Adelaide's Inner West

[JRP]

Hello there,

Long time reader, First time Poster!

I'm Looking to purchase an IP in Adelaide's west preferably 3ks From the CBD.

(Budget is under 230k)

Some of the 2 bedroom units in areas such as Mile End, Richmond or Brooklyn Park could possibly fetch around that 6.5% yield, within close proximity to the airport, beach and obviously the CBD, it appears to me that they could be a sound investment in the long term?


These areas ( Richmond In Particular ) don't seem to be very popular with investors or investors don't seem to be drawn to these areas for reasons I cant understand?


I have been hearing lots of talk about the Onka shire and I feel as though I have already Missed the Boat on that one.


All Feedback welcome

thanks

 

[ad5]

Hello there,

These areas ( Richmond In Particular ) don't seem to be very popular with investors or investors don't seem to be drawn to these areas for reasons I cant understand?

thanks

Depends on the spot, some parts are under a very noisy flight path or near the end of the runway.

 

[Logica]

... Some of the 2 bedroom units ... could possibly fetch around that 6.5% yield, .... it appears to me that they could be a sound investment in the long term?

I guess I would be careful equating yield with sound long-term investment... Most long-term investors tend to put higher emphasis on capital growth. By the way, 6.5% sounds ambitious at this price point.

 

[JRP]

I guess I would be careful equating yield with sound long-term investment... Most long-term investors tend to put higher emphasis on capital growth. By the way, 6.5% sounds ambitious at this price point.

Logica,

please elaborate.Back up your comment with reasoning?

A 6.5% yield is more then achievable, the proof is there.

"Most long-term investors tend to put higher emphasis on capital growth"

I found this comment rather Generalized.

it almost seems you are naive to property that has a neutral to positive cash flow and still has capital gains

Id like to Consider myself a long term investor (by the means of holding all my property for at least the next 25 years)

So Here is one investor who will only buy a neutral or positive cash flow property and still achieve substantial growth, i am sure there's plenty more out there...

 

[jim1964]

All Feedback welcome

Sure about that?Maybe have another read of your reply to Logica.

 

[JRP]

Sure about that?Maybe have another read of your reply to Logica.

Would just like his comment backed up with reasoning, for the benefit of learning on everyones behalf

 

[MattADL]

Everything im about to say is based on no facts and it just an open discussion.

Personally Ive always liked the area, im biased, I grew up western suburbs. The flight path is a big draw back and it is hard to miss. If you load a google map and extend the strip across to the CBD it should give you a good indication of the noisiest areas.

I actually thought Richmond had some potential, lots of rear subdivisions, cheaper to buy. I found the area of richmond good for learning. There was lots of information on past sales, both the subdivision and the original block. I dont know how to speculate on future grow, so ill leave that to the experts.

Id do some quick research on jetstars new dream liner coming to Adelaide. With jetstar soon to be doing direct international flights they possibly have a late night departure/arrival to Bail starting + louder bigger plane.

 

[Logica]

Hi JRP,

I agree there are many properties that achieve both a good rental yield and a reasonable capital growth. Long-term, this could even be the majority? However, it is difficult to find property that has both high yield and high capital growth. Capital growth is usually inversely proportional to yield: the higher the long-term capital growth prospects the lower the rental yield.

Therefore, it is important to select and maximise one and then optimise the other. In my experience, most successful long-term investors select a property that has the best long-term capital growth prospects and then maximise its rental income (eg via a renovation). Not the other way around.

I always use the comparable market rental figures to estimate the market rent. Take Richmond as an example. A 2 bedroom unit has a median price of $240k and average of $250k. The median market rent is $267 (average $266) per week. This gives a gross rental yield (before buying costs) of between 5.5% and 5.8%.

Based on the market evidence it could be a challenge to buy a unit for well below median price and achieve a well above median rent. Above average rental income is usually achieved in smaller, well-located, single storey unit groups, well-maintained and renovated and often newer. This however means much higher purchase price...

Thanks, Paul

 

[JRP]

Hi JRP,

I agree there are many properties that achieve both a good rental yield and a reasonable capital growth. Long-term, this could even be the majority? However, it is difficult to find property that has both high yield and high capital growth. Capital growth is usually inversely proportional to yield: the higher the long-term capital growth prospects the lower the rental yield.

Therefore, it is important to select and maximise one and then optimise the other. In my experience, most successful long-term investors select a property that has the best long-term capital growth prospects and then maximise its rental income (eg via a renovation). Not the other way around.

I always use the comparable market rental figures to estimate the market rent. Take Richmond as an example. A 2 bedroom unit has a median price of $240k and average of $250k. The median market rent is $267 (average $266) per week. This gives a gross rental yield (before buying costs) of between 5.5% and 5.8%.

Based on the market evidence it could be a challenge to buy a unit for well below median price and achieve a well above median rent. Above average rental income is usually achieved in smaller, well-located, single storey unit groups, well-maintained and renovated and often newer. This however means much higher purchase price...

Thanks, Paul

Logica,

Thanks for the Justification

I understand that this isn't a direct comparison but what would your thoughts be on this unit... with a 8-13k facelift ?

http://www.realestate.com.au/property-unit-sa-richmond-115063887

 

[Logica]

Hmm... some of the other units in the group rent for about $250pw, which seems ok. But I would be worried because it's almost directly under the flight path and I would be worried about the impact of the flight path on CG. Brooklyn Park would be a safer bet.
NB: check the strata minutes and accounts carefully to make sure the management and maintenance is up to scratch and there is enough money in the bank.

 

[james93]

Hmm... some of the other units in the group rent for about $250pw, which seems ok. But I would be worried because it's almost directly under the flight path and I would be worried about the impact of the flight path on CG. Brooklyn Park would be a safer bet.
NB: check the strata minutes and accounts carefully to make sure the management and maintenance is up to scratch and there is enough money in the bank.

I paid 189k for this unit. I do understand your concern on the flight path but I have strong belief that it may have some effect, but look at suburbs in other states close to airports eg marrickvile, kurnell and mascot in Sydney. I understand Sydney's market isn't a good one to compare it too but I think it will have potential. Hopefully going to get away with an 11k reno and a rental of 270 p/w... That's what the renovated unit downstairs is achieving

 

[Logica]

Thanks for the feedback. Let us know how you went with the rent after the reno. Cheers,