looking for that first IP [sydney]

[trinity168]

Hi,

Just needed to get that first step going towards our first IP. We initially started looking at 2Br Units in Westmead, thinking it has good facilities, plus the hospital, thereby there would be no shortage of renters. After a chat with a friend, they suggested not to buy out west, and, so I had a quick look on the web for price range closer to the city. The price range in the city would have us look at 1Br units, I do not really want a studio. Our plan is to buy and hold for a number of years (7+ min), so that IP can supplement our income.

Question is, what factors did you guys look at before buying your first IP, especially in terms of location. Our budget range is 350-370K. Would you go smaller unit, closer to city, or 2br in a location like Westmead.

Thanks for your inputs!

 

[ndpjai]

I have no complaints with my IP in westmead. The suburb has got everything you could ask for and within your budget, i'm not sure what your friend told you. It's got schools, hospital, medical centres, nice park, fast trains to city, close to M4, parramatta CBD.

 

[travelbug]

Look at the numbers. Ask your friend to put numbers on paper showing you what it will cost you to buy/hold the properties he/she is talking about..

Then compare with "out west". Then there's the "inner city has more CG" argument.

All areas have their merit. It depends what your long term goals are. If you want to supplement your income you need a high yielding property. Or do you mean to sell it in 7 years and get the CG?

Some people "like your friend" would never buy out west. Might be right for him/her but not necessarily for you.

 

[alexlee]

Why does your friend dislike the area, and what experience / investments does your friend have to make his/her opinion worth considering?

 

[mr_squiggle]

As has been said there are areas out west that have done well, and also not so well in recent times. There was a piece on Today Tonight a few nights back of poor perfoming property south west of Sydney selling roughly for the same price purchased 7 years ago, areas like West Hoxton etc but then you are getting quite a distance to the CBD so i can understand why these areas haven't done as well as suburbs closer in.

Westmead I think is a safer bet as far as the west is concerned but i have heard very bad things about areas like Pendle Hill, Blacktown, Mount Druitt and beyond even the Parramatta area has a dodgy element but a lot of these areas are tipped to be strong CG performers in the next few years.

 

[Rolf Latham]

Older style units and townhouses in Westmead have performed ok, historically, and residex reckons will continue to do ok.

Your broker should be able to run u a suburb report on this and others you are looking at to see what the historical numbers look like

ta
rolf

 

[C-mac]

I am having the same conundrum as you!
My budget is around the same as yours. Difference is, I do have a couple of IP's out west already (Granville/Parramatta border, & St Marys), so I'm seeing great yields there to supplement income.

What I'm looking at now is solid 7 yr + capital growth. I was initially hostile at the concept of 1 bedroom units (I'll never buy studios, they are just too tricky/delicate to resell), but I'm warming to it. If the numbers stack up then go for it.

That said, there's quite a discrepency between what a 1br can rent for, at least in the inner west (where I'm looking to purchase). With 2br in most areas the variance of rent payable doesn't seem as severe (by this I mean brand new versus old and unrenovated); maybe a $100 or so. But with one bedda's in say, Stanmore for example, they can vary from $300 per week up to $500 per week! Irrespective of condition!

So my advice is to see how the 'numbers' stack up, but then check what rental spectrums are payable with 2br then against 1br in your target suburbs.

 

[trinity168]

All areas have their merit. It depends what your long term goals are. If you want to supplement your income you need a high yielding property. Or do you mean to sell it in 7 years and get the CG?

First, thanks for all your inputs. I just really wanted to hear from others. The "do not buy out west" was a dinner table discussion.

Travelbug, sell it in 7 years is probably the earliest time we would consider selling. In terms of goals, really would prefer hold as long as possible, and, say, if we have 20 IPs, sell the other 10 or 12 to pay for the rest and live off rent money.

I think Westmead is a good starting point for us actually. Good rental yield, schools, hospital, train line.

I guess the comment just made me think a bit.

 

[trinity168]

I do have a couple of IP's out west already (Granville/Parramatta border, & St Marys), so I'm seeing great yields there to supplement income.
So my advice is to see how the 'numbers' stack up, but then check what rental spectrums are payable with 2br then against 1br in your target suburbs.

Thanks Operative, do you mind if I ask when you bought your IPs out west? Have you had any issues with, say, the unit itself, tenants, property manager?

 

[albertwt]

I have no complaints with my IP in westmead. The suburb has got everything you could ask for and within your budget, i'm not sure what your friend told you. It's got schools, hospital, medical centres, nice park, fast trains to city, close to M4, parramatta CBD.

Yes, but who's going to rent it out in Westmead, I wonder what would be the type of people in that area ?

 

[Rolf Latham]

Yes, but who's going to rent it out in Westmead, I wonder what would be the type of people in that area ?

Humans, with a head, 2 arms and 2 legs with some form of income.

Type is such a broad question.

If you could place some specifics around that you would possible get a better answer than mine

ta

rolf

 

[luce.rocks]

Why not stay open to both options, monitor your selected suburbs in both areas, and when a property comes up with the right numbers, go for it? I'm sure you could find something in either market.

