Brisbane CBD

[ShawnG]

Hi all,

This being my first investment property I'd like to dictate my strategy and get people's thoughts on it.
I have about $500,000 to spend and have been recently looking around Sydney as that is where I am from.

With the Sydney market climbing out of my reach, I have been looking externally and have seen some value in Brisbane's CBD apartments (as compared to Sydney's)

Ideally I'm looking for an investment that would provide a perpetual return and be positively geared from day one.
I understand a 2 bedroom apartment in Brisbane can be picked up upward of $420,000 and can be rented out for $540pw ++

I just want to ascertain other's thoughts on this matter and this strategy to consolidate the feedback and criticisms if any.

Regards,
Shawn

 

[Rixter]

Are you investing for CG or CF?

With the answer to the above in mind, does your DD for the IP's your looking at support your answer?

 

[ShawnG]

Hi Rixter,

Thank you for the reply.

As at this point I will be going for CF. I would like to be +CF so that I will have a stronger ability to lend for my next property (planned in 18-24 months) and may be my PPOR or another IP (depending on my personal journey)

On another note, what does DD mean?

 

[j_p]

Hi Rixter,

On another note, what does DD mean?

Due Diligence.

 

[ej89]

Hi all,

This being my first investment property I'd like to dictate my strategy and get people's thoughts on it.
I have about $500,000 to spend and have been recently looking around Sydney as that is where I am from.

With the Sydney market climbing out of my reach, I have been looking externally and have seen some value in Brisbane's CBD apartments (as compared to Sydney's)

Ideally I'm looking for an investment that would provide a perpetual return and be positively geared from day one.
I understand a 2 bedroom apartment in Brisbane can be picked up upward of $420,000 and can be rented out for $540pw ++

I just want to ascertain other's thoughts on this matter and this strategy to consolidate the feedback and criticisms if any.

Regards,
Shawn

Be careful of Brisbane and Melbourne CBD apartments...There's a mass supply of new apartments and I know developers are saying you could get ridiculous rent on them.. What areas are you looking at?

 

[Rixter]

As at this point I will be going for CF so that I will have a stronger ability to lend for my next property (planned in 18-24 months) and may be my PPOR or another IP (depending on my personal journey)

Just looking at the initial purchase & yield figures you've provided, at best the property would be cash flow neutral to negative (in today's excellent lending environment), so I cant see it increasing your DSR as you are looking for it to do in the time frame.

 

[Roosterman]

I don't think a $420k apartment in the CBD renting for $540 per week would be cashflow positive.

Strata for these unit blocks can be up to and over $2k per quarter - those lifts, concierges and pools are expensive. Once you add council rates, water etc, you could be looking at over $10k in expenses.

At today's record low interest rates (let's use 4.5%) you'll be paying around $18900 per year in interest, plus $10k in costs - $28900. You'll need rent of $555 per week just to break even on those numbers.

That also assumes you can rent it out 52 weeks per year, Brisbane CBD has a vacancy rate of 4% (slightly in renters favour).

The other concern would be buying into a block with 100 other units - there wil invariably be someone having financial issues selling their unit at a firesale price, which will affect the value of your unit.

Lots of due diligence needed here

 

[ShawnG]

Hi All,

Thank you for opening my eyes and showing me a different side to the story to what I researched. I greatly appreciate your feedback and will definitely take it on board.

Where in Australia would I be able to obtain cashflow positive property that would be high in demand?

Roosterman, you are indeed right about the Strata/Body Corp fees on some of these apartments being high. One of which I am looking at is "M on Mary" located at 70 Mary Street.

http://www.realestate.com.au/property-apartment-qld-brisbane+city-118321867

I understand this is a one bedroom apartment and will be rented out as such.
If I obtain a loan at 4.4% (which I have), is it possible for this to have +CF?

Thanks once again guys

 

[ej89]

Hi All,

Thank you for opening my eyes and showing me a different side to the story to what I researched. I greatly appreciate your feedback and will definitely take it on board.

Where in Australia would I be able to obtain cashflow positive property that would be high in demand?

Roosterman, you are indeed right about the Strata/Body Corp fees on some of these apartments being high. One of which I am looking at is "M on Mary" located at 70 Mary Street.

http://www.realestate.com.au/property-apartment-qld-brisbane+city-118321867

I understand this is a one bedroom apartment and will be rented out as such.
If I obtain a loan at 4.4% (which I have), is it possible for this to have +CF?

Thanks once again guys

Why not get a dual-occ home or get a house and build a granny flat on it to make it cashflow positive?

 

[ZachAnSel]

Hi All,

Thank you for opening my eyes and showing me a different side to the story to what I researched. I greatly appreciate your feedback and will definitely take it on board.

Where in Australia would I be able to obtain cashflow positive property that would be high in demand?

Roosterman, you are indeed right about the Strata/Body Corp fees on some of these apartments being high. One of which I am looking at is "M on Mary" located at 70 Mary Street.

http://www.realestate.com.au/property-apartment-qld-brisbane+city-118321867

I understand this is a one bedroom apartment and will be rented out as such.
If I obtain a loan at 4.4% (which I have), is it possible for this to have +CF?

Thanks once again guys

Hi Shawn,

Welcome on board, I was on the same page when first started 5 years ago.
In rule of thumb if gross rent (rent x 52) / purchase price is 7% then its CF+.
But this is just rule of thumb, as so many factors involve in DD..

In current loan rates, I believe 6-6.5 % already CF+.

Every time we bought, our aim minimum is neutral CF (before or after tax).

However I want CF as well as CG, and along the way I learned we can achieve using different strategy. I use particular buy low, cosmetic reno (add value), increase rent and hold, then 2nd or 3rd year re-val and repeat.

Doesn't mean you have to follow my strategy, but I'm saying there are options available for you. You need to be creative and look beyond your backyard. Not all will accept your point of view, I personally get sarcasm and critics on Christmas lunch/family gathering. Its because I mentioned bought property at Guildford 2010, when Merrylands famous with shooting and criminal news. But its double the price now

So please invest your time wisely here, learn smart way (especially from other person mistakes), and happy boring investing.