First Home - IP

[Tungstencalais]

Hi everyone,

I've recently become interested in buying an IP. I'm new to most of the concepts involved in buying a place etc (this will be my first), so I may have many misconceptions - apologies in advance. I've read several posts on this forum and feel that many of you may have valuable suggestions for me.

I'm after an IP (unit) for the value of $500K. I'd prefer a decent-sized 2 bedder, with car space, quiet-ish location, low risk tenants. From what I can gather, I should be looking at some of the following suburbs:

-South: Wolli Creek/Arncliffe/Rockdale/Kogarah
-Inner west: Ashfield/Croydon, perhaps Homebush
-North west: Ryde/Meadowbank
-LNS: ?Lane Cove

Are these all areas that can have reasonable CG? Are there any other areas I should be considering? (I'd prefer to buy a place closer to the CBD, with the thought of perhaps using it as a PPOR down the track if I needed to - currently work in Inner west).

What are some good resources to find out more about what/where to buy - I haven't come up with much besides forums thus far - people to talk to/reports/magazines, that sort of thing?

Thanks for any help!

 

[monalisa]

I gather this is your first investment property. It would be useful to work out why you wish to buy one IP for 500K - I do understand you are after "low risk tenants", but it would be worthwhile working out what the end goal is. I don't think just because the property is 500K there will be low risk tenants. You can find decent tenants else where too in cheaper areas, it is just how you perceive it.

 

[ndpjai]

Hi

AFAIK, most of the suburbs you have mentioned are low risk, good value suburbs i will definitely buy if i found a suitable IP that are aligned to my personal strategy.

 

[Propertunity]

AFAIK, most of the suburbs you have mentioned are low risk, good value suburbs i will definitely buy if i found a suitable IP that are aligned to my personal strategy.

^ ^ what this poster said.

All those suburbs are fine. If you currently work in the Inner West, why not start there?

 

[Jacque]

Hi everyone,

I've recently become interested in buying an IP. I'm new to most of the concepts involved in buying a place etc (this will be my first), so I may have many misconceptions - apologies in advance. I've read several posts on this forum and feel that many of you may have valuable suggestions for me.

I'm after an IP (unit) for the value of $500K. I'd prefer a decent-sized 2 bedder, with car space, quiet-ish location, low risk tenants. From what I can gather, I should be looking at some of the following suburbs:

-South: Wolli Creek/Arncliffe/Rockdale/Kogarah
-Inner west: Ashfield/Croydon, perhaps Homebush
-North west: Ryde/Meadowbank
-LNS: ?Lane Cove

Are these all areas that can have reasonable CG? Are there any other areas I should be considering? (I'd prefer to buy a place closer to the CBD, with the thought of perhaps using it as a PPOR down the track if I needed to - currently work in Inner west).

What are some good resources to find out more about what/where to buy - I haven't come up with much besides forums thus far - people to talk to/reports/magazines, that sort of thing?

Thanks for any help!

Hi Tung

You really need to work out where you'd like to buy first, as that's quite a wide spread of suburbs there! Reading into your post, I believe the Inner West may be your preferred choice, given that you currently work here and may want to use the IP as a PPOR further down the track. Lots of stock in the $400K's (no need to spend $500K though it does depend on your specific criteria eg: 2 bathrooms?) but it's a big place with many variations on price, depending on where you look.

Ashfield and Croydon certainly fit your budget as would surrounding suburbs such as Dulwich Hill, Hurlstone Park, Summer Hill, Petersham, Marrickville etc. though keep in mind that the closer you tend to get to the city and the trendier suburbs such as Newtown, Glebe etc the prices go up, significantly depending on location and if they're under the flight path or not!

Lane Cove might be a good alternative choice given it's closer proximity across Victoria Rd to the IW but again it will come down to preference.

 

[roceans11]

OP, if you don't mind, I'll probably tag along in this thread. Let me know if you want me to move on to another thread.

I face a very similar situation to yours - 24 years old, I work in the West (Blacktown) earning a reasonably good salary, live in the South West (Holsworthy) and looking for my first IP in the same areas as you are. I don't own any other property so it will literally be my first venture.

Still live in with my folks and they don't mind it. Looking to move out with the gf in probably 2 years time.

At first I thought I could do this on my own, but due to my inexperience and not living in Sydney for long enough (5 years), I am still failing to gather the market here in NSW. I feel a Buyers Agent would be great to have, but I don't know if its worth it or not.

Obviously the aim is for capital growth as with any investor, but am I starting of with the right approach? Should I be looking at two 200k properties in areas such as Mt Druitt, Liverpool or Lakemba which would earn a lot more rent but not face any good capital gains.

