Investing in Western Sydney

D

Daria

Hello!

I'm completely new to property investment and really need some advice.

I would like to spend around 350-400k on a property, probably a two bedroom unit. I want to buy in an area that will grow over the next couple years as opposed to just having a strong rental return.

I've heard a lot about Merrylands as being a good place to invest due to the proximity to parramatta and also the new stocklands shopping centre. I've also heard a bit about Harris park? Any advice or other suggestions? Do you think these suburbs in the west will have strong growth or do you think I'm better off spending a bit more and getting something closer to the city ie burwood, strathfield or Ashfield?


Also, with the craziness of the current market (properties selling for up to 20% more than market price) do you think I'm better off waiting till early next year?

Any advice would really be appreciated!
 
I guess I should also mention that I will have around a 50% deposit.

I'm not too sure how much of it I should use to actually put on the loan. The way I've calculated it, if I use all of my money as a deposit I could have the place being paid off by the tenants. I wouldn't have to use my work pay cheque. I was also given advice to keep maybe 100k in an offset account incase I want to buy a second property???

Because I'm young and single (no duel income) I just really don't want to get in over my head...that's really my main concern.
 
Daria said:
I guess I should also mention that I will have around a 50% deposit.

Well done for having that amount liquid available

I'm not too sure how much of it I should use to actually put on the loan. The way I've calculated it, if I use all of my money as a deposit I could have the place being paid off by the tenants. I wouldn't have to use my work pay cheque. I was also given advice to keep maybe 100k in an offset account incase I want to buy a second property???

Far more flexible to go the offset route IMO

Because I'm young and single (no duel income) I just really don't want to get in over my head...that's really my main concern.

Having the excess parked in the offset should give you that peace of mind. It's your discretion to never use it or to employ it for further investing as your confidence, knowledge, risk adversity change.
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Others here on the forum are far more in tune with the Western Sydney market, however for the coin you're willing to part with, I would be looking at Parramatta itself or North Parramatta. Perhaps you could get something a little more substantial such as a townhouse in the suburbs you nominate in your OP. Keep researching............
 
I can't comment specificaly on the locations, but my understanding is that Western Sydney has increased in value and a lot of it has been driven by investors chasing good rental returns. Whilst you may be trying to get in at the higher end of the market cycle, I don't think that prices are about to drop any time soon. If you're thinking of delaying your purchase given that prices are 20% higher, I don't think the situation is going to improve for you.

For the finance structure, you may want to consider borrowing 80% of the property value even though you've got a large deposit and only need to borrow 50%. If you make the loan interest only and combine it with an offset account, you'll have the ability to drop your spare cash into the offset account and instantly reduce the monthly repayments.

The benefit of this is that you preserve more of your savings for future purposes (you may want to buy another IP or your own home), but your holding costs are the same as if you borrowed less. It combines low repayments with the flexibility of cash available in the future.
 
Daria said:
Thanks for your reply! Yeah, I'll have to check out some units in parramatta then. Thanks!
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Please do more research before jumping into Parra units. I could be wrong here but stay away from any new flashy units with high strata too.

I think Strathfield is more attractive with faster trains now. I could be biased as I live in this area but it takes 12 mins to get to Parra now!
 
I would go for Wentworthville, Pendle Hill, and Toongabbie - close to Parra. 5-10 min train ride.

Under the new timetable it is taking about 40 min on train from Toongabbie to the City.
 
devank said:
I think Strathfield is more attractive with faster trains now.
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Strathfield has had fast trains previously too :p so not sure how much faster these would be under the new timetable?

I would think Strathfield is more expensive for the given budget of 350-400K.
 
monalisa said:
Strathfield has had fast trains previously too :p so not sure how much faster these would be under the new timetable?
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It used to take about 20 mins to get to Parra but it is about 13 or 14 mins now.

monalisa said:
I would think Strathfield is more expensive for the given budget of 350-400K.
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You are right. 400K won't get far but OP has more deposit.

All I'm saying is that more and more people will eventually find it lot easier travel from Strathfield to all four directions. These things slowly evolve feeding from each other.
 
Rental yields in merrylands and surrounds are dropping fast due to the recent price increases. Must be a new wave of investors buying cos the numbers just don't make sense.
Look at unrenovated properties in merrylands and surrounding areas, using some of your savings to renovate prior to tenants moving in. The majority of new investors want a property they don't hand to renovate. I spoke to an agent just over a week ago and he mentioned a repo auction for a unit without a kitchen. Think it was around the Manchester/Birmingham area. Would be difficult to get finance at a higher LVR so with you funds it may suit you.
 
I was watching the ABC's 'Business Tonight' or something similar last night. Apparently, most buyers are cashed up investors. Sounds like 'retirement' money is coming through.
 
Nothing wrong with Mt Druitt. In fact brand new 2bed units there are going for $325k and 3-4 year old units going for $290-$300k. Mt Druitt gets a bad wrap but it is well connected with a large train station and M7. It is close to unis and major shopping centres. It is, in my opinion very undervalued.
 
doozer said:
Nothing wrong with Mt Druitt. In fact brand new 2bed units there are going for $325k and 3-4 year old units going for $290-$300k. Mt Druitt gets a bad wrap but it is well connected with a large train station and M7. It is close to unis and major shopping centres. It is, in my opinion very undervalued.
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Not sure if there are any 3-4 year old units in Mt Druitt - there has barely been any construction in the last couple of years.

However, there are 10 year old units in that price range, and a little less.

There is nothing wrong with these, but the returns are fast diminishing.
 
Ok...

What is a good/ bad vacancy rate? What stats should I be looking at to ensure that I'm buying in an area that will always have tenants for my investment?

I'm still looking in Merrylands and even broadened my search to include North Parramatta. Any thoughts?

Thank you for all the replies!
 
monalisa said:
Not sure if there are any 3-4 year old units in Mt Druitt - there has barely been any construction in the last couple of years.

However, there are 10 year old units in that price range, and a little less.

There is nothing wrong with these, but the returns are fast diminishing.
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There are 3-4 year old units in The Avenue Mt Druitt. Only one available at the moment which is the penthouse on the market for $319k which could be a little overvalued. Units in this complex come onto the market now and again and are 2 bed 2 bath 1 car space. I think they would be worth $300k-$305k and rising. Many were sold for $259k in 2009 off the plan. Rents are around $350p/w and are also rising. This area is well connected to the train station, Highway, M7 plus TAFE, unis, schools etc. There's units going up in the street over in Durham St which were sold for $289k off the plan, 2 bed 1 bath, 1 car. I think buyers of these units have already made money on them.
 
I paid under $260k in 2009 for a brand new 2 bed 2 bath 1 car unit in Mt Druitt close to Westfield, train station, hospital and schools. Might have seemed a tad high then but it's consistently rented for $350p/w with full depreciation being a new dwelling. I've thought about putting it on the market at the moment but I think West Sydney has a beat of heat left in it going into next year. It would probably sell for $300k at the moment or a little more.
 
is it worth investing in another city like brisbane and then looking at sydney once it cools down?
Im in a similar position and am wondering if its worth investing in sydney at all considering the prices properties are selling for
 
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