sydney apartment market

[alpina]

Firstly,

We'd like to say hi - been looking to find a group like this for ages - Thank Michael (you know who you are )

Have so many question - like if i have money in the bank being taxed, should we just dump it into our investment property and use the equity that way to build wealth rather than just keep borrowing to the max and using the negative gearing model?

But thats not our first question. We are currently looking at getting our second IP and am wondering if its a good idea at this moment in time (ie, high vacancy rate). We are also curious to know how strong the top end 1bdr rental market is? We viewed a project over the weekend whereby a 68sq mt (internal) + carspace and terrace was asking nearly $700k and its not even due for completion for 2 years - we are talking inner city here (or at least cityish) although the building is quite unique.

Any thoughts

Ben & Julie

 

[bbruham]

G'day Ben & Julie,

Every building in Sydney is "unigue". One bedroom for $700k,
my gosh!
How's the rent on this palace of gold? Are you going to collect an
acceptable percentage of rent, a minimum of 5.5% or better?
That's $750 per week for your 5.5% return.
Please supply more details as to the location of the palace of gold.
Like is there harbour views, possiblity of being built out at a later date, losing any other outlooks, etc etc.

Bruce G.

Winners make it happen.
Losers let it happen.

 

[geoffw]

Hi Ben and Julie,

Welcome to the forum. I hope you can get some value out of being here.

Firstly, congratulations for having the courage to get out of you comfort zojne, and to invest in property. And most of all, deciding to continue.

But I’d be wary of inner city-most of all inner city with a high price tag- look ath the thread http://www.somersoft.com/forums/showthread.php?postid=30859#post30859

For one persons view of where the Sydney property market is going, check out the thread
http://www.somersoft.com/forums/showthread.php?postid=3812#post3812- especially the notes from the Peter Spann presentation (Mr Spann is a seminar presenter, so take it with a grain ofsalt-but some of the info seems to be of good value)

 

[alpina]

thanks for the feedback guys - think we'll give it a miss

i was referring to a penthouse level 1bdr in a new development in newtown called the silo (the old flour mill conversion - http://www.thisissilo.com/) - in its credit, it is one of 3 apartments on this top level, with the other 2 being 2 bedders with million dollar plus price tags. having said that and thinking of capital gains, i dont know of many 1 bedders that appreciate to $1 million plus and those that do, Im sure have uninterrupted water/harbour views.

something inside us was telling it was not a good idea - you guys have reconfirmed this.

thanks

julie

 

[geoffw]

Alpina,

You've obviously got some good equity, and an interest in real estate.

Can I suggest that a weekend seminar from Steve Navra is of excellent value- he gives ways of choosing real estate, ways of share investing, and ways of using real estate capital growth.

The web page (http://www.navrainvest.com.au/) is a little out of date in regard to seminar times and locations- but for around $300 for a full weekend course, excellent value. You'renot getting ripped off at that price!

 

[Lotana]

Alpina,

Seems that most people think that Sydney inner city is not a good buy these days. Perhaps that's exactly the time one should buy? The market has soften in the last few months and with low interest rates, growing immigration, gentrification of inner city suburbs, smaller families, and limited land Sydney city units are an almost sure bet. Newtown has been a trendy yuppie area for a few years and seems to continue this way. OTP buy with 2 years till completion is very attractive allowing you to build equity with minimal expenses using a deposit bond. Generally OTP buy from a respectable developer is safer than most people think. Another benefit of OTP purchase is (we don't like to think about it) limited exposure to market collapse. You only risk deposit money (typically 10% of purchase price). You can say $70K is a lot of money. It surely is, but it's nice to know that until you settle you can't loose more even in case of a major market correction.

Another benefit of OTP is that you can actually sell the unit straight after you settle on purchase, and pay CGT on 50% of your CG because you held an asset for more than 12 months (by exchange date).

Please get me right - I am not saying that buying OTP in inner Sydney is always a win, but there are more factors to consider than harbour views or current rental return.

Say cheese

Lotana

 

[paulzag]

Actually Lotana I suspect you've overlooked something there.

A deposit bond is more like a futures play than a option. You can lose significantly more than your deposit if the developer is using a standard NSW contract.

Unlikely but possible.

Standard contracts in NSW call for a 10% deposit. As I understand it, a little-known feature is the purchaser is liable for damages if they don't complete.

I'll let the lawyers explain it better but an example might help. You sign a $500,000 purchase contract and fail to settle. The vendor then subsequently re-sells and can only achieve a $400,000 sale price, you are liable for the difference plus costs and interest.

I know of a few over-extended OTP purchasers who cannot raise the finance and are sweating to sell before they have to settle.

Hopefully I am wrong on this.

 

[Kevmeister]

Paul, I don't think your comments about futures/options has anything to do with the deposit bond directly, but the contract of sale for the property.

The contract of sale isn't an options contract, so the purchaser is bound by it and I guess if you rescind and the contract permits the vendor to recover costs you can lose more than than just the deposit.

But that would apply whether you were using a deposit bond or not, wouldn't it?

Kevin.

 

[Lotana]

Paul and Kev,

Thanks for correcting me. I think I misunderstood the nature of the standard OTP contract. Thanks again - I have learnt a very important lesson, which reassured me that this forum is an invaluable resource.

Regards,

Lotana