Studio in Potts Point - your thoughts?

[kristaje]

Hi Guys,

I just visited a friend who live in Potts Point and was quite surprise to hear the rent price there. I mean studio apartment that are selling around $200K can rent around $350/w! That's almost 10% yield!

These studios are very tiny though, like 27m2 or so. So I don't think not many of them are owner occupied. And being small, I'm a bit worry about the prospect of capital gain.

What are your thoughts?

Or do you think it's better to invest in a bigger apartment somewhere else in like Marrickville, Ashfield, Parramatta, etc.?

 

[alexlee]

1) You may have problems financing something that small
2) What are the body corp fees?
Alex

 

[kristaje]

Hi Alex,

The selling agent said that she could introduce to lender that do small apts - if needed. As long as dp is above 20% its ok she said.

Total outgoing is around $700-800 pq. After accounting for that the yield ends up around 7%-ish (before agent cost) or 6.5%-ish (after cost), still pretty good.

What I'm not so sure of is the fact that most of those studios are owned by investors, might be a bit volatile in price as most investors are geared. What do you think?

 

[alexlee]

My main concern would be that you're not going to get much owner occupier interest in them. That may limit capital growth in the future. Also, with such high body corp I'm assuming there are facilities (pool, elevator, etc). These can mean high special levies in the future.
Alex

 

[BenG]

The other thing around this area are some of the studios may be near housing commission. Anything that is worth 200k in the heart of sydney definitely isn't receiving the same sort of capital gains as everywhere else. Is 200k the sort of money you are looking to invest

 

[kristaje]

Thanks for your replies Guys.

BenG, I'm looking to invest somewhere in inner suburbs of Sydney. Our budget is around 550-600K (house) or 350-400K (2 bedroom apartment). Currently I'm looking around Newtown, Rozelle, Glebe, Leichhardt, etc. Any suggestions on areas?

Jen

 

[Tikor]

I bought one in 2004 for $165K. I think it would fetch about $200K now so not spectacular growth. But I've never had trouble finding tenants, and the rent is now around the $200 mark. When I was looking for this one, I saw a lot of studios in the area, most of which I wouldn't keep a pig in, all for unrealistic prices. So shop around!

 

[WinstonWolfe]

Ben, if housing commish have anything in Potts Point, I'll run along Cabarita Beach naked.....whoops, already did that today.....

Re these studio apts, I'd try and get a hold of the rental records, and see what the tenant churn is like. If the feng shui is cr@p, then I'd avoid them. higher tenant turnover, more conflict between tenants, etc. Am surprised they haven't been converted into short term rentals. much more profit if marketed well....

 

[Rolf Latham]

Hiya WW

many of them have been converted into short term rentals .............rent by the half hour sort of thing................

We have done quite a few of these and as long as they are 25 and studio, STG will do them at 80 % lvr without much argument.

Id argue the growth will be ok because studios are a staple for this area, much like one and 2 beds are in many parts of the eastern burbs

ta
rolf

 

[WinstonWolfe]

...........rent by the half hour sort of thing.......

ta
rolf

hehehehe..... well Rolfie, I hadn't thought of short term to that extent....but have to respect your runs on the board....

PP was pretty swish in the 80s when I was down there, and Elton got married.....despite the larrikin who yelled out after he emerged from the wedding ceremony.........."good onya poofta"

suppose a restless Gen XYZ are pushing things beyond E.Bay, Wool and KX

Is there a Harry still selling pie floaters down that way?

Ani? you bought any of Harry's pies recently?

 

[kristaje]

Thanks for the input Guys!

WW, yes Harry's still there, and still as good as ever.

PP is really quite nice at the moment, very happening and yet some streets are still pretty quiet. Being so close to city is definitely a plus too for rental.

I'll keep looking around and see if I can find a slightly bigger 1 bedder there or maybe around (Rushcutters/Elizabeth Bay).