Positive gearing in Sydney

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From: Silvester Valiente


Can anyone give me examples of positive geared properties in Sydney. I live in the south west of sydney (ie Campbelltown). The average price for a house out there is $220,000 with rental income around $190/wk.
I have yet to find a property that would be cashflow positive from day 1.

Has anyone found a way of generating +ve gearing without a large deposit?

I would be interested in all areas of Sydney just as long as the IP is cash flow positive

Thanks

SilvesterV
 
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Reply: 1
From: Yuch .


As far as I know....there is no positively geared properties in Sydney.

Most positively geared properties are located outside Sydney metro.


Regards
yuchun
~ The secret to success is to start from scratch and keep on scratching. ~
 
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Reply: 1.1
From: Terry W



I know of someone that purchased a place (bachelor unit??) in Kings Cross e=arlier this year for $125,000. She is currently leasing it out for $300 per= week fully furnished. That equals a 12.5% yield on based on the purchase p=rice and would be positively geared. I assume that Kings Cross would also h=ave good capital gains as well. So it can be done, even in the inner city!

Regards

Terry



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Reply: 1.2
From: Yuch .


Hi Terry,

12.5% is the gross yield. When you put strata levy, rates and water into your equation, these units will be slightly negatively geared.

Also, the housing prices in Kingscross have moved up by ~50% but the rent hasn't moved much, and this makes the gross yield for those studio units about 7% - still better than most Sydney suburbs but not good enough to make the investment positively geared.

And I am pretty sure Rolf is gonna remind you that you can only borrow max 70% LVR for these units, right Rolf?

Regards
yuchun
~ The secret to success is to start from scratch and keep on scratching. ~
 
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Reply: 1.2.1
From: Glenn Mott


I have to disagree with you Yuchun regarding the gearing position on this unit.

If the figures stated are correct, ie

Purchase price = 125000
Weekly rent = 300\wk

Conservative yearly figures would be as follows:

Rent = 14000 (allowing for vacancy)
Strata fees = 2000 (huge for 125k property)
Rates = 2000 (exaggerated)
Maintenance = 1000

Net rent = 9000

Net return = 9000\125000
= 7.2%

With the 5 year fixed rate currently available at 6.5% from a couple of lenders, you could borrow the lot and have an operating cashflow of $875 per year.

As this property is fully furnished, there is a strong chance that depreciation on the furniture would mean that there would be no tax liability at the end of the year.

It looks like a good buy to me, $875 buys a lot of advertising as well...

Glenn
 
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Reply: 2
From: Brett Burt


Northern part of the Central Coast and Newcastle have positive cash flows in
many instances.
----- Original Message -----
From: "propertyforum Listmanager" <listmanager@bne003w.webcentral.com.au>
To: <Recipients of 'propertyforum' suppressed>
Sent: Friday, December 28, 2001 10:42 AM
Subject: Positive gearing in Sydney


> From: "Silvester Valiente" <silvesterv@hotmail.com>
>
> Can anyone give me examples of positive geared properties in Sydney. I
live in the south west of sydney (ie Campbelltown). The average price for a
house out there is $220,000 with rental income around $190/wk.
> I have yet to find a property that would be cashflow positive from day 1.
>
> Has anyone found a way of generating +ve gearing without a large deposit?
>
> I would be interested in all areas of Sydney just as long as the IP is
cash flow positive
>
> Thanks
>
> SilvesterV
>
>
>
> To reply: mailto:propertyforum.18278@bne003w.webcentral.com.au
> To start a new topic: mailto:propertyforum@bne003w.webcentral.com.au
> To login: http://bne003w.webcentral.com.au:80/~wb013
>
>
 
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Sim

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Reply: 1.2.1.1
From: Sim' Hampel


Yes, but what about the costs of maintaining the furniture to ensure that it is still rentable at that rate ? Accountants (and the ATO) deem depreciation to be an EXPENSE. Are they wrong ?

 
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Reply: 1.2.1.2
From: Joo Joo


Hi Silvester,

Yes it is true, you can find positively geared property in sydney but in my experience (which is minimal) there are only two cases where this is possible....

1- A studio apartment, you can ussually find these as cheap as 80k, with a rental return of $120+ per week. The problem with many of these is that they are ussually under 50 m2; many of the banks do not give out loans for properties this small.

2- A Defence Housing Authority (DHA) rented home, although there are also associated risks with these, do a search under DHA for more info.


Regards
joojoo
 
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Reply: 1.2.1.3
From: Yuch .


I do know there are a few studios in Potts Point, Wooloomooloo and Elizabeth Bay are renting out at $300/wk. But you may find that most of them can only rent out for $200/wk max.

Those renting out at $300/wk have swimming pools, lift, indoor garden, etc in the builing. So as you can imagine, the quaterly levy and maintainance cost (sinking fund) are more expensive. I tried to find my old spreadsheet and pulled out the numbers there, but I don't keep it anymore. So I can't remember the exact number for levy and taxes and rates etc. But overall, these studios are slightly negatively geared, assuming you can borrow 90%. (negatively geared before depreciation and other tax benefits)

Regards
yuchun
~ The secret to success is to start from scratch and keep on scratching. ~
 
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