I know I am probably still waffling along a bit and not asking the right questions. I think I probably need to visit a property accountant (if there exists one? Any recommendations?) and have a strategy to follow on investing.

At the moment, I am looking at Ryde/Meadowbank/Dee Why/Sutherland areas for units from 350k-400k (botique buildings, <$600 strata, >70sqm).

 

[Propertunity]

Obviously the aim is for capital growth as with any investor, but am I starting of with the right approach? Should I be looking at two 200k properties in areas such as Mt Druitt, Liverpool or Lakemba which would earn a lot more rent but not face any good capital gains.

My advice in the initial stages of building your portfolio, would be to choose a couple of growth properties first. You need those properties (or single property) to grow, so that you can drawn down equity in the form of cash for more deposits on IPs. If you choose poorly, or buy cash flow positive but low growth properties, then you are left with "saving" as a strategy for your next deposit/s. (Personally, I've never saved more than the very first deposit. I'm not good at it. I find it slow and boring.)

At first I thought I could do this on my own, but due to my inexperience and not living in Sydney for long enough (5 years), I am still failing to gather the market here in NSW. I feel a Buyers Agent would be great to have, but I don't know if its worth it or not.

I declare a bias, but in your position as a novice, I'd be seeking out the services of a good mortgage broker and a good buyers agent to get you on the right path. A good BA can save their clients many times the fees they charge. In your case, I'd be sticking closely with them and using the experience as a mentoring exercise as well, asking lots of questions.

 

[roceans11]

Thanks for your reply. I was actually thinking of giving you a call sometime last week regarding the prospect of a BA. But I thought first I'll get my strategy sorted out with an accountant, get a broker and then probably approach a BA.

I went to a few open houses last week in the Ryde area and most of them were packed with first home buyers. It really looks like they want to make use of the 7k grant before it expires in October. Seems like an unnecessary rush which I don't want to get caught up in. Hope to call you soon, Alan. Cheers.

Edit: Is there any such thing as a good/poor mortgage broker or do most of them do the same job day in day out.

 

[Shahin_Afarin]

OP, if you don't mind, I'll probably tag along in this thread. Let me know if you want me to move on to another thread.

I face a very similar situation to yours - 24 years old, I work in the West (Blacktown) earning a reasonably good salary, live in the South West (Holsworthy) and looking for my first IP in the same areas as you are. I don't own any other property so it will literally be my first venture.

Still live in with my folks and they don't mind it. Looking to move out with the gf in probably 2 years time.

At first I thought I could do this on my own, but due to my inexperience and not living in Sydney for long enough (5 years), I am still failing to gather the market here in NSW. I feel a Buyers Agent would be great to have, but I don't know if its worth it or not.

Obviously the aim is for capital growth as with any investor, but am I starting of with the right approach? Should I be looking at two 200k properties in areas such as Mt Druitt, Liverpool or Lakemba which would earn a lot more rent but not face any good capital gains.

I know I am probably still waffling along a bit and not asking the right questions. I think I probably need to visit a property accountant (if there exists one? Any recommendations?) and have a strategy to follow on investing.

At the moment, I am looking at Ryde/Meadowbank/Dee Why/Sutherland areas for units from 350k-400k (botique buildings, <$600 strata, >70sqm).

Capital Growth is very important particularly with your first IP. The growth in that property will allow you to purchase subsequent properties. The question is then whether say a unit in Ryde or a house in Holsworthy would give you a higher CG. Position is key however generally speaking there is much more opportunity for Capital Growth within houses than units. You can extend and develop (or at least get DA) whereas you cannot do that with units. Renovations are also somewhat restricted with units more than houses.

Also ensure that your loan is set up correctly so that they are in line with your longer term investment strategies. If you need property reports on any potential IP's just PM me with the details of the property.

 

[Tungstencalais]

Thanks everyone for your replies, and roceans11, I don't mind you tagging along in the thread - your position is essentially identical to mine at present, so most of the advice is applicable!

I initially picked $500K as it would seem to buy a decent property regardless of location - and nicer, 2 bedroom units in quiet locations but near amenities in the inner west (Ashfield and closer) or northwest (Ryde/Epping) seem to go for around this amount. I guess $400-500K may be more realistic?

Based on the advice in this thread, it does seem that the inner west would be the ideal location to consider an IP/possible PPOR. Are there any recommendations on areas within the Ashfield/Croydon/Summer Hill suburbs where I'd be able to find an IP with the above requirements? Would an IP in these areas be able to experience any significant CG over the next decade?

I'm also at the stage of talking to more experienced people - had a meeting with a mortgage broker, but thinking it will soon be time to take the plunge and start talking to a REBA...

