Sydney - where to buy an investment property?

[nsy]

New to this so apologies if I am oblivious to any etiquette here.

So, I'm looking to invest in landed property in sydney - houses, terraces or townhouses. I am primarily looking for capital gain over longer term and can wear a bit of negative gearing in the meantime.

My maximum spend is approx $1.2m and can be spread across a few properties or just one if i have sufficient conviction. I have access to a couple of ok builders which can undertake some work if required so can manage a small fixer-upper. Now my problem is locating the areas I should be looking at. I prefer to hold a property in Sydney.

Any recommendations?

Many thanks

 

[skater]

Sydney is a big place. Why don't you do some research, like we all did when we started out. The forum is here to help you on your journey, but we are not going to do it for you.

Maybe pick a suburb and ask specific questions about that suburb, you get the picture.

 

[Propertunity]

So, I'm looking to invest in landed property in sydney - houses, terraces or townhouses. I am primarily looking for capital gain over longer term and can wear a bit of negative gearing in the meantime.

OK

My maximum spend is approx $1.2m and can be spread across a few properties or just one

There is a school of thought that says if you just buy one $1M property then you only have one lot of stamp duty to pay, one property manager to deal with, one tenant to collect rent from, one place to spend maintenance on etc. and I can see some benefits in that.

On the other hand, if that one tenant decides not to pay rent for one month - then some might find it hard to fund nearly $5K for a mortgage payment out of their own pocket. So it comes down to risk mitigation as well as your own personal financial situation.

Spreading the risk around to say 3 x $400K properties maybe an alternative? Or 2 x $600K properties? Anyway - that's something to think about.

Now my problem is locating the areas I should be looking at. I prefer to hold a property in Sydney.

Generally speaking you can't go too wrong with being 10 - 15 kms of any of the 2 Sydney CBD's - Sydney or Parramatta. The other things you'd look for if possible is being near water or having a water view. Along with this: coffee, shops, schools, transport, hospitals, beach, parks, fast food, etc - all the stuff that tenants and OO's like.

Having said all that you still need to do stacks & stacks of research. You could pick up a copy of API (Australian Property Investor) magazine at your newsagent - they publish property stats in the back pages. You could do some research at http://www.investsmart.com.au/property/ to find high growth suburbs and use that as a starting point. Just some suggestions.

All the best with your search.

 

[nsy]

Sydney is a big place. Why don't you do some research, like we all did when we started out. The forum is here to help you on your journey, but we are not going to do it for you..

Have done lots of research over the last few months - trouble i have is tossing up across the different areas.

Maybe pick a suburb and ask specific questions about that suburb, you get the picture..

Will do - thanks.

 

[Raja]

Have done lots of research over the last few months - trouble i have is tossing up across the different areas.

Which areas are you tossing up between?

And from your research, what have you found out about these areas?

 

[Jacque]

Hmmm.. $1.2m to spend. Lots of alternatives there.

As others have said, do your research and come up with some suburbs that have performed well (look up API mags and Residex reports) and talk to other investors who may be able to make suggestions. Try ideally to stick to median or just above as this ensures you are catering to the majority of tenants as well.
Sydney is a big place, but keep in mind that it's a well-known myth that only those suburbs close to the Sydney CBD perform well. The old 5-10km out rule may be well touted by spruikers (funnily enough usually selling OTP units in these areas ) but when you actually do your DD and look at the cg rates, you may well be surprised at what growth has been achieved in suburbs far from the central hub of our great city. Take the average cg rates (houses) for the last decade from Residex as a starting point and compare the following:

Outer ring suburbs
Penrith 8.49%
Mt Druitt 8.19%

Middle
Glenhaven 8.4%
Winston Hills 7.15%
Asquith 7.27%

Inner
Lane Cove 7.42%
Roseville 7.59%
Paddington 7.89%

Naturally, there are other factors to consider besides growth (infrastructure, future planning, transport, reputation, rental return, your budget etc) but at the end of the day, there is no small group of suburbs that are "best" for investing here in Sydney. There's a great no. that you can select from and with a budget such as yours, I'd be giving it some serious thought before jumping straight in. If it were my money, I'd be spreading the risk a little, mainly due to the rental return from purchasing one $1.2m property. Why not buy a house in a well performing middle ring suburb and a unit in a high rental demand area in another?

