Help! $400K to spend in Sydney and I need a Strategy!

[C-mac]

I think you're correct on that front.

Perhaps I could look to have one driveway and have a little parking bay offshoot from it, in the front yard, or something like that. But it really depends on the actual property of course.

What does everyone think of this idea? Anyone had successes/failures with granny flat subdivisions, in Sydney's middle-outer west?

 

[virgo]

Granny Flat

Hiya

There is no need to provide parking for the granny flat; i have a carport for my main house and my gf tenant parks off site; it is a quiet cul de sac tho' so as you say, it depends on the property...mine is a big block about 700 sqm; my main house is on the right and my gf is on the left and i put up a Colourbond fence so the yard is quite separate...

Google Nek who did a beautiful granny flat on a corner block and achieved some amazing returns....if i don't remember wrongly, his gf ended up with higher rents than his main house..

The main house tenant pays 70% of water and electricity and my gf has this included in her rent; so far it has worked well ! (So well, i am putting a gf on my own PPOR!)

 

[wannaretire!]

You should also be prepared not to sell 9 of the properties but instead access the equity (if this is possible in 10 years time). Let's say you have 12 properties worth $7m. If the average growth rate is 10% then your portfolio should grow by $700k each year. Access $100k to service loans and $150k as income each year and still enjoy the growth of your $7m capital. in 15 years your portfilio might be worth $10m, rental income has reduced holding costs, growth has reduced your LVR.

How do you access this equity? Do you apply for a line of credit? Which lenders would let you do this? From my dealings with the CBA it seems highly unlikely they would allow you to access equity in this way.

 

[Felixter]

How do you access this equity? Do you apply for a line of credit? Which lenders would let you do this? From my dealings with the CBA it seems highly unlikely they would allow you to access equity in this way.

Low or No Doc home loans. Apparently this loop hole is being closed. Who knows what will be happening in 10 years, but you should be open to different strategies other than just the "living off the rent" one.

 

[gfreer]

USA investment

Hello fellow IP Heroes!!

I'm fairly new to the IP game. I wouldn't call myself 'uneducated' when it comes to IP, but I'm far from a seasoned investor.

Here's my history/where I'm at:

- First IP: 2bdr unit in Parramatta NSW. Bought 2.5 years ago $243K. Valuation that came in this week (for refinancing purposes): $310K.
- Second IP: 2bdr unit in St Marys NSW. Bought 10 months ago $183K. Valuation that came in this week (for refinancing purposes): $196K

Refinancing was done this week that essentially saw me given a buy-rate (aka spend rate) of $400K max in the market.

Here's my conundrum; do I purchase 2 x $200K units out west again; have them yield really well (but with slow/reduced CG), or...

Do I take a gamble and go for a higher CG property that may not yield as well initially but garner great CG return?

Doing this would see me purchase in a different area:
- I live in northern beaches and think there's some real scope for beachside CG growth in these coastal suburbs
- Or, who can go past the inner west for 'decent' yields and excellent CG?

Holding costs will be harder with the 1 x $400K property versus the 2 x $200K properties, but I just feel like at this stage I need to mix up the porfolio a bit.

FYI my future strategy is to procure one property a year over the next ten years; holding all 12 or so of them; selling 9 to cash out the other 3; live in one of these ownded outright (zero rent/mortgage payable by me); then have the dual revenues from the last two be my income during retirement.

Thoughts?

Why not combine yield AND growth prospects with buying 10 affordable, cashflow positive properties, diversifying geographically across USA states? Historic highs for AUS $ exchange rate and evidence that US economy is finally gaining traction after GFC. Government stimulus ongoing.
As a Buyers Agent I can't ignore this alternative to recommendations of inner west and Brisbane (another countercyclical opp).
http://www.mainstreet.com/slideshow/real-estate/best-worst-housing-markets-2011

 

[C-mac]

That does sound quite risky in itself, though!
Are you suggesting to spend $400K on ten properties, so $40K per property??

So, I'd need to learn 'ten' different markets, under this idea? That is really not viable.
If you had of said 'Why not spend $300K on an AU one, and $100K on one or two markets in US, I'd have sort of agreed to you.
Even just to invest in one market in the US would require so much due diligence. My advantage with Sydney is that I study and live this market day in day out (I need a life, I know, but every day after work I come home and dedicate a couple hours to Sydney research. Not just looking at Domain; but getting my spreadsheets out and crunching numbers, accessing RP Data, analysing trends, and reading trusted sources - blogs included as well as published data)

I do value your comment on 'spreading the risk' across ten different American cities, but even to get to that point it requires extensive due diligence on all ten cities (then the suburbs within these, then suburb/street data etc etc). A lot of work!

 

[C-mac]

Additionally, comrades, what are people's thoughts on Granville. For houses I mean, not units. Closer to CBD than Merrylands/Greystanes, VERY well connected with buses/trains, very close to Parramatta CBD.