 

[vaughan]

Would an IP in these areas be able to experience any significant CG over the next decade?

Well, that's the question. There is no way to know. There are many ways to guess what might happen, some are more believable than others, but none are more reliable than others (otherwise we'd all be using that strategy).

Data is available from many sources that shows the past growth, but this is no guarantee of future performance.

Since you're buying an IP it's a good idea to have a strategy that looks at how you expect to make money, how long you'll give the strategy to work, and how you plan to get out.

As others on the Forums have said, hope (for future capital growth) is not a strategy. For this reason most strategies involve adding value to the property to "manufacture" growth so you are not relying on the market alone (which is out of your control).

At its simplest this adding of value is a renovation, which means lots of people are looking for properties that need a renovation (the simpler the better) and consequently these properties are quite often over-priced by over-zealous buyers. For this reason you need to be doing numbers on your investment strategy so you know whether or not a property is going to be worth while after factoring in buy costs, renovation costs and holding costs.

 

[roceans11]

Also ensure that your loan is set up correctly so that they are in line with your longer term investment strategies. If you need property reports on any potential IP's just PM me with the details of the property.

Thanks mate. Sure will do when I come to that stage. Appreciate it.

 

[Rolf Latham]

I'm also at the stage of talking to more experienced people - had a meeting with a mortgage broker,

And hopefully they have suggested an Interest only facility with an attached offset account that actually works, with as high an LVR as you are comfortable with.

ta
rolf

 

[Rolf Latham]

. I think I probably need to visit a property accountant (if there exists one? Any recommendations?) and have a strategy to follow on investing.

Hiya

certainly worth your while to look at getting appropriate taxation advice, but most accts that are NOT financial planners wont to keen to lay out a statement of advice for you

As a parallel decent option for cashflow analysis, something like PIA software would be a good investment.


ta
rolf

 

[Rolf Latham]

Edit: Is there any such thing as a good/poor mortgage broker or do most of them do the same job day in day out.

Talk with a few and see what works for you.

if you arent being asked questions that are beyond the current purchase, you have a good indication that broker/banker has a transactional approach, and is possibly not capable of setting a decent financing plan

But, you need to know what you AND why you want it !

Most folks perceived ideas of what is a good lender or mortgage structure is based on parental influence, and other well meaning but often misguided information.

ta
rolf

 

[Jacque]

Thanks everyone for your replies, and roceans11, I don't mind you tagging along in the thread - your position is essentially identical to mine at present, so most of the advice is applicable!

I initially picked $500K as it would seem to buy a decent property regardless of location - and nicer, 2 bedroom units in quiet locations but near amenities in the inner west (Ashfield and closer) or northwest (Ryde/Epping) seem to go for around this amount. I guess $400-500K may be more realistic?

Hi Tung

$400-500K is more realistic, and quality will depend on budget naturally

The most important thing is to find something in a well-managed and well-kept complex. For this price bracket you'd ideally want a decent 2 bedder in a quiet st with parking and walk to transport. I'm a big fan of light and airy abodes as well, so we look for maximum windows and aspect too. We've bought for many investors and home buyers in all these areas and the common "want list" is a quiet st, smaller block (without lift) manageable strata fees (less than $800-1K p/q) light aspect, parking, internal laundry and outdoor space (either balcony or courtyard). Naturally yield is important, and unit returns are pretty healthy for your preferred areas of choice. In fact, unit rents are actually growing faster than house rents right now in Sydney- see this recent article on the subject. in the last quarter of this year, unit rents as a whole in Sydney increased 4.4%- pretty healthy.
http://m.smh.com.au/domain/real-est...en-unit-and-house-rentals-20120711-21waj.html

Based on the advice in this thread, it does seem that the inner west would be the ideal location to consider an IP/possible PPOR. Are there any recommendations on areas within the Ashfield/Croydon/Summer Hill suburbs where I'd be able to find an IP with the above requirements? Would an IP in these areas be able to experience any significant CG over the next decade?

I'd consider all of them- and I'd also include Dulwich Hill, Hurlstone Park as well depending on your preference. With the light rail also impacting on the area demand certainly isn't going to lessen. For a similar reason, however, this is why Epping remains popular- the rail link that's now faster access to the city has made a big impact on prices here. Back in 2009/10 prices exploded and units saw over 30% cg in those years alone. Things have settled down since, however, but the impact of FHOG and SD concession changes have made a difference here. It remains a very popular area for both owners and investors however.