 

[sports fan]

if i was looking to spend 1.2m on a property for long term gains i would definantly be looking at buying the biggest flatest block i could find in ingleside on the northern beaches.. once warriewood valley is fully subdivided, ingleside will be the next to be carved up... australand paid a fortune for that land in warriwood. but land in ingleside doesnt come up for sale all that often

 

[mystery]

Hmmm.. $1.2m to spend. Lots of alternatives there.

As others have said, do your research and come up with some suburbs that have performed well (look up API mags and Residex reports) and talk to other investors who may be able to make suggestions. Try ideally to stick to median or just above as this ensures you are catering to the majority of tenants as well.
Sydney is a big place, but keep in mind that it's a well-known myth that only those suburbs close to the Sydney CBD perform well. The old 5-10km out rule may be well touted by spruikers (funnily enough usually selling OTP units in these areas ) but when you actually do your DD and look at the cg rates, you may well be surprised at what growth has been achieved in suburbs far from the central hub of our great city. Take the average cg rates (houses) for the last decade from Residex as a starting point and compare the following:

Outer ring suburbs
Penrith 8.49%
Mt Druitt 8.19%

Middle
Glenhaven 8.4%
Winston Hills 7.15%
Asquith 7.27%

Inner
Lane Cove 7.42%
Roseville 7.59%
Paddington 7.89%

Naturally, there are other factors to consider besides growth (infrastructure, future planning, transport, reputation, rental return, your budget etc) but at the end of the day, there is no small group of suburbs that are "best" for investing here in Sydney. There's a great no. that you can select from and with a budget such as yours, I'd be giving it some serious thought before jumping straight in. If it were my money, I'd be spreading the risk a little, mainly due to the rental return from purchasing one $1.2m property. Why not buy a house in a well performing middle ring suburb and a unit in a high rental demand area in another?

Good post Jacque. Really well put together.

Martin

 

[farmilor]

if i was looking to spend 1.2m on a property for long term gains i would definantly be looking at buying the biggest flatest block i could find in ingleside on the northern beaches.. once warriewood valley is fully subdivided, ingleside will be the next to be carved up... australand paid a fortune for that land in warriwood. but land in ingleside doesnt come up for sale all that often

Ingleside ............ I'd buy this place. What a corker

http://www.realestate.com.au/cgi-bi...r=&cc=&c=99359352&s=nsw&snf=rbs&tm=1248308679

Maybe a little above budget though

 

[BlueEyes]

Very nice just down the road from me. I gather this was a tongue in cheek post otherwise you would need a rent of $8175pw+. Last I knew Brangelina had a place.

 

[Jacque]

if i was looking to spend 1.2m on a property for long term gains i would definantly be looking at buying the biggest flatest block i could find in ingleside on the northern beaches.. once warriewood valley is fully subdivided, ingleside will be the next to be carved up... australand paid a fortune for that land in warriwood. but land in ingleside doesnt come up for sale all that often

Landbanking can be profitable IF you can afford the long term holding costs and lack of income from either a vacant block ($0) to an old shack that is ready to be demolished. I like the Northern Beaches too, and see it interesting to see the once semi-rural areas being carved up for dvpt. Sign of the times- much like Kellyville used to be 2 decades ago.

 

[josko]

New to this so apologies if I am oblivious to any etiquette here.

So, I'm looking to invest in landed property in sydney - houses, terraces or townhouses. I am primarily looking for capital gain over longer term and can wear a bit of negative gearing in the meantime.

My maximum spend is approx $1.2m and can be spread across a few properties or just one if i have sufficient conviction. I have access to a couple of ok builders which can undertake some work if required so can manage a small fixer-upper. Now my problem is locating the areas I should be looking at. I prefer to hold a property in Sydney.

Any recommendations?

Many thanks

Jacque has given you some food for thought.. Nice post Jacque.

Make a list of your priorities and start from there.

Anything with a view or within walking distance to the beach or CBD is going to come up trumps for Capital Gain.

