New investor seeking some advice first IP

[Pumpkin]

Hi All

I have just come across this website & i'm overwhelmed with the information & advice on here.
My partner & I are both 24, purchased our own house about 3 years ago & have just started seriously thinking about getting our first investment property.
We purchased our home here in New Lambton (Newcastle) for 250k 3 years ago it was a deceased estate & needed a bit of aesthetic work, but structurally it is great as well as a great location up high in New Lambton with ocean glimpses. We have done a lot of hard work & some renovations. (new kitchen, big deck on the back, cleard the yard & turfed, entirely re painted, polished floor boards etc but were careful not to overcapitalise on the place just make it comfortable to live in.) Our loan now is now under 220k & we have about 10k in savings.
We are not too savvy with the whole IP arena but would love to get ahead. We have a net combined income of about $6200/month I am first year out of Uni & my partner is only just starting his career too so our incomes will only increase & we are not planning on kids for at least a few years!!
I like the though of investing in a unit somewhere within the hunter region.
I have come across some almost brand new (1 yr old) 2 bedroom (1 story) units in Gillieston Heights which is a 'go-ahead' area 5 minutes from Maitland. There a lots of new housing estate areas going in around this area & it is estimated that lots of families, who will also bring their ageing parents will move to the area. In this new area house & land packages surround with land starting at about 160k & house & land at about 350-450k.

The units I have been looking at are on the market for 198k & have been fully rented for the last year for $270/week. They are at the end of a quite coldesac with the blocks of land around the units for sale too.

From the little knowledge I do have, I think purchasing a unit would mean we would negatively gear the property & be able to use lots of the outgoings as tax deductions, & with the unit being practically brand new depreciation would be a factor.
Any advice on whether this would be a good investment for us to start out with would be great...

Many thanks

 

[Propertunity]

Hi & welcome to the forum Pumpkin & partner

We are not too savvy with the whole IP arena ....
I like the though of investing in a unit somewhere within the hunter region.
I have come across some almost brand new (1 yr old) 2 bedroom (1 story) units in Gillieston Heights which is a 'go-ahead' area 5 minutes from Maitland.

I'm not so sure that Gillieston Heights is a 'go-ahead' area. My data shows median price falls of 9.6% this year. RP Data has it falling 2.7%. Either way a fall is a fall and in the current environment where there are hefty rises in other parts of the Hunter, I'd be looking elsewhere.
85% of the people there are owner occupiers, meaning if you were looking to rent, then Gillieston Heights would not be where you'd start looking.
Additionally the people there are mostly low income earners with most earning under $40K pa.

There a lots of new housing estate areas going in around this area

Yes, and that's not the only problem For an IP you'd generally stay away from new estates. One or two increases in interest rates and 50% of the suburb goes on the market - not good if you intend to refinance equity out of your IP there for you next purchases.

& it is estimated that lots of families, who will also bring their ageing parents will move to the area.

This is NOT the Australian way. Most young couple can't wait to get AWAY from their ageing parents. Who told you this BS? Old people like to stay near doctors and hospitals and other services.

In this new area house & land packages surround with land starting at about 160k & house & land at about 350-450k.

You can get that much closer to Newcastle in suburbs with much better CG.

The units I have been looking at are on the market for 198k & have been fully rented for the last year for $270/week.

That is a 7.1% yield - pretty damn good IF the rentals your are quoting are true market rents and not some rental guarantee figures.

with the blocks of land around the units for sale too.

That is also a concern. Prices rise when supply is limited. Lots of land for sale = no limited supply = poor growth (at least until the supply dries up)

From the little knowledge I do have, I think purchasing a unit would mean we would negatively gear the property

NOT from the figures you just quoted. 7.1% yield is positive geared my friend

& be able to use lots of the outgoings as tax deductions, & with the unit being practically brand new depreciation would be a factor.

Yes depreciation on new can be good for deductions BUT in your case they just make the unit even more positive geared. This is not a bad thing but you will be paying more tax not less. Not that that is a bad thing either - you must be putting more money in your pocket.

Any advice on whether this would be a good investment for us to start out with would be great...

Buy something better closer to Newcastle where there is plenty of CG and rental demand IMO.

 

[Pumpkin]

Thanks for your advice.
What Newcastle suburbs do you recommend?

 

[Propertunity]

Thanks for your advice.
What Newcastle suburbs do you recommend?

Because of my occupation, I cannot make recommendations to you specifically without knowing your goals, financials etc. (and you don't want to post that on a public forum).

However, if you do a search on "Newcastle" in the forums here you will see what others (and I) have said about various suburbs. This might form the basis of where you'd look and what you'd look out for IF they suited your goals.