Buying an IP in Sydney

Hi All,

Im looking to purchase an investment property in Sydney. Ive currently got an existing investment property in Ermington (Parramatta Council) that i purchased in 2003 (not the best investment to date - bought in 03 for around 480, and its probably still worth that much :().

Reading through some of interviews, ive realised ive made the biggest mistake of simply standing still and doing nothing for the last 6 years. I've decided its to put my bum into gear and get started.

Positive cash flow is ideal as i plan to adopt a buy and hold strategy. I know people say there are heaps of properties out there yielding 7%+, but from what i understand these are units, I have a preference towards houses. Reason being is that I hate strata / body corporates, at least with a house i get to spend what i want, when i want.

Any tips would be appreciated.

Thanks
 
how about buying a house close to cf neutral, renovate it, and increase the rent. It'll be cf+ if everything goes as expected, or at least it'll become cf+ after couple of years. But with rates increasing it'll be more difficult, but not impossible.

just curious about your IP in Ermington...it hasn't gone up in price at all!!?? 480k!!? is it at least cf+?
 
neK

I think you've left it a bit too late,
prices in many areas have already gone up.

Perhaps look at auburn, Merrylands, Guildford
 
how about buying a house close to cf neutral, renovate it, and increase the rent. It'll be cf+ if everything goes as expected, or at least it'll become cf+ after couple of years. But with rates increasing it'll be more difficult, but not impossible.
I wouldnt mind that, but i cant seem to find any in the areas that i know. Everything is cashflow negative. Any areas in particular that you recommend?

just curious about your IP in Ermington...it hasn't gone up in price at all!!?? 480k!!? is it at least cf+?
Its probably gone up by $50k, pretty small in the whole scheme of things seeing its been over 6 years already. And no its not cash flow positive. Rent is only 430 pw.

neK

I think you've left it a bit too late,
prices in many areas have already gone up.

Perhaps look at auburn, Merrylands, Guildford
Yes i know ive left it bit too late. But what other options are there? Shares just arent my thing (i tend to start monitoring the prices on a daily basis and attempt to day trade.... not a good idea for me).
 
Im looking to purchase an investment property in Sydney. Ive currently got an existing investment property in Ermington (Parramatta Council) that i purchased in 2003 (not the best investment to date - bought in 03 for around 480, and its probably still worth that much :().
Don't beat yourself up too much:
1. Most of Sydney peaked in 2003 and it was only last year in 2009 that those same levels were reached again and then exceeded. It was not that Ermington was a bad choice.
2. You did not lose 40% like a certain Professor Keen was predicting :)

I know people say there are heaps of properties out there yielding 7%+, but from what i understand these are units, I have a preference towards houses.
No - you can get this with houses on land as well - but they need to have a granny flat - for dual renatal income to reach 7+% gross.
 
Don't beat yourself up too much:
1. Most of Sydney peaked in 2003 and it was only last year in 2009 that those same levels were reached again and then exceeded. It was not that Ermington was a bad choice.
2. You did not lose 40% like a certain Professor Keen was predicting :)
Well hopefully Parramatta council let me build something at the back of this yard to make it cashflow positive overall, then ill be a bit happier.

No - you can get this with houses on land as well - but they need to have a granny flat - for dual renatal income to reach 7+% gross.
Hmmm, so does looking for a house that where I can put a granny flat at the back work? Or do you mean find one that already has a granny flat on it?
 
Don't beat yourself up too much:
1. Most of Sydney peaked in 2003 and it was only last year in 2009 that those same levels were reached again and then exceeded. It was not that Ermington was a bad choice.

If this property was negatively geared for six or seven years, with zero capital growth... then I would suggest that really, this probably was a bad choice so far. Just because the market averaged zero doesn't mean that keeping to the average makes it ok.

But, that's been and gone and is old news now. The important thing from here, is to learn from the mistakes and not make them again.

If you are now looking for positive cashflow, you may need to use a little creative thinking. A dual income property like Prop suggested is one option. Heavily discounted purchases ala Nathan is another. Renovating, or adding a bedroom, might be worth looking at. Student accommodation. Regional stuff. Overseas stuff. Vendor finance. Lease options. Higher cash deposits. Holiday rentals. New buildings with high depreciation.

Or, short-term negative cashflow deals to realise short term cashflow gains (by selling or refinancing quickly); such as subdividing, strata deals, serious renovating, organising plans and permits without building, or actually building new properties.

There are probably a lot of other ideas that I haven't mentioned there. Then again, perhaps buying and holding and waiting is actually the right strategy moving forward, for you?