I know I know it has an ugly duckling/bad reputation, and that it's neighbouring suburbs (with the exception of Parramatta, Harris Park, and Holroyd gardens which are nice); Merrylands, Auburn, Guildford aren't very reputable, I think it's a great alternative for young families who can't afford houses in Northmead/North Parramatta area.

I'm finding that I can get older unrenovated houses for under $400K on decent blocks (around 500sqm).

Am I right to picture in my mind not Granville now, but Granville in ten years time (buy and house), a nice little cosmetic reno done say, five years into that ten years to get a boost.

Thoughts?
Keen to hear negative and positive ones..

 

[superbird]

I currently live in Granville but on the side closest to Merrylands. Our area was recently rezoned to R4 with height limit of 18m! Definately the council has big plans for Granville with many units going up. This is why getting a house now as they are likely to become scarce.
Unfortunately, Granville still has that reputation which will hopefully change over the next decade. I don't believe its high on anybody's list as a place to live. My dad told me that about 25-30 years ago areas such as Leichardt, Five Dock were considered a hole and had similar reputation to what Granville has now. Now looking at these areas today and properties are over $1mil as the city spreads out further and further. I am hoping that it wont take 25-30 years though for Granville to change!

 

[devank]

Ever time I look out the window (@ Granville station) there is always a police chasing someone! Okay... that is a bit exaggeration

 

[beachgurl]

My next door neighbour recently moved from Granville. Late-teenaged kids who were constantly bullied by the "majority group" in the area. Apparently they are not the only Anglos who were pretty much pushed out of the suburb by neighbours and their friends who used to hassle the whole family.

I guess it would be a good investment for the future as it is in a great location to transport and the city, but I wouldn't be living in it myself.

As for the Merrylands end of Granville, the site of my nan's old place is now multi-unit housing. Looking at the demographic in the area, it appears that DOH has snapped up a fair few units in the area. Just to add another factor to the mix.

 

[C-mac]

I do agree with the comments on Granville. Neighbouring Auburn has an even worse reputation.
Surely these places won't be like this forever? We always hear of suburbs gentrifying to become good (Balmain for instance) yet I never hear much of suburbs gentrifying to become worse. Apparently in the 50's/60's Auburn was 'da bomb' aka a solid suburb, and it's been getting worse ever since.

So my question then to everyone is this: If you had $400K to spend in Sydney, and your strategy was long term (10 years +) buy-and-hold (with potential to renovate and hold a few years into the journey), and you had two choices:

1) Granville house (won't grow in CG as fast as option #2, but will be instantly netural/poz geared), with good land size and sit on it waiting for developers' offers (or potentially granny-flat extend it later), or;
2) Dulwhich Hill and surrounds 1 or 2 bedroom older unit (unrenovated) which will see faster CG growth due to better location but probably more negative geared (= higher holding costs initially) than option #1

What would you choose?


My gut instinct now is to go for option #2 because:
- As a first time reno (a few years in) a cosmetic apartment reno is WAY easier for a first timer than a full house reno and/or the addition of a granny flat. I could begin building contacts, tradie's etc and establish myself with a smaller project
- A less flippant/unreliable investment than houses (houses seem to be a money pit of maintainance; at least a unit has more 'fixed' quarterly costs)
- Most importantly, because my aim is to acquire one property a year, the Dulwich Hill unit will grow faster in CG = more equity to unlock for the next purchase...

Thoughts?
I know I only gave two options for selection. Happy to hear a third (but if you mention a third I'd love to hear that options' backing strategy!)

Cam

 

[albertwt]

I currently live in Granville but on the side closest to Merrylands. Our area was recently rezoned to R4 with height limit of 18m! Definately the council has big plans for Granville with many units going up. ............

How did you know that information ? do they have mailing list about the plan on the suburbs that we can subscribe to ?

 

[C-mac]

If the above is true it might be just the ticket to twist my arm into Granville. Surely with Parramatta expansion this will see neighbouring Granville introduce rezoning to accomodate more people?
Do you think some of the industry in Granville will recede and make way for more medium density residential?

 

[beachgurl]

I read in the local paper not long ago that the Clyde refinery is being scaled down so it's likely to be sold for residential purposes. Makes sense really when there is a relatively unused station down the street. Could make the rough side of Granville a more interesting proposition if the powers that be don't overpopulated the place or hand the majority of it to DOH.

 

[Fractal]

Clyde Refinery

Hi Beach Gurl

My understanding is that the Clyde refinery is being converted from a refinery to a distribution center for imported petroleum prodducts.

Would love to know if your information is more up to date or accurate.

Anyway is better for the area as no further emissions from the refinery in a few years. As a option for residential not seeing this for a long time.

However think the neighbouring areas are in for some good growth in the next 5 to 10 years.

 

[superbird]

How did you know that information ? do they have mailing list about the plan on the suburbs that we can subscribe to ?

Hi albertwt

You can find this info on the Parramatta City Council website Draft LEP 2011 http://www.parracity.nsw.gov.au/build/forms_and_planning_controls/Draft_Parramatta_LEP/lep_maps and look at the relevant maps for the suburb.

Cheers