Beachside Suburbs in Sydney

[shanh]

Hi everyone, this is my first post in the forum and I'd be very grateful for your input.

I am looking at purchasing a investment property over the next year or so, budgeting for up to $350k. Just browsing through sites like domain and realestate, it just occurs to me that some properties in good areas close to beaches appear more affordable than I thought.

For example, I was looking at Maroubra, and there were quite a few studios up for grabs on realestate for around $200k, all claiming rental income at about $220-$240 a week. Then I look back at sold properties over last few years, there was one studio property that was sold for $165k back in 2008 and is now asking for $200k - so that's gross CG growth of 10% p.a.! So it came as a surprise, as I never really associated significant CG with studios. Crawling over historical data revealed that rent at the same property back in 2002 was $170 per week, putting rent growth at 4% p.a. over last 8 yrs. To me, it seems like these studios appear to be sound investment opportunities.

But I am still pretty new to property investment, so I'd appreciate any opinions on the following regarding Studios in beachside suburbs:

1. Capital Growth

2. Tenancy makeup (singles, family, travellers, foreigners, students, etc.)

3. Vacancy rate

4. Transport to the CBD and elsewhere (convenient? puts people off?) - I live in the West so railway is my preferred method of commute, I don't really know much about the buses...

5. I am also aware that banks are hesitant to lend for a property of small area (<50 square metres)... so are there actually ways to secure 80% mortgage for studios?

6. Any points that I haven't mentioned that you think needs to be considered?

I would also appreciate it very much if you could share your success stories with regards to studio investments.


Thanks!

 

[Propertunity]

..... I'd appreciate any opinions on the following regarding Studios in beachside suburbs:

1. Capital Growth

They move in-line with the CG of units in the suburb.

2. Tenancy makeup (singles, family, travellers, foreigners, students, etc.)

families in a studio??

3. Vacancy rate

www.sqmresearch.com.au and re.com rentals

4. Transport to the CBD and elsewhere (convenient? puts people off?) - I live in the West so railway is my preferred method of commute, I don't really know much about the buses...

Not everybody needs to get to the CBD to work. Not everybody that works in the CBD needs to go there every day. www.131500.com.au for trip options.

5. I am also aware that banks are hesitant to lend for a property of small area (<50 square metres)... so are there actually ways to secure 80% mortgage for studios?

Some lenders will do them. Some will do them at lower LVR's. Some won't touch 'em. It also depends on the strength of the borrower (you).

6. Any points that I haven't mentioned that you think needs to be considered?

Strata fees. PMs that specialise instudent accom. if that's what you end up buying. Furnished/unfurnished. Permanent/holiday letting.

Why are you considering studos @ $200K when you have a $350K budget?

 

[shanh]

Thanks for the quick reply Propertunity.

By family... I guess I was thinking more of a couple/partnership but yeah, I'm not too sure what sort of people likes renting beachside studios, and how good a tenant they'd make, hence the question.

Regarding my budget, to be precise, I have enough deposit (20%) for a $350k-$400k property. But I'd like to explore options, so I wanted to see how studios do in the market. As it stands now, $400k is barely enough for a 1 unit apartment in Maroubra.

Although I haven't done a detailed calculation, but buying two studios instead of one apartment is also in sight.

Cost wise, stamp duty for two studios of $200k each will be cheaper than a unit for $400k by about 2k. Problem is probably can't even get a 1 bedda in suburbs in Maroubra for $400k. If CG for studios are on par with units, then that's definitely a plus. Also having two properties instead of one spreads risks... if one's not tenanted, other one might still be getting rentals. But of course, two properties means two sets of management costs...

But in any case, I'm trying to learn as much as I can about these studios in terms of tenancy, vacancy rates, capital growth, etc, because buying studio(s) is an option.

I'm not considering Student Accommodation studios though, because that's too specific a market.

 

[Propertunity]

My suggestion would be to stick to 2brm units - less risk for tenanting, market appeal, selling in future, financing to get into, financing for buyers down the track etc. This is less risk IMO.

 

[shanh]

www.sqmresearch.com.au and re.com rentals

Thank you for these links

 

[shanh]

My suggestion would be to stick to 2brm units - less risk for tenanting, market appeal, selling in future, financing to get into, financing for buyers down the track etc. This is less risk IMO.

Yeah, what you said makes sense, 2 beddas are really the favourite kids of the lot. But I wonder in reality how much difference there is between the performance of 1 beddas and 2 beddas.

 

[Propertunity]

Yeah, what you said makes sense, 2 beddas are really the favourite kids of the lot. But I wonder in reality how much difference there is between the performance of 1 beddas and 2 beddas.

Nobody captures the data separately - so no way of telling. 1,2,3 brm units all get lumped in as units. Houses the same. It then becomes a units Vs houses statistic for the suburb.

