Properties in SA for <$400k

[leytk004]

I think you are on the right track here, suburbs within 5km to the Adelaide CBD will always have high demand by tenants and property owners alike. I tried to buy this one in Hilton (adjacent Mile End, Torrensville) http://house.ksou.cn/p.php?q=Hilton&sta=sa&id=374684
but missed out. I would recommend a house with large land component, even if you are not interested in developing yourself down the track, the land will achieve you the best capital growth outcome in my opinion.

Hi Erica, thanks for sharing your thoughts. I agree with you on this also.
From what I have gathered between your post and Brady's, this is now my refined criteria:

• Properties up to $450k (but the lower the better to avoid paying too much LMI as I only have $85k in my savings account).
• Properties within 5-8kms from the CBD with large land component that has development potential for maximum capital growth gains.
• Does not require renovation and can be tenanted immediately.

Now my next goal is to be able to evaluate a property and knowing which property is a good deal when it comes by!

 

[Brady]

Sounds like a good plan, I personally wouldn't limit yourself to just 5-8 still good buys up to 5-15km IMO. I would recommend you sitting down with a good banker or broker that has good investment knowledge that you can trust.

Yes buying for less means less LMI, but LMI can be a great tool. Stick to under 90% and you're on your way. A banker / lender will be able to show you some different purchase prices and give you an idea of different deposits and LMI cost.

Example

$450,000 purchase price

90% Loan $405,000 LMI ~$8,800 Funds Required ~$70k

89% Loan $400,500 LMI ~$6,900 Funds Required ~$75k

88% Loan $396,000 LMI ~$6,300 Funds Required ~$80k

87% Loan $391,500 LMI ~$5,000 Funds Required ~$85k


As you can see you can keep ~$15k and only costs you $3,800 extra. You can then work out is it better to put in $15k extra or keep that for your next purchase or as a back up.

 

[leytk004]

1000% agree with this comment, Adelaide might not be booming along like Sydney. But buying property in Adelaide with development potential will give you the best chance of accelerated growth IMO. It applies to pretty much every suburb be it down south in Christies/Hackham, north in Elizabeth/Salisbury or in the <15km rings around the CBD.

This type of property in a most places will yield you ~5% which will make holding pretty comfortable, vacancy rates in most of Adelaide is <2% add these two on top of development potential and its a good recipe.

This is a beautiful house on for auction that I'm going to this weekend:
http://www.realestate.com.au/property-house-sa-richmond-118397915

Guys & gals, what is the maximum you would bid on this house? And how much do you think it will go for??

 

[J_aco]

Hi OP!

It's really interesting how I have very similar thoughts to what you've proposed in the refined criteria; thought I'd shed some lights on how I adjusted my thoughts:

- Previously I've always wanted to pay 20% deposit and not pay LMI, but as LeoT would put it, treat LMI as part of doing business. Also, think whether you plan to build a portfolio of properties, if you intend to acquire say 2-3 over the next 2-3 years, you probably want to minimise this initial outlay. You can always put spare cash in offset acct.

- I ALSO initially thought I'll get something that 'does not require renovations', but don't let it hinder you? Treat it as renovation is a way to "manufacture" equity, so even if prices stagnate, you have a medium to create equity

I'm brand new to all these too so happy to learn from everyone and share ideas =]

 

[Corey Batt]

This is a beautiful house on for auction that I'm going to this weekend:
http://www.realestate.com.au/property-house-sa-richmond-118397915

Guys & gals, what is the maximum you would bid on this house? And how much do you think it will go for??

Quite an attractive house indeed. What draws you to it as an investment? What's the suburbs vacancy rates, the estimation of yield and future CG potential?

 

[Jaggannath]

This is a beautiful house on for auction that I'm going to this weekend:
http://www.realestate.com.au/property-house-sa-richmond-118397915

Guys & gals, what is the maximum you would bid on this house? And how much do you think it will go for??

Search realestate.com.au for comparable sales (similar blocks, similar fit-outs), but if I had to guess I'd say it would sell outside your budget (not I've done no research). It's a big block, a nice house in good condition. You'll need to know expected rental yield as part of your due diligence.

 

[leytk004]

Search realestate.com.au for comparable sales (similar blocks, similar fit-outs), but if I had to guess I'd say it would sell outside your budget (not I've done no research). It's a big block, a nice house in good condition. You'll need to know expected rental yield as part of your due diligence.

