First investment dilemma

[ej89]

Hey everyone,
I've been reading for a while and researching for months and talked to many investors and am looking to get my first IP. I've got a bit of a dilemma. I'm looking to buy my first investment property but am also looking for somewhere I can live one day.
I've been looking in the Mount Druitt area, and there are still affordable properties.
My financial situation:
I can borrow up to 600k to live in and 830k to invest but I don't want to start with anything above 370k because I have to add a 100k for a granny flat + stamp duty etc. I also don't think the houses in the Druitt are worth much over 350k. I was also attracted by tregear and emerton both being in your investment property mag's top 20 investment places in 2015. What do you think of this?

I'm self employed and on average am on about $1400/week. I know that's a lot of money left over weekly but I don't want my first investment to be a huge risk as I need to expand my business, as well as get married in the next year.
I'm looking to get married in the next year and my partner is at uni for the next 3 years so I want to make sure I get something cheap so if we do live in it I still have more than enough to provide for her in the next few years and if there is a correction or God forbid, a crash, I can easily still pay off my house.

My strategy. Buy old house and build a granny flat on it. Rent ithe granny out for the next year and maybe move into the granny flat next year when we get married and keep renting out main house.

My other option is to buy interstate and rent here.
I've looked at areas I think have a good upside for growth.
Areas I've looked at:
Redcliffe area
Everton hills
Ipswich
Springfield- I see a lot of Northwest Sydney in Springfield
Chermside
Logan
Redbank plains
Coorparoo
And many others within 10km of CBD

In Melbourne i've looked at:
Scumshine (Sunshine)
Scumshine west
West Footscray.

Reason I like Sunshine is because it's cheap, will be cleaned up and is a big part of Melbourne 2030 report in developing and creating jobs on that western side of Melbourne.

I don't like negative gearing so anything I do must be neutral or positively geared, due to the fact that I need as much cash as possible to get married and develop my business more etc.

I'm stuck on what to do. Should I buy in an area that YIP magazine is expecting to go up a fair bit and is cheap and close to me now, or do I buy interstate and rent and pay someone elses mortgage off when getting married..the wave of growth has swept through each individual suburb from Blacktown to Mt Druitt slowly. Blacktown went up, then Lalor Park and Eastern Creek, then Colyton, then plumpton and Hassall Grove. Last few months its been Hebersham hitting close to 500k a house. Is it time for Tregear and Emerton and those suburbs to go up? The demand is absolutely nuts at the moment and if I can get a decent deal would it be worth it or should I stay away and buy interstate?

Tough situation. What would you do? Do areas like Mt Druitt lose more value than others when/if there's a correction?

P.s sorry for the essay. Bit stuck and I know i'm the type who's susceptible to analysis paralysis because I overthink everything and also read way too much into our economy and feel like there's a recession coming, which is why i'd be comfy with a cheap purchase cos I at least don't miss out if theres no crash

 

[MsAli]

Mount Druitt itself won't have a house for 370k. For a house on a decent sized lot 550sqm-750sqm, you're looking 500k-575k. Even houses on 450sqm lots are selling north of 480k. As for granny flat build, with a lot of CG having happened, I don't think it would give you too much cashflow

You can however buy 2-3br villa/townhouse in your budget within Mount Druitt. We like it and have done well there. Nice area IMO, serviced by fast trains to the city (45 minutes), hospital, westfields and other local shops...and not to forget the best scones in town in one of the bakeries near Aldi

The satellite suburbs in Mount Druitt may not give your partner good access to transport..(which university does he/she go to?)

 

[Tonibell]

I would suggest that you purchase the best piece of land that you can afford - in an area that you want to live in for the next few years.

It should also (ideally) be something that you can add value to - maybe by renovating an old house.

It is even better if you are able to put a granny flat on it now or in the future.

You will probably spend a lot more than you are comfortable with the get this place (at least the $600K) - but that will be a great motivator for you and your partner to do everything you can to get the debt back to a comfortable level.

This will accelerate when you get two good incomes going.

In a few years time this will be cornerstone for all your future ventures and you will wonder what all the worry was about.

In any case - make sure you get yourself on the ladder as it will only get harder.

 

[ej89]

Thanks guys.
There are suburbs like Emerton, Tregear and Lethbridge park that I can get for 350-400 with 500sqm+ land.
Do you suggest I buy in these areas even when we're at the top of the cycle or do you suggest I buy in Brisbane and rent here?
I want to have multiple properties within a couple of years and eventually have a good passive income. My initial goal was to buy interstate as i'll probably get better capital growth which will kick start my portfolio but then i'll have to rent in Sydney.

