1st IP - Sydney - Parra? Macquarie Park?

I would appreciate some advice, please.
I am 34 years old, married, 3 young kids (under 6). Wife currently not working but will return to work part time in September, 3 days a week - in child care (so money is not great).
Having said that, I am lucky and on a high income. We were able to pay off our first home loan (2005 - 500k) in 6 years, and our current home loan (bought in 2013) of 1.1m we have already paid off around 500k. We are good savers and able to manage money well, I think.

We have paid off 500k by putting it into an offset account.

Now, we are thinking of buying our first IP. Reasons for buying:
- Long term capital growth
- Tax minimization
- Alternate source of income

A few people I have spoken to that I trust have suggested either Macquarie Park or Parramatta - both because of their closeness to transport, and Macquarie Park due to proximity to Macquarie Uni - lots of international students looking for accommodation. Both have low vacancy rates as far as I can tell.

We can afford to borrow around 800k, I think. We could then pull another 200k out of our offset account, giving us the ability to play with around $1m, which would be easily sufficient to buy a 2 bedroom, 1 garage newish (or brand new) apartment in either location.

Both areas have a rental income of around 500pw.

By my calcs, this effectively would cost me around $200/month in cash flow, PLUS the extra interest we would be paying on our home loan by withdrawing 200k from the offset. These numbers don't worry me and I am confident we could manage it.

Questions:

1) Is now a good time to buy? it seems we are at the peak of the market - but then again, I figure we have to get in 'at some time'
2) What other areas in Sydney should we consider? Are there areas with higher rental yield than these 2 areas?
3) Anything I am not considering here?

Thanks - greatly appreciate any advice you can offer.
 
Yes - people I know who have bought property.. however by no means are they 'sophisticated' investors. Hence my post to this forum.
 
My opinion is this is almost the opposite of what you should be doing. 1 million for a 2 bed apartment in those areas? I can't imagine you will see any CG for a very long time.

Just my opinion.
 
Sounds like you would be increasing your non deductible interest by pulling money out of your ppor offset? If thats the case it would be better to leave it there and borrow 100% for investment purposes IMO.
Is it a good time to invest? Its always a good time to invest if you can afford to but is it a good time to buy in Parramatta? I'll leave that question to others.
 
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My opinion is this is almost the opposite of what you should be doing. 1 million for a 2 bed apartment in those areas? I can't imagine you will see any CG for a very long time.

Just my opinion.

I assumed the 1m was for 2 units each renting for 500 per week if thats not the case that return is terrible IMO
 
Depend on what type of property your investing on.

There several old established units 2 bed close to Westfield & Station for around low 500k with a potential rent of 450-500 per week. I don't know what other think, but I believed that's still pretty cheap and has potential in the long run to grow.

I'm living around the area, and has been studying closely in the past year or two. The growth for unit has started to pick up around mid-late 2014 in Parramatta area.

I believed there are still room for growth in Parramatta (Just Ovoid OTP, as 2 bed is roughly over 850-1 mill)
 
I would not be shelling 1mil for a 2 bedder!
I would rather as suggested get 2 older units, even if it's one 2 bedder and 1 one bedder.
The choice of the areas is a vast question: personally I would try and think in terms of rental yield which translates into holding cost and pick pretty good/decent areas which will translate into good prospects for long term capital growth. I would imagine Macquarie Park be pretty good with the business park and the uni nearby and good transport around.
I too would avoir high rise, Off the Plan (OTP), brand new units.

I think you should have a look at other areas too, there are plenty of good areas in Sydney that are in demand from renters and that will offer good prospects of long term capital growth - what I am trying to say is do not limit yourself to those areas that have been suggested to you: they may not be bad, but there might be other options for you out there.
 
Thanks everyone
1) How best to research areas with high yield and high capital growth?
2) My thinking with 'newer' properties is higher deprecation deduction
3) 1mil is probably high - I am thinking it'll be more like 800k.
 
Thanks everyone
1) How best to research areas with high yield and high capital growth?
2) My thinking with 'newer' properties is higher deprecation deduction
3) 1mil is probably high - I am thinking it'll be more like 800k.

800k in Parra is too expensive, considering the established unit is around 550 now (fairly good condition). I wouldn't touch OTP at the moment... It's very risky you dont know where the market will be going next year or the year after.