Yes, I am aware that it will be more than $450k. I'm willing to pay more than my current budget as it seems to tick all of the other boxes in my criteria. I'm just a bit concerned about the rental yield though as I believe I'll have to put in a couple of hundred per week (when it's tenanted) to pay off the mortgage..

 

[johnpendles]

its not an issue that's right next to the airport?

 

[D.T.]

I doubt the sale price of that begins with a 4.
I bet the yield is high 4's though.
In which case, why adelaide? Does the property bring you closer to or further from your goals?

 

[leytk004]

Quite an attractive house indeed. What draws you to it as an investment? What's the suburbs vacancy rates, the estimation of yield and future CG potential?

All great questions! My interest in this property purely comes from the belief that it has CG potential being a corner block house on large land that's very close to the CBD. I think there's potential to subdivide? What do you think?

If I do secure this purchase, I'm hoping to be able to have it tenanted for around $500 per week. Where can I go to check the suburb's vacancy rates?

 

[J_aco]

http://www.sqmresearch.com.au/graph_vacancy.php?postcode=5033&t=1

 

[leytk004]

I doubt the sale price of that begins with a 4.
I bet the yield is high 4's though.
In which case, why adelaide? Does the property bring you closer to or further from your goals?

It will certainly sell for well over $500k. I believe the potential it has will bring me closer to my goals. Totally relying on capital growth here. My first thought was to get 2 properties at around $300-350k each. But I wouldn't mind owning just one really decent property rather than 2 average properties IMO.

Once I have a bit more experience I may start looking at interstate properties. But at the moment I am an amateur investor who just turned 24 and has never moved out of Adelaide before. I don't know anything about the other states whereas I'm starting to get the feel for prices of properties in the suburbs of Adelaide.

 

[D.T.]

All great questions! My interest in this property purely comes from the belief that it has CG potential being a corner block house on large land that's very close to the CBD. I think there's potential to subdivide? What do you think?

If I do secure this purchase, I'm hoping to be able to have it tenanted for around $500 per week. Where can I go to check the suburb's vacancy rates?

Instead of checking vacancy rate, I'd instead jump on realestate.com.au and search for rentals in the area? Do you have much competition? How much are they renting for?

 

[leytk004]

http://www.sqmresearch.com.au/graph_vacancy.php?postcode=5033&t=1

Cheers mate!! 1.5% vacancy rate. Seems pretty good?

 

[leytk004]

its not an issue that's right next to the airport?

I have thought about this too and it is one of the cons of houses in this area. Where else would one usually look in Adelaide for similar houses with that sort of land area close to the CBD between $400-500k?

 

[leytk004]

Instead of checking vacancy rate, I'd instead jump on realestate.com.au and search for rentals in the area? Do you have much competition? How much are they renting for?

Great idea. Looks like most decent 3 bedders are asking between $400-480. There's a 5 bedder asking for $600 pw. So from these numbers reckon I'd be able to get at least $500-$550 pw for this 5 bedroom home? If this is true then I wouldn't mind paying good money for it at this auction!

 

[D.T.]

Does that bring you closer or further away from #2?

 

[leytk004]

Does that bring you closer or further away from #2?

Good point, D.T.
Hrmm assuming that the property will go well over 500k, being quite negatively geared may bring me further away from #2 IP. It will also be way above the median price for houses in that area. SQM Research shows houses in Richmond in the last 5 years haven't gone up which worries me a bit. I have a set price in mind and would still like to go to the auction anyway (my first one) to get some experience with bidding and find out what others would be willing to pay for the property.

 

[D.T.]

This isn't state specific advice by any means - if you want to grow a portfolio, you need to know where IP #n+1 is coming from.

 

[Corey Batt]

Good point, D.T.
Hrmm assuming that the property will go well over 500k, being quite negatively geared may bring me further away from #2 IP. It will also be way above the median price for houses in that area. SQM Research shows houses in Richmond in the last 5 years haven't gone up which worries me a bit. I have a set price in mind and would still like to go to the auction anyway (my first one) to get some experience with bidding and find out what others would be willing to pay for the property.

I'm personally not a huge fan of investing in properties significantly above the areas medians, as the CG potential to rise is at a higher risk level imho - just something to think about. It's good for you to gain the experience however, seeing and understanding how the auction process works.

If you are intending to register to bid and potentially bid, be sure to make sure your finance is in place - you don't want to be entered into an unconditional contract that you cannot complete.