Thoughts on this sydney purchase?

I have been doing an analysis on a Sydney property & have the following scenario racking my brain:

I have found a property off-the-market with the following attributes:

? 1 bed, 1 bath, 1 car
? 58sq/m plus car space
? Approx. 5kms from CBD
? Walking distance to train station & supermarket
? Small unit block (older style)
? Low Body corp
? Potential for cosmetic reno

If I secured this property for $550k & continued tenanted @ $500 p/wk, based on 5.00% capital appreciation going forward it would only take under 4 years for it to become CF +?ve. My CF calculator tells me it will only cost me $29.00p/wk after tax with borrowing 105%.

By all accounts this seems pretty close to a risk-free purchase for the following reasons:
? Close to CBD
? Low out of pocket cost per week
? Sydney population growth expected to continue
? Rates to stay low for at least a few more years (my opinion)
? Blue-chip suburb with low vacancy rate & appeal to renters

This has the foundations of a decent purchase, my only worry is buying at the top of the cycle. Plan is to hold this long term (never sell) & potentially use as PPOR in the near future (3-5years) so maybe the cycle doesn?t even matter?

What are your thoughts? Should I be this worried about buying at the top of the cycle? Economic commentators all saying there is a bubble etc & its making me hesitant.
 
Hi,

Depends on your goals really.
I think at this stage of the Sydney cycle you need to consider:
1. Will you be able to afford to hold it when interest rates rise?
2. What are your short/medium term investment goals? You may not be able to access equity for some time depending on how stagnant the market becomes (or possibly negative equity). So you might not be able to purchase your next property for some time...

I wouldn't pay much attention to the media hype.
It looks like you've crunched the numbers yourself. If the numbers work and you think it's worthwhile now then get in and buy.

I personally am looking to buy again this year but am seriously considering out of Sydney as the yields just look terrible everywhere.
 
I have been doing an analysis on a Sydney property & have the following scenario racking my brain:

I have found a property off-the-market with the following attributes:

? 1 bed, 1 bath, 1 car
? 58sq/m plus car space
? Approx. 5kms from CBD
? Walking distance to train station & supermarket
? Small unit block (older style)
? Low Body corp
? Potential for cosmetic reno

If I secured this property for $550k & continued tenanted @ $500 p/wk, based on 5.00% capital appreciation going forward it would only take under 4 years for it to become CF +?ve. My CF calculator tells me it will only cost me $29.00p/wk after tax with borrowing 105%.

By all accounts this seems pretty close to a risk-free purchase for the following reasons:
? Close to CBD
? Low out of pocket cost per week
? Sydney population growth expected to continue
? Rates to stay low for at least a few more years (my opinion)
? Blue-chip suburb with low vacancy rate & appeal to renters

This has the foundations of a decent purchase, my only worry is buying at the top of the cycle. Plan is to hold this long term (never sell) & potentially use as PPOR in the near future (3-5years) so maybe the cycle doesn?t even matter?

What are your thoughts? Should I be this worried about buying at the top of the cycle? Economic commentators all saying there is a bubble etc & its making me hesitant.

Generally i wouldn't recommend most places in Sydney to buy now, but For 550k with all the above factors you mentioned, plus the location, I don't think its too bad and you could do a lot worse. Also, if your planning to have it for ppor then its an even easier decision. Don't worry about all the bubble talk nonsense. It mostly affects ppl who bought way over priced property. Now I haven't seen the unit so I cant know for sure, but from the data you provided, its something that could be quite a decent buy, even in this market. Also it completely depends on your goals, circumstances etc.

Leo
 
How does the price compare to comparable units that are on the market ?

An off-market transaction does not automatically equate to a bargain.
 
All of this sounds great:

? 1 bed, 1 bath, 1 car
? 58sq/m plus car space
? Approx. 5kms from CBD
? Walking distance to train station & supermarket
? Small unit block (older style)
? Low Body corp
? Potential for cosmetic reno

Even when the steam comes out of the market, the above will put a floor under the value.
 
