Hi all,
Sonic,
Just on Geoff's point. You have a property that has just lost 9.8% of its value in a year, and you expect it to go up by 5% pa, and to get this 5% pa you are prepared to lose 2.5% in 'costs' (providing rent is 10% higher than current)??
To me there seems to be a little discrepancy between reality and expectations.
bye
Hi I'm glad I raised this post, as its always good to get an alternative view to 2nd guess my investment decisions. Also the posters on this forum are way more experienced in investing than me so I'll obviously always listen to everyones opinions seriously.
My personal reason for investing in studios is because its a good entry point into the Sydney market for me (I'm reluctant purchasing outside Sydney as I can't realistically check the place out). My strategy is to look at heaps of units and only make a purchase if its below market value.
My research shows that the price I'm going to buy it is 9.8% below market i.e. the last sold value of $158K is fair market value as it:
1) sold very quickly
2) 2 units sold in the building for $165K a bit more slowly.
THe reason I'm getting this one cheap is because its been on the market for ages and I've been haggling with the agent lowballing for the past 2 weeks and the vendor is now seriously considering my offers. Online its marked as a sale price of $170K and I'm sure if it were advertised for $150K online it would be sold immediately.
I understand most peoples reluctance on studios / small 1 bedrooms because of financing and resale issues. However both my first 2 properties (1 studio and 1 small 1 bedroom unit 34sqm and 38sqm respectively) are in Potts Point and if do a search on domain u can see that its a high density area unlike most other suburbs and there is actually quite a large range of studios for sale all thetime. On average 1-2 sell a week comparable to 1 bedroom units (check the newspaper) so I think the resale arguement doesn't hold for that suburb.
In addition I"m pretty happy with my first 2 purchases I bought the studio last year for $115K and it recently got revalued by the bank to $200K. I'm waiting for a few months for the 1 bedroom to get revalued (i bought it less than 6 months ago) but I got it for $158K and ones in theb uildilng previously sold for $180K and $185K.
However I am reconsidering now not buying this deal now because I've I'm slightly concerned being overweight in Potts Point.
Even though the yield is good it really is an investment unit and will have limited growth and Geoff raises a good point regarding redrawing future equity (Colonial will fund up to 80% but I guess they can always change their policy).
Also in regard to Bill's comment as rental being optimistic 10% above market, I follow the suburbs rent's quite a bit. My estimate could be wrong of course but I'm always on the conservative side when modelling units in the buildling have rented for $220-$240 I"m modelling on $220.
The current rental of $200 is definitely below market.
Thoughts/comments appreciated.
). I"m buying a 27sqm unit. I've got 20% financed by equity and I can get a loan through commbank (I'm on the professional package) with no fees for 7.27% variable or 7.2% fixed.