As for future CG no-one can guarantee that. If we could, we'd all be sipping those cocktail drinks with little umbrellas in the Bahamas What you need to look for is good historical growth, high levels of rental (and owner) demand for the type of property you're buying, proximity to the usual suspects ie: transport, shops, parks, other attractive amenities and position. Treat property investment as a long term scenario and try to minimize your costs by seeking or creating (via reno or dvpt) a maximum yield.

I'm also at the stage of talking to more experienced people - had a meeting with a mortgage broker, but thinking it will soon be time to take the plunge and start talking to a REBA...

Do yourself a favour and speak to an experienced MB- lots on this forum who do a fantastic job- including Rolf Latham, who's already replied to this thread.
They will assist not only with finance but structure as well. By REBA I'm assuming you mean a BA? Happy to help out, even if you just want some ideas... feel free to call or email (see details below). Like Alan, I'm a BA here in Sydney.

 

[roceans11]

Went to a few open houses in the Shire area (mainly Sutherland) over the weekend to gain a feel of the suburb and people since it has been some time since I visited the area.

Most people who visited the open houses were FHB. Some very nice apartments but all too close to the train line or princess hwy for an investor.

Most prices for a regular 2 bedder were from the 375-425k mark. Any opinoions on the Shire area (hopefully the TV series doesn't affect the judgement of the posters )

In a seperate question, what are the opinions of a 2 floor apartment, i.e, stairs in an apartment. Is it a turn off for renters/future buyers, and how does it normally fare for investment?

Cheers.

 

[Shahin_Afarin]

Went to a few open houses in the Shire area (mainly Sutherland) over the weekend to gain a feel of the suburb and people since it has been some time since I visited the area.

Most people who visited the open houses were FHB. Some very nice apartments but all too close to the train line or princess hwy for an investor.

Most prices for a regular 2 bedder were from the 375-425k mark. Any opinoions on the Shire area (hopefully the TV series doesn't affect the judgement of the posters )

In a seperate question, what are the opinions of a 2 floor apartment, i.e, stairs in an apartment. Is it a turn off for renters/future buyers, and how does it normally fare for investment?

Cheers.

My personal investment portfolio does contain apartments but I have tried to ascertain low rise boutique apartments with low overheads and strata. The good thing about stairs is that it 'shouldn't' carry the high strata costs which come with elevators. Generally speaking I would stick with a middle or top floor unit instead of a ground floor. This comment is based on the area of course. I lived in a ground floor unit in cammeray and we got broken into 4 times over 12 months yet the unit above us were never robbed. Also why do you think it is not good to live never the train line?

 

[roceans11]

Sorry, I think I worded it the wrong way.

I meant a unit with 2 floors, i.e penthouse style ... Found a couple of units in Sutherland which had this style. Was just wondering what the general consensus would be regarding this. I'm assuming safety would be a risk for families with young children having stairs in the house etc?

With regards to the train line, close to station is great, but not facing the train line. While we were viewing the apartment, we could clearly hear the noise of the train as it passed by. If I was a FHB, it would be ok I guess since I could have gotten double glazed glass, but as an investor, I don't think I would go too close to the train line in terms of visual and noise aspects.

My main criteria in looking for units are,

• 2 bedrooms, 1 parking minimum
• >80sqm
• <~$600 strata
• Close to transport services.
• Below median prices.
• No lifts, gyms, pools.
• Decent area in terms of socio economic status.
• Quiet street

Note, this would be my first property, but from a research point of view, that's what I've really come across in terms of trying to buy as a criteria.

 

[Shahin_Afarin]

Sorry, I think I worded it the wrong way.

I meant a unit with 2 floors, i.e penthouse style ... Found a couple of units in Sutherland which had this style. Was just wondering what the general consensus would be regarding this. I'm assuming safety would be a risk for families with young children having stairs in the house etc?

With regards to the train line, close to station is great, but not facing the train line. While we were viewing the apartment, we could clearly hear the noise of the train as it passed by. If I was a FHB, it would be ok I guess since I could have gotten double glazed glass, but as an investor, I don't think I would go too close to the train line in terms of visual and noise aspects.

My main criteria in looking for units are,

• 2 bedrooms, 1 parking minimum
• >80sqm
• <~$600 strata
• Close to transport services.
• Below median prices.
• No lifts, gyms, pools.
• Decent area in terms of socio economic status.

Note, this would be my first property, but from a research point of view, that's what I've really come across in terms of trying to buy as a criteria.

Yes I couldn't agree more about facing the train line or at least being extremely close to it. I think you have good criteria. I don't have much experience with double storey units. It depends on the demographic. May not be an issued with found buyers but may be an issue with the older demographic. Perhaps speak to a local RE agent to see what sells and what doesn't.