Especially with APRA tightening up lending already, you might find it hard to settle, or the market might drop next year
 
Thanks - I was leaning towards Macquarie due to the business park there, the transport there, and the university (international uni students wanting to rent etc)

I figure 800k for a 2 bedder there is probably fair.
agree with no OTP.
 
Thanks - I was leaning towards Macquarie due to the business park there, the transport there, and the university (international uni students wanting to rent etc)

I figure 800k for a 2 bedder there is probably fair.
agree with no OTP.

I live around here so yes - it's a relatively convenient place.

I still think that $800K for a new 2 bed is expensive (though that's what you would expect if you are buying into new units here, I'm happy as long as my place is valued better for this :rolleyes:). Expect traffic congestions worsen

Have you consider existing older units/ townhouses? Less deduction maybe, but if the numbers work, why not?

Like this http://www.realestate.com.au/property-unit-nsw-macquarie+park-119765443# and http://www.realestate.com.au/property-townhouse-nsw-macquarie+park-119700963

Add:

The newest upcoming OTP will be the Macquarie village build by Stamford, the corner of Herring Rd and Epping Rd. Expected completions 2017 ish. 2 bedroom OTP there will be closer to $900K.
 
Hi Zubs,

I live on Herring Rd, the older units next to the Stamford.

You can still get older 2 bedroom stock for around $650k in Macquarie Park. My only concern is the yield. You generally get around $470 rent which isn't great, a gross yield of 3.8%.

Before you jump in on the newer units, run the numbers. I suspect they might be even worse when you factor in the high strata costs. Even if you go for depreciation, I doubt it would stack up. Personally I would be weary of the new OTP units, so many of them going up on Herring Rd.

Does your first IP have to be in Sydney? Personally think it's not the best time to buy in Sydney.

Good luck!
Michael
 
Hi Zubs,

I live on Herring Rd, the older units next to the Stamford.

You are next door to me? Coffee on me sometimes to get tips from you? :D


You can still get older 2 bedroom stock for around $650k in Macquarie Park. My only concern is the yield. You generally get around $470 rent which isn't great, a gross yield of 3.8%.

Before you jump in on the newer units, run the numbers. I suspect they might be even worse when you factor in the high strata costs. Even if you go for depreciation, I doubt it would stack up. Personally I would be weary of the new OTP units, so many of them going up on Herring Rd.

A reference for newer unit in Mcq Park
1 bed will be about $500-550 per week
2 beds will be about $650-$720 a week

Strata
for 1 bed about $800 pq
for 2 bed about $1100-$1200 pq
 
A reference for newer unit in Mcq Park
1 bed will be about $500-550 per week
2 beds will be about $650-$720 a week

Strata
for 1 bed about $800 pq
for 2 bed about $1100-$1200 pq

there're few 1 bed relative new units on Herring road advertised for 500-550 per week, and if you can get a brand new unit without Gym/Pool, etc. Your strata fees should be in 500-600 per quarter.
It should cost you around 600-650k for 1 bed (relatively new unit). that should give you roughly ~4.2-4.5% gross yield
 
there're few 1 bed relative new units on Herring road advertised for 500-550 per week, and if you can get a brand new unit without Gym/Pool, etc. Your strata fees should be in 500-600 per quarter.
It should cost you around 600-650k for 1 bed (relatively new unit). that should give you roughly ~4.2-4.5% gross yield

Depends on which unit and how big it is. For mine $600 is for every 2 months, not per quarter :eek:
 
Thanks everyone for your advice.
Have done some more research and am also considering Haymarket and Alexandria - both have higher rental yields (5 to 6%)
 
Thanks everyone for your advice.
Have done some more research and am also considering Haymarket and Alexandria - both have higher rental yields (5 to 6%)

I doubt you'll get 5-6% rental yield in Alexandria.... 2 bed apartment is over 750 with rent around 550-600 per week

Unless you're talking about service apartment
 
With up to a million, you could get a much better yield- both within Sydney and out of state.

Interested to hear how spending $800-$1m and only achieving $500 rent per week would only cost you $200 per month?

For a similar price, you could get an established apartment in either the eastern suburbs or LNS- which I think are more resilient if there were to be a Sydney crash- and with slightly higher rents. Or purchase 4-5 apartments in Brisbane and they won't cost you anything ! :)
 
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