Also, do areas like Tregear, Emerton and Lethridge park have a big fall? I can actually see some capital growth potential as there are new estates being built around them, and there's also an industrial area 5 mins from there being built in the Northwest growth centre

 

[ej89]

Mount Druitt itself won't have a house for 370k. For a house on a decent sized lot 550sqm-750sqm, you're looking 500k-575k. Even houses on 450sqm lots are selling north of 480k. As for granny flat build, with a lot of CG having happened, I don't think it would give you too much cashflow

You can however buy 2-3br villa/townhouse in your budget within Mount Druitt. We like it and have done well there. Nice area IMO, serviced by fast trains to the city (45 minutes), hospital, westfields and other local shops...and not to forget the best scones in town in one of the bakeries near Aldi

The satellite suburbs in Mount Druitt may not give your partner good access to transport..(which university does he/she go to?)

She drives her own car so i'm not too worried about the public transport side of things. I would say Mt Druitt has more troublemakers than the surrounding suburbs due to the apartments mostly having housing, but the place has still gone up in value due to what it has. I have a feeling the money Mike Baird announced for hospitals will also go towards the hospital. I feel bad taking her out of such a good area in Rouse Hill to the slums of Mt Druitts surrounding suburbs but I guess if I buy in Sydney it's all I can afford and I guess I should start the way my parents and hers started and that was cheap homes in crappy areas

 

[The Y-man]

Do you suggest I buy in these areas even when we're at the top of the cycle...

How do you know this - not being sarcastic, just genuinely interested to know.

The Y-man

 

[The Y-man]

Should I buy in an area that YIP magazine is expecting to go up

How accurate are they? What is their past performance of "picking the right suburbs" been like?

The Y-man

 

[ej89]

They base it on the DSR score, which I quite like.
All the talk is that we're at the top of the cycle and everybody on the forum and investors i've talked to think ive missed all capital growth and wont get much.

Someone even said the Mt Druitt area drops a lot in price during the slump. How do I go about finding something out regarding that? Also, do I check RP data to see the value of the house? Onthehouse.com.au sucks. It's valued the house I live in to be 550k. It's current market value is 950k lol

 

[MsAli]

I would say Mt Druitt has more troublemakers than the surrounding suburbs due to the apartments mostly having housing, but the place has still gone up in value due to what it has.

How would you say that? Have you been there?

Firstly, I don't see anything wrong with where the apartments are. And who said you have to live near the apartments? The south side of Luxford Road is old mount druitt, which mostly has houses and new developments. It's a very clean area with access to local shops and westfields. Personally I see good potential in the long term. We'd like to go back and buy more once the market dips..though as always do your due diligence before making a decision.

 

[The Y-man]

They base it on the DSR score, which I quite like.
All the talk is that we're at the top of the cycle and everybody on the forum and investors i've talked to think ive missed all capital growth and wont get much.

Fair enough.....

Someone even said the Mt Druitt area drops a lot in price during the slump. How do I go about finding something out regarding that? Also, do I check RP data to see the value of the house? Onthehouse.com.au sucks. It's valued the house I live in to be 550k. It's current market value is 950k lol

I usually look at the past 10 years's worth of median price for the suburb,
Fortunately in Victoria, we can get it for free from government.
Maybe check with your friendly broker to see if they have any info.

The Y-man

 

[MsAli]

PM me your email address, I can send a suburb flyover and charts.

 

[ej89]

How would you say that? Have you been there?

Firstly, I don't see anything wrong with where the apartments are. And who said you have to live near the apartments? The south side of Luxford Road is old mount druitt, which mostly has houses and new developments. It's a very clean area with access to local shops and westfields. Personally I see good potential in the long term. We'd like to go back and buy more once the market dips..though as always do your due diligence before making a decision.

Yeah I grew up 15 mins from there and have heaps of mates who live there and every time we drove past the blocks of apartments they'd give me new stories. I could be wrong though.

The way I see Mt Druitt is that people will think its a hole but it will improve. If you go back 10-15 years Fairfield, Merrylands, Wentworthville, Lalor Park, Marayong, Blacktown, Eastern creek and Liverpool were all where Mt Druitt and its surrounding areas are now. They were holes. Go back 5 years, Hebersham, Werrington, Kingswood and Plumpton were holes. They've improved as more owner occupiers go into each area. All these areas have improved and the worse ones are generally shalvey and bidwill, which is funny because the new estates will be behind all the housing commission.

How much would you pay in Emerton, Whalan, Lethbridge park in this heated market? What do you think it will go down to when it cools down?

 

[Redom]

Hey OP, have you been self employed for 2 years +? You may have trouble borrowing without 2 year ABN history. Just something to think about if you haven't already considered.

Cheers,
Redom

 

[ej89]

Hey OP, have you been self employed for 2 years +? You may have trouble borrowing without 2 year ABN history. Just something to think about if you haven't already considered.

Cheers,
Redom

All good mate finances are set

 

[MsAli]

How much would you pay in Emerton, Whalan, Lethbridge park in this heated market? What do you think it will go down to when it cools down?

That's a "how long is a piece of string" question. Really depends on property, the lot, the house, exactly what you are after to determine what ticks your boxes..