

S

 

[skater]

Hi Guys.
The objective is to have it close to paying itself off so i need a relatively high yield. I may be moving overseas in the next year so i don't want to worry about it much.

The return, based on the asking price is about 5% already taking into account the high strata.

I'm not familiar with the area, however alarm bells are ringing for me when I have a look at the above statements you have made. Do you realise that a 5% yeild is nowhere near being a cf neutral investment unless you have a sizeable deposit or the depreciation available is way off the charts. Not only will you have to dip your hand into your pocket each month, to fund the interest payment, you will have to make sure you have available cash for all the hidden "extra's" that go with investment.

 

[lancia]

Hi Skater,

Thsnks for your concern. But I am planning to pay the difference with my own funds. When I leave for overseas I plan to leave some money (enough to cover the difference plus some more just in case rates keep going up) here and have my folks look after the unit.

Cheers

 

[alexlee]

Depends on how much you're borrowing. What LVR will you be borrowing? If it's 90%, say, then you would be losing at least 3-4% AFTER tax, by my rough estimates. And that's assuming you have the Australian income to offset the property losses against.

Why not look near your own neck of the woods? High body corp for a small, inner city apartment with no parking just rings too many alarm bells. But that's just me.
Alex

 

[depreciator]

Hard to comment on the growth prospects - I don't think you find any date that will reliably tell you how a one bed Newtown apartment will compare with a 2 bedder in Stanmore.
Newtown is a great area - and getting better.
Transport is good with Newtown station very close and Erskinville maybe a 10 minute walk (different train line).
The food around there is great.
You've got the Dendy cinema about a 3 minute walk away.
Great pubs.
A fantastic book store - Better Read Than Dead...............

Can you tell I like Newtown?

59sqm is a good size for a one bedder and you'll never have trouble finding a tenant.

Like Alex said, though, it's just those high strata fees.

Scott

 

[sash]

Lancia

The lack of parking is not neccessarily an issue....the high strata fees will be the issue. If it is over 400 pq forget it and move on. Newtown is a great spot but if it is in soe of the newer buildings the stratas are ridiculous.... The right one bedroom is an asset in Newtown but also look at resale...a unit with the works - internal laundry, parking will always command a premium.

Perhaps you can look further out like areas like Marrickville/Dulcwich Hill where you can still buy run down two bedders for about 280-300. A very simple reno on these will get you got rental returns. Arternatively one bedders with parking and over 50sqm will set you back abou 230K.

I have just got out of a a 38sqm 1brm in Marrickville .with no parking ...it was a bugger to sell but the agent did a fantastic job! More than doubled my money since I bought in 2000.

 

[MichaelSyd]

Hi Lancia

I've just bought a PPOR in Newtown about 2 blocks from your prospective unit in Erskineville Rd. I've studied this market including Erskineville closely last year before purchasing.

Happy to help out more if you want some more info.

btw if the unit you are refering to is in the complex I'm thinking of...then we need to have a chat, I looked in at a 2 bed unit last year as part of research...there are some scary issues with the block I'm thinking of...

cheers Michael

 

[lenojd]

I've been looking for a small terrace/semi in Erskineville for a little while now and unfortunately demand has pretty much priced me out of the area. There has been significant CG in the last yr or so - if only I managed to get in before this!

Good luck with it!

 

[depreciator]

MichaelSyd sounds like a great resource for you, Lancia. I'd be getting in touch with him.
My first house was in Erko - scary place back then. Pretty pricey now. Enmore is a bit cheaper.
I'd like to live in Newtown or Erko, but I need a big place. And I want plenty of parking. So I'm in Marrickville. It's a great suburb. Not sure about the older units there, though - some dense pockets of ugly 70s block with a fair bit of HC.
There is some good stuff near Stanmore station I would look at, too. That's a great area.
Scott

 

[dantheman]

A client & friend is currently buying in Newtown, they had previously tried to buy and were getting gazumped too often. Some properties were going so fast they didn't get a chance to "bid", but things have slowed down a little now although demand is still very strong and good properties are moving quickly. I love Newtown myself as I love to eat

I've got an 1 beddy IP in Erskineville actually with no parking and it's been great, rent goes up $50 per year!

Dan