Sydney market



From: Anonymous

Hello all,

I really like the concept of a cash flow positive IP rather than a negatively geared one. The inner Sydney market is the one I know best so I would like to buy an IP here. Does anyone know if it is realistic to expect to find a positive cash flow IP in the inner suburbs of Sydney? Prices are so high compared to rental yield, and most properties on the market were built before 1985 (hence cutting out tax depreciation allowances). It just seems that if you intend to borrow 100% of the purchase price of the property, plus a bit extra to pay for expenses, that you can only expect to have a negatively geared property in Sydney's inner suburbs.


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Reply: 1
From: Lotana Von Amor

Hello Andrew,

IMHO in any investment you see your target as either "growth" or "income" or a combination of both. This applies to both shares and property investments. Inner Sydney market is similar to a young company - it has good growth prospects but pays low dividends (rent). In other words, buyers are happy to pay a premium for blue sky ahead. On the other side there are well-established companies steadily growing, but no surprises. They pay high dividends year after year but don't expect the share price to leap. Examples of such IP markets are Brisbane, Gold Coast and some other places.

Getting the best of both worlds would be good but rarely found. In Sydney you may look at converting a property to dual occupancy or to backpacker's accommodation (subject to zoning).


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Reply: 1.1
From: Mike .

Hi Andrew,

Your dilemma is shared by us all and some people are willing to do expensive courses like Henry Kaye's for a chance to buy in bulk off developers either as an individual where you buy half a dozen units, keep one and onsell the others or form a syndicate to buy the units at wholesale.

The providers of these courses usually have access to a large pool of funds that you can use to make the deal work.
Co-developments work on the same group-buy philosophy.

As an individual buying a single property in Sydney your chances of not only finding but outbidding other investors for a positive cashflow property are thin. The Flippers on this forum say Brisbane is easier to find such properties but the capital gain is not as good as Melb or Syd.

Only other option is to develop yourself which is what I'm intending to do when I've researched the whole thing. There are plenty of large blocks around with a tiny bungalow sitting on them which you can demolish and build a duplex.

Regards, Mike
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