Postive CF property in sydney?

[Totaro]

Hi I've been looking around for first IP for 12 mths now, and I'm kicking myself for the delay...while I was looking the price goes up around 20% in the areas I was interested in...
anyway, this week I tried to rethink my strategy and reassess whether it's a good time to buy IP. the reality is the price went up and as a result rental yield went down quite a bit. Early 2013, you can still find apartment around 5% and house around 4% yield in main stream (ie. now too far away, safe, demographics) suburbs. Nowaday, the yield would be more like 4% and 3% in some suburb. If you look hard, maybe some apt can make to 4.5% but after taking into consideration of strata and property manager's cut, it's more close to 4%.
so pretty much as far as cash flow goes, most sydney IP would be negative geared. That is fine if it's balanced with CG, however I'm not quite sure about sustainability of house price growth, maybe the market will take a break after the impressive run in last 12 mths?

Anyway, I reached a somewhat contradicting conclusion that either I should buy into it, knowing the cash flow will be negative, and betting on CG. Or, I should just walk away and waiting for a better yield to buy.

What do I miss?

 

[alexlee]

Anyway, I reached a somewhat contradicting conclusion that either I should buy into it, knowing the cash flow will be negative, and betting on CG. Or, I should just walk away and waiting for a better yield to buy.

What do I miss?

Nothing. You've pretty much nailed it. Negative cashflow only works if long term there are capital gains. If you think capital gains aren't going to be there, wait. e.g. Sydney during most of the noughties was pretty flat.

You have to be confident that you'll buy when the buying is 'good', though. The best time to buy is when things look bad and look like it's going to get worse.

 

[Corey Batt]

Might have to wait the market out if it doesn't meet your needs, or otherwise look at alternative markets.

 

[Lollie]

the popular suburbs of Sydney are still hot!

Depends if this is a long term buy and hold for you and you're looking in the popular suburbs within 7km from sydney's cbd. The market will remain hot for another year in my opinion. There's a lot of pent up demand and interest rates are low and stable. If you buy now you just have to wait for the rents to play catch up because CG is having it's turn. Rents will start to increase over the next year or so as they've been fairly stable over the past two years. You'll never regret buying your 1st IP in a good suburb of Sydney.

 

[Michael_X]

Why not try other markets?

I started in Sydney about 12 months ago and realised the numbers just don't work out. Then looked else where, bought in Central Coast, Newcastle, Coffs Harbour and now in Brisbane.

Have done much better than if I had stayed in Sydney.