Apartment buying problem inner Sydney

I bought a 1 br unit in inner Sydney, exchanged in October, took ownership in early December. (I.e. 8 weeks ago). It's awesome, positive cashflow from day 1!

So I decided I would like to buy another.
Had a look at what's available at the moment in Surry Hills, Chippendale, Redfern, Darlington. Omg. It looks impossible to buy anything for that price (low 5's) unless I was to really compromise on internal space, balconies, car space, age of building, street noise or strata fees.
I feel like I got an awesome buy.... :D

Just an aside, I wonder if a valuer would value the one I just bought somewhere high 5's or better cause I can't find anything comparable at the price I bought at?
 
I bought a 1 br unit in inner Sydney, exchanged in October, took ownership in early December. (I.e. 8 weeks ago). It's awesome, positive cashflow from day 1!

So I decided I would like to buy another.
Had a look at what's available at the moment in Surry Hills, Chippendale, Redfern, Darlington. Omg. It looks impossible to buy anything for that price (low 5's) unless I was to really compromise on internal space, balconies, car space, age of building, street noise or strata fees.
I feel like I got an awesome buy.... :D

Just an aside, I wonder if a valuer would value the one I just bought somewhere high 5's or better cause I can't find anything comparable at the price I bought at?

Hi Gockie, with the one you bought in early December, is that positive cashflow net of all costs (eg strata?)

Also is this because its leased under a short term arrangement resulting in higher rental returns than normal? Would it still be cashflow positive if it was leased under a standard arrangement (ie same tenant pays a regular amount and stays there for 1 year or more)?
 
Hi neK,
Yes, you are right, it wouldn't be positive if under a standard rental. I should shut up now!

Sorry, don't get me wrong, I was curious to know how it was achieved?
(I just pieced together comments from your previous posts to come to that conclusion).

Regarding your next purchase, you've got your little niche market there, ask yourself, if you were the potential short term renter, would a smaller room make a difference to them?

How are these people renting this property? Do they inspect? Or do they go off pics, location and feedback?

I know when i look at airbnb/vrbo for overseas visits, those 3 things are what i go by.

For example, when i went to hawaii, I was comparing against hotels and i knew hotels were small. Then when comparing against other airbnb rentals, size were similar, some were 30sqm, some where 40sqm. Realistically, 10sqm did not make a difference to me - I was going to be there for 1 week. Not like it need room to accumulate junk.

The photos you posted up of your existing place, for me that would be too small as a LONG TERM tenant. But as a visitor, that size is good (i even thought i was rather large!). Also, does the parking space add value to the rental? How often is used? Are you better off leasing that off separately to city workers?
 
Sorry, don't get me wrong, I was curious to know how it was achieved?
(I just pieced together comments from your previous posts to come to that conclusion).

Regarding your next purchase, you've got your little niche market there, ask yourself, if you were the potential short term renter, would a smaller room make a difference to them?

How are these people renting this property? Do they inspect? Or do they go off pics, location and feedback?

I know when i look at airbnb/vrbo for overseas visits, those 3 things are what i go by.

For example, when i went to hawaii, I was comparing against hotels and i knew hotels were small. Then when comparing against other airbnb rentals, size were similar, some were 30sqm, some where 40sqm. Realistically, 10sqm did not make a difference to me - I was going to be there for 1 week. Not like it need room to accumulate junk.

The photos you posted up of your existing place, for me that would be too small as a LONG TERM tenant. But as a visitor, that size is good (i even thought i was rather large!). Also, does the parking space add value to the rental? How often is used? Are you better off leasing that off separately to city workers?

Ta neK,
Yes, you put two and two together and have raised some good points. I could buy smaller (even say a studio).
Under traditional thinking though, they are less popular for mainstream buyers, future price growth may be not so great compared to a larger property and financing for smaller properties maybe difficult. Under 40sqm and many lenders will require the 80% LVR.
If more people think with a short term rental hat on, then these properties will become more popular. For a studio you could get a better rate of return. But the legalities of short term rentals is still subject to council and so carries a risk. AirBnB etc. has come to agreements with San Fransisco, New York etc, in some cases remitting tax on behalf of the property owner, or limiting the number of nights which can be rented out as a whole apartment. If the second option was to happen in Sydney then.... Well there goes this form of income. Yes, it can still be rented out like normal, but the small properties are going to suffer. Buying something small for this purpose with this risk is possibly not the smartest thing to do. But if you already own a small apartment in a great location it's worth hosting it on Airbnb.