FWIW, Mum and I were in a similar position a few years back (4 years? 5? can't remember) and we ended up purchasing a 1 br unit in Ultimo for around 275K (279K? 273K? can't remember). At the time I think it was rented for 350pw, or something like that.

It's probably worth around 400K now and, partially furnished, rents for 475 pw, which makes it pretty close to neutrally geared after just 4 or 5 years. It's never been empty more than a week or two. Which just goes to show that you can get good growth and returns out of 1 br apartments, if you buy well and in the right place.

 

[albertwt]

Why not stay open to both options, monitor your selected suburbs in both areas, and when a property comes up with the right numbers, go for it? I'm sure you could find something in either market.

FWIW, Mum and I were in a similar position a few years back (4 years? 5? can't remember) and we ended up purchasing a 1 br unit in Ultimo for around 275K (279K? 273K? can't remember). At the time I think it was rented for 350pw, or something like that.

It's probably worth around 400K now and, partially furnished, rents for 475 pw, which makes it pretty close to neutrally geared after just 4 or 5 years. It's never been empty more than a week or two. Which just goes to show that you can get good growth and returns out of 1 br apartments, if you buy well and in the right place.

Yes that does sounds very good Luce, but in my situation the bank dosn't want to lend me for studio apartment in anywhere (it has to be minimum of 2br) and now in Sydney CBD the studio room is around $500k+ (World Tower and Maestri Tower).

 

[Rolf Latham]

in my situation the bank dosn't want to lend me for studio apartment in anywhere (it has to be minimum of 2br)

might be time for a new lender

many lenders will do 1 beds above 50 sq unless they are in black listed postcodes

Id agree that if you need lmi, then studios arent a good fit for most

ta
rolf

 

[luce.rocks]

Yes that does sounds very good Luce, but in my situation the bank dosn't want to lend me for studio apartment in anywhere (it has to be minimum of 2br) and now in Sydney CBD the studio room is around $500k+ (World Tower and Maestri Tower).

It wasn't a studio, it was a 54m2 1 bedder. Your bank really won't lend to you unless you get a minimum 2 bedrooms? That's weird. But I'm not a mortgage broker, so I wouldn't know

 

[trinity168]

Yes, but who's going to rent it out in Westmead, I wonder what would be the type of people in that area ?

I think you, as the property owner, screen the type of people that you want to rent your place. Is it safe to say that Westmead is a working class suburb?

 

[Jacque]

I think you, as the property owner, screen the type of people that you want to rent your place. Is it safe to say that Westmead is a working class suburb?

The majority of the population in Westmead are Australian born married catholics who are less than 39yrs old- check out the suburb profile
http://www.domain.com.au/public/suburbprofile.aspx?mode=buy&suburb=Westmead&postcode=2145

Seriously, though, of course you can screen your tenants as a landlord. You get your PM to check their references, their payment history, their ability to service the rent via pay slips etc. The final decision is always yours.

I believe the Parramatta area has much going for it- in terms of both location and affordability. Yields are decent for both units and houses and there seems to be a steady ongoing demand for quality IP's in the area. The types of tenants who are "likely" to rent in Westmead would be from a range of backgrounds including medical, uni students (UWS has a Westmead campus) retail and clerical workers, tradies, professionals etc. $360K is a sufficient budget to work with but I'd also look further afield at Parra, Harris Park and Wenty as well. You can pick up older larger units that have reno potential in often superior locations to some of the newer blocks on busier roads.
Best of luck with your search.

 

[trinity168]

Thanks for your comments, Jacque. Not too sure about reno, unless it's just a paint job. As I have no contact to tradesmen, and, totally not good with a hammer or drill. Hence, looking for something that can be rented straight away. Any tips on reno would be appreciated, for future reference.


Cheers

 

[travelbug]

Yes, but who's going to rent it out in Westmead, I wonder what would be the type of people in that area ?

I keep typing responses to this but decided not to bother.

I'm shaking my head.

 

[albertwt]

The majority of the population in Westmead are Australian born married catholics who are less than 39yrs old- check out the suburb profile
http://www.domain.com.au/public/suburbprofile.aspx?mode=buy&suburb=Westmead&postcode=2145

Seriously, though, of course you can screen your tenants as a landlord. You get your PM to check their references, their payment history, their ability to service the rent via pay slips etc. The final decision is always yours.

I believe the Parramatta area has much going for it- in terms of both location and affordability. Yields are decent for both units and houses and there seems to be a steady ongoing demand for quality IP's in the area. The types of tenants who are "likely" to rent in Westmead would be from a range of backgrounds including medical, uni students (UWS has a Westmead campus) retail and clerical workers, tradies, professionals etc. $360K is a sufficient budget to work with but I'd also look further afield at Parra, Harris Park and Wenty as well. You can pick up older larger units that have reno potential in often superior locations to some of the newer blocks on busier roads.
Best of luck with your search.

Many thanks for your clarification.