 

[beachgurl]

If you are looking at Maroubra in particular, the rise you saw in studios in the past few years is out of the ordinary IMO. Maroubra had a steep rise in unit prices recently and there's now not such a divide between it and the neighbouring beach suburbs. The studios at the top end of Maroubra Road aren't in the best location with the best of neighbours. If you want a studio in the area you are better off spending a bit more and going for the ones in the old hotel near Pacific Square. Returns probably aren't so great but (in general) you'd have a much better type of tenant that is likely to stay for longer.

there seems to be a divide between 1 and 2 bedders in Maroubra, but wonder if that is a general divide in most suburbs due to the difficulty in obtaining finance for 1 bedders. A few years back I nearly bought a 1 bedder on the market for 317K in Maroubra - over 400k now. I think you've probably missed big CG there for this property cycle. I'd like to eat my words as I have a unit there but the gains seen recently have been much bigger than normal. With the large number of units still being built in the suburb I don't think demand is going to be so high to push the prices up too much. The newies are a bit overpriced but not so much to push another 10% growth any time soon.

 

[Caputo Lawyers]

My suggestion would be to stick to 2brm units - less risk for tenanting, market appeal, selling in future, financing to get into, financing for buyers down the track etc. This is less risk IMO.

I agree with this if you can afford it though given the budget and area!

 

[XBenX]

Maroubra Junction isnt beachside =)

For your money why not look in Sth Maroubra by the beach. There is plenty of housing commission but some nice pockets.

 

[shanh]

The studios at the top end of Maroubra Road aren't in the best location with the best of neighbours.

Thanks heaps for this! This is the type of information I was after Really helpful! I will look into the old hotel to see what it's got for offer, sounds like a low growth high yield case.

A few years back I nearly bought a 1 bedder on the market for 317K in Maroubra - over 400k now. I think you've probably missed big CG there for this property cycle. I'd like to eat my words as I have a unit there but the gains seen recently have been much bigger than normal.

Would you consider this "bigger than normal" to be on par with other suburbs you have looked at? I do hope you end up eating your words but only time will tell.

With the large number of units still being built in the suburb I don't think demand is going to be so high to push the prices up too much. The newies are a bit overpriced but not so much to push another 10% growth any time soon.

That's something I wasn't aware of actually, rushed to have a look at the supply-demand graph, seems like supply's been climbing over the past few months... hmmm.... and I do find the newies quite expensive but looking at suburbs like Meadowbank and Rhodes, you wonder what the heck's going on, prices are clearly catching up to traditional "waterfront" suburbs.

 

[shanh]

I agree with this if you can afford it though given the budget and area!

Thanks for the heads up for 2 brm I'm considering other suburbs, Maroubra and the likes are def. out of budget.

 

[shanh]

Maroubra Junction isnt beachside =)
For your money why not look in Sth Maroubra by the beach.

lol I didn't know that actually, but was talking about Maroubra proper

There is plenty of housing commission but some nice pockets.

How do you get information on where housing commissions are located? They are literally everywhere! Thanks

 

[beachgurl]

Re housing commission in maroubra, the streets with American state/town names is where most are. Lexington place is the worst part and gets better the further away from that. Is a bit cheaper than the rest of maroubra but if u take a drive you'll see why. I rented in that cluster when I first moved to the beach. Great location re beach, but not the best place at night.

 

[shanh]

Thanks heaps for the info Beachgurl I will probably go take a drive around the area sometimes soon.

All the best with your investments!

 

[charlieandkath]

We had a dilemma earlier this year between buying an older 2 bedroom unit in Randwick or a newer 1 bedroom unit in Coogee. In the end we went with the one bedder in Coogee mainly to be closer to the beach. Time will tell whether we made the right decision but we generally feel over the long term they will do much the same for CG. I suspect this would be the same for studios.

My thoughts would be to go and inspect as many studios as you can in the areas you like and you will soon work out which ones are goers or not. By the time you have looked at 10 you will be an expert. When you have decided on what you are looking for try and find out what it last sold for and when. This is always good to know.

Cheers

 

[shanh]

My thoughts would be to go and inspect as many studios as you can in the areas you like and you will soon work out which ones are goers or not. By the time you have looked at 10 you will be an expert. When you have decided on what you are looking for try and find out what it last sold for and when. This is always good to know.

Hi, charlieandkath, thanks heaps for sharing your story and the tips

I'm mainly looking for something with good yield and decent CG potential. I thought beachside properties might offer both.

 

[charlieandkath]

I'm mainly looking for something with good yield and decent CG potential. I thought beachside properties might offer both.

The yield on our investment in Coogee has had quite an impressive jump just recently which we were pretty happy about. The old tenant was good but only wanted a six month lease so we took the risk of finding another tenant. Had a good experience with our managing agent who has an office at Maroubra but is based in Bronte. He was so proactive about the tenant swap over that we did not miss a days rent. How good is that?

I think if you buy quality in great beachside areas close to Sydney then you are setting yourself up well for CG and eventually yields will catch up as there are tenants that will chase these qualities.

All the best to you shanh.