I will mention, I like how my apartment has a separate bedroom as it can sleep up to 4 short term. 2 in the bedroom, 2 in the living space. Totally ok for a short term (say a week's) stay. Would be better if I made the living area more private for guests staying downstairs, but trying to do that without ruining the aesthetics is an issue I havent been able to resolve.
It's still ok though for just a couple to use, so it is suitable to a wider audience of guests than just a simple studio.

* I agree, a hotel room down to 30sqm (or even 14sqm if you think about how big a cabin is on a cruise line) is acceptable. My property offers the kitchen and laundry facilities which you don't find in a hotel room and to me it feels like what I would expect for a serviced apartment. So it's superior to a hotel in some respects. And when you consider my nightly room rate is not too high... I'd prefer this over a hotel room any day.

I think the downside to my property for long term living is that the kitchen is small and doesn't have a pantry space. Otherwise, it is quite liveable even for a longer term tenant. But the yields are much stronger the way it is right now. Making hay while the sun shines.

* You do have a valid point about the car space. It can be considered non essential/nice to have. About 1/4 to 1/3 of guests enquire specifically as it has a car space. But if I didn't have it, guests could still park on the street, or I'd just get other guests. For guests with a car, I would need to provide some council parking labels/stickers as the immediate area car parking is zoned for just 2 hours, and the council limits availability of them to an address to just 45 per year. I am sure though, without the car space the vacancy rate wouldn't change too much, the place has been booked solidly thus far. Not sure how it will go in winter, but it's looking very good to the end of April. I reckon I'd get more foreigners if I removed the car space from the listing as its more common for people from interstate to ask for the car space. I don't know exactly how much I could get for the car space. Perhaps $70 or more per week? I'd have to advertise it somewhere to find out. It's about a 4 minute walk to Redfern Station. It also has a Goget car just 20 metres down the road too. So a car space is nice to have but ultimately not essential.

* Strata rates, I know what you mean and I agree. A colleague of mine bought an apartment brand new 3 years ago with reasonable (maybe $800) Strata fees. It's gone up to $1400 per quarter now. :eek:
So I sacrifice pools, gyms, lifts and look for properties with strata rates below $1000. Three digits, fine. Four digits rates, no. It's rare to find strata rates of $600 per quarter ANYWHERE near the city. As it doesn't have a lift, my property is not suitable for people who cannot use stairs. Note, there's not an excessive number of stairs, just one flight from street level and 1 flight within the apartment itself, but for some people, it's something that makes the property unsuitable. I own another apartment with a lift (in suburban Sydney, rented out as a regular rental) and a year or two ago one of the two lifts had to be replaced. That cost was $125,000/72. That's on top of regular charges for lift maintenance, pool maintenance, and everything else. So a lift is not on my wish list. :) so I tend to buy walk up apartments. But I also look to avoid a crazy number of stairs. It would be a turn off for guests lugging suitcases. I know it was no fun when I was bumping the furniture in. So the number of stairs must be reasonable.

Just a note, so many properties available on the market these days have quarterly strata fees over $1000. Actually where I'm looking, it feels like it's in the majority. Even studios too! Crazy. Anyway, I rule these ones out.

Final note. Guests, believe it or not, just book from having an idea of location, the photos, (on Airbnb you can post lots), what I write about it on the listing and through communications with them and from my reviews. That's it.
Seems to work!
:p
 
Gockie, it is worth noting as the building content increases so do your strata levies (insurance does cover the building and the newer the building, the higher its replacement value & insurance costs). Whereas with a house you have a heap of land which insurance is not covering (other than minor items like outbuildings).

As for the dramatic increases in levies - when buying a new apartment, the levies are an educated guess and artificially low as many items are covered under warranties eg: lift maintenance. When the maintenance period expires, then the levies shoot up.
 
As for the dramatic increases in levies - when buying a new apartment, the levies are an educated guess and artificially low as many items are covered under warranties eg: lift maintenance. When the maintenance period expires, then the levies shoot up.

I thought they were artificially low so the developer can sell the units ;)
They stay low until the developer sells the last one and then it becomes someone elses problem.
 
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