If you know some builders, older houses in the Northern Beaches come to mind.

You need to pick a few areas and flick through a few suburbs on realestate.com.

Find out the yields for those suburbs and then start narrowing your choices down.

In the end, go with your gut instinct.

Regards Jo

 

[Cashflow]

Have you thought about buying a commercial property? They can be a lot less hassle to manage especially if you have a long lease with options, good tenant and directors guarantees.

Recently sold a commercial property in Maryborough, Queensland for a nice profit - I know it's not Sydney but only had to inspect the property before purchasing and after that managed it from Sydney.

Just a though, but perhaps an option you could look at.

Peter
www.cashflowcalculators.com.au
www.privaterealestate.net.au

 

[see_change]

JP

The stats are deceptive re Penrith and Mt Druitt .

These two areas boomed later in the last cycle than some of the other areas mentioned. As a result most of the last cycle is included in the last ten years , where as in other places they were booming prior to ten years , so some of their growth is not included in the last ten years .

Also in Mt Druitt ( I know this specifically ... and assume Penrith was the same ) , after the peak in the late 80's to early 90's the market slumped significantly untill very late in the 90's , so it was coming off a lower base compared to other nicer areas which didn't slump so much or at all off their previous high's .

I'd be using the stats to see which centrally located places have underperformed in the last ten years and use that as a starting point . actually the main thing I'd draw from the stats is that every where go's up ....

Then look for bargains .

Cliff

 

[Jacque]

I'd be using the stats to see which centrally located places have underperformed in the last ten years and use that as a starting point . actually the main thing I'd draw from the stats is that every where go's up ....

Then look for bargains .

Cliff

Exactly
As I said earlier, you can't rely exclusively on stats as other factors are equally as important but it does go to show you what happens when you hold property for a decade, doesn't it?!

 

[nsy]

Thanks for all the thoughts. Been looking for a good year or so. A few areas/strategies I have looked harder include:
- seven hills. good transport with freeway and a train station and decent yield for a house compared to say the north shore. problem is that a lot of these houses will need continuous work and i suspect net yield might be a lot lower in the medium term.
- north shore. i feel this area has been hit harder than the stats suggest and great value to by if you want to live there, but struggle with the low yields and don't want to be negatively geared by a large extent on a fairly large purchase
- inner city. surry hills and darlinghurst has been a focus - will post separate post to get your views.
- block of apartment. bank will look at any block with more than 4 units as a commercial property and an extra 2% interest so kills any yield uplift. true, i can do more if i own the whole block but don't think it enough to overcome #1.
- suburbs just a step further away from inner city - rydalmere up to pennant hills. This remains of interest.

 

[slam]

Have a look in Surry Hills, terrace houses rarely come up for sale and they rent well. Im settling on one this coming week. Make sure its a decent sized block with rearlane access.

Being so close to the city the values are consistent and do not take huge swings. I have lived in the lower end towards central for 30 years, alot of the people in the area have lived here for long long time. So houses dont come up for sale often. Most of them are deceased estates if they do come up.

For 1.2m you can probably one with 4.5meter frontage, 4brd with rearlane access. Theres one on domain thats an office at the moment, not sure how much they are asking but its a decent house thats an office at the moment.

The beauty about these houses is, many of them are built late last century or early this century with Victorian style features. If you can restore them but have a modern house inside, thats alot of character and very nice / unique =D. Im looking to extend mine and build an attic later as well. BTW these houses are built solidly. Nearly all of them are over 100 years old, they are cool in summer and warm in winter.

Good luck.

Slam

 

[Nathan]

Buy wherever there is value on the day.

Just make sure you secure under market value.

 

[Scorpio]

Housing commission auctions

what do you think about housing commission auctions ,is it good to buy through them and what suburbs ..? How can we contact them directly if its good to buy of them,thanks in advance

 

[china]

Buy wherever there is value on the day.

Just make sure you secure under market value.

And this is most possible if you follow a suburb very closely for over a few months, regularly attending auctions / open for inspections and maintaining close contact with agents.

That way, when you see a well priced property, you will know it immediately.