All of this sounds great:

? 1 bed, 1 bath, 1 car
? 58sq/m plus car space
? Approx. 5kms from CBD
? Walking distance to train station & supermarket
? Small unit block (older style)
? Low Body corp
? Potential for cosmetic reno

Even when the steam comes out of the market, the above will put a floor under the value.

100% agree.
 
There's not a great deal of property at that price point within 5km of the cbd.

Unit sounds reasonably large for a 1 bed @ 58m2 plus parking.

Demand will always be there that close to town.

Even with a market correction & ppor on the horizon it would stack up.

What else is being built in the area, how much are they asking for similar properties?
 
I have been doing an analysis on a Sydney property & have the following scenario racking my brain:

I have found a property off-the-market with the following attributes:

? 1 bed, 1 bath, 1 car
? 58sq/m plus car space
? Approx. 5kms from CBD
? Walking distance to train station & supermarket
? Small unit block (older style)
? Low Body corp
? Potential for cosmetic reno

If I secured this property for $550k & continued tenanted @ $500 p/wk, based on 5.00% capital appreciation going forward it would only take under 4 years for it to become CF +?ve. My CF calculator tells me it will only cost me $29.00p/wk after tax with borrowing 105%.

By all accounts this seems pretty close to a risk-free purchase for the following reasons:
? Close to CBD
? Low out of pocket cost per week
? Sydney population growth expected to continue
? Rates to stay low for at least a few more years (my opinion)
? Blue-chip suburb with low vacancy rate & appeal to renters

This has the foundations of a decent purchase, my only worry is buying at the top of the cycle. Plan is to hold this long term (never sell) & potentially use as PPOR in the near future (3-5years) so maybe the cycle doesn?t even matter?

What are your thoughts? Should I be this worried about buying at the top of the cycle? Economic commentators all saying there is a bubble etc & its making me hesitant.


In my opinion, I reckon you would be better to put your money in other markets to get a better return for now. If your goal is to move into the property in the next few years and you need a place to live, then sure buying a property to live in would be important for you. Otherwise from an investment point of view, Sydney is currently priced too high and it's just a matter of time when the price of property will correct itself.

That's my opinion and I think it's worth just waiting...
 
I don't think it will drop less than 550k, it sounds like a good opportunity.
Good size, car space, walk to station, low strata, Reno potential....
Sounds good.
 
. Otherwise from an investment point of view, Sydney is currently priced too high and it's just a matter of time when the price of property will correct it..

Does that mean you wouldnt consider paying 650k for a 2 bedder in north bondi?

Leo
 
Where is it? I'm sure you won't mind considering it's an off market deal... Is it Mosman? I know a guy selling one there for similar price..
 
Sounds like good fundamentals. Sydney's prices are out of control but there is limited land within 10km of the CBD so if the market collapses, I feel purchases like this will be relatively safe (well that's what we tell ourselves with a relatively similar property we purchased in Sydney late last year!)

One question: regarding this 'If I secured this property for $550k & continued tenanted @ $500 p/wk, based on 5.00% capital appreciation going forward it would only take under 4 years for it to become CF +?ve. My CF calculator tells me it will only cost me $29.00p/wk after tax with borrowing 105%."

In order to becomoe CF+ are you assuming the rent will also grow at 5% p.a.? This would be the only potential flaw as I don't think rents are growing this quickly (if at all!)
 
I have spent many hours on this great forum and also researching Brisbane, Gold and Sunshine Coast areas to buy IPs.

And then, I went against what most forumites are saying and bought something locally (2200). I went through the numbers many times, thinking I am missing something but it just looked good even at the peak of the market. It doesn't have any reno potential, but the place is only 12 months old, so depreciation for years to come. Guaranteed no vacancy for the next 18 months (contracted with the government), I know how much rent I will be getting, and given these low interest rates, the place is cash flow positive by $5-10/week before tax (yes, I thought that my calculations were not right, but I am certain now that I took everything into consideration). Looking at $4-5k CF+ per year after tax/depreciation. Could not resist this offer, I know the area well...

It is worth mentioning that my calculations are based on nil vacancy and nil expenses for repairs (the property is 12 months old).

In my opinion, I only need another 6 months of moderate growth to be able to