Good luck with it, either way :)
 
Nek
Just a thought if the land is over 450m2 you maybe able to put a granny flat on that block first and then go for another IP ( 10 day approval and there about 50k or there abouts ) , just depends on how you want to work it from there.
Just about to settle on an IP which will be pretty close to CF+ but will have a reno done on it straight after settlement .
stuart
 
Heavily discounted purchases ala Nathan is another.
Heavily discounted purchases? How do you find these?
Nek
Just a thought if the land is over 450m2 you maybe able to put a granny flat on that block first and then go for another IP ( 10 day approval and there about 50k or there abouts ) , just depends on how you want to work it from there.
Just about to settle on an IP which will be pretty close to CF+ but will have a reno done on it straight after settlement .
stuart
Stuart, is this a house or unit you're buying? As for the 50k on Granny Flats, is that how much it costs for someone with contacts in the building industry? Because i have zero contacts, i wouldnt even know where to start when it comes to building.
 
neK

I think you've left it a bit too late,
prices in many areas have already gone up.

As a new investor trying to get into the Sydney market this is exactly my concern. I seem to have mis-timed my interest/education in real estate (haven't bought yet) about a year too late.

But does the fact that prices have already gone up mean that I should wait until the next "bottom" of the cycle to get good value? I know there are "creative" options for creating +ve cashflow properties, but as a novice investor I'm looking for a straightforward buy-and-hold.

Or should I instead look to buy outside of Sydney... eg. Brisbane?
 
Or should I instead look to buy outside of Sydney... eg. Brisbane?

Ashley

In my opinion the low interest environment has made buying in all our capital cities difficult.

Vendors and Real Estate Agents have higher expectations and I've noticed that any new stock coming on the market is priced higher.

Properties still sell even at the higher prices because there is very little stock available.
Buying in regional areas could still be an option
 
Hmmm, thanks Ziggy, that's a pity. Seems like I should have bought in 2008! It wasn't on my radar at the time though.

I'm very mindful of the advice that money is made in real-estate in the buying, not the selling. Would you be waiting to see what opportunities arise in 2011/2012 instead of buying now? It seems a lot of people are still expecting the market to rise for the next 6 months, and perhaps slow a little beyond that.

On the other hand I could be waiting a while for the right conditions to come along. If prices boom in the next 3/4 years I would be kicking myself!
 
Ashley

As long as the yields are good it doesn't matter if prices have moved upwards a bit.

I'm only after 2 properties so I'm looking for uggly ducklings in Sydney and Newcastle and also have my eyes on Tassie as well.

Tassie is an interesting market but I'm unfamiliar with it and don't know what the rental market will be like. Also, because of the distance we can't take on any diy work
 
Interesting. Tassie is one of the places I've crossed off the list because quite a number of 'experts' reckon it will have below-average capital growth. I'm not so sure (but hey, what do I know!). I often here of people saying they are planning to, or would like to one day, retire to Tassie. What with the ageing of the population it would seem odd if it didn't do decently well.

What do most investors consider a "good" yield? I know some investors only go for +ve geared properties, which means yields around 7.5% and above at the moment (allowing for some holding costs).

I guess I'm wondering whether I should wait until conditions are right for getting a good yield, or just accept something at a bit over 6% and get in now.
 
Or should I instead look to buy outside of Sydney... eg. Brisbane?

Yes, QLD holiday time :)

Seriously though, South East QLD market tends to be a couple of years behind the Sydney cycle and prices are definitely down there at present. The data for 09 shows some pretty depressed prices for some segments.
 
South East QLD market tends to be a couple of years behind the Sydney cycle and prices are definitely down there at present. The data for 09 shows some pretty depressed prices for some segments.

Troyhunt
Which suburbs are you refering to?
 
Troyhunt
Which suburbs are you refering to?

I'm mostly familiar with the Gold Coast. Suburbs like Southport have RP Data reporting an 11% drop in units in 09 against 08. I suspect this is largely due to greater sales of new developments in 08 but certainly there were a lot of resales last year at significantly lower prices than when new in the preceding few years. There are also a number of older properties selling at equal or lower prices than previous years and will yield 6%+ within walking distance of the CBD.
 
I'm mostly familiar with the Gold Coast. Suburbs like Southport have RP Data reporting an 11% drop in units in 09 against 08.
Thanks, I did look at SE QLD but didn't like the prices.
Also, there are too many units, not enough investors and tourism is down this year
 
Also, there are too many units, not enough investors and tourism is down this year

I’ve stayed out of SEQ for the last few years while areas of Sydney were comparatively cheap but the GC is looking attractive again. In Southport alone, there are 277 two bed unit ads listed for sale on realestate.com.au which is very high and seems to be having some downward pressure on prices.

Tourism is a factor but has become less so over the last decade while the GC has developed other industries. It also affects different markets within the GC to varying degrees; your Surfers and Broadbeach areas are far more dependent on this industry than somewhere like Robina or Southport which have more significant corporate presences.

Personally, I’ve felt a small drop in my Southport rentals and a slightly longer period to find tenants but this has very minimal financial impact. I think there are plenty of investors around but they have been predominantly grabbing the newer high rise stock which account for a lot of the vacancy and the price drops. With the rate of population growth, large investment in infrastructure (mass transport, new hospital) and slowing development, I’m still optimistic and have put a couple of lowball offers out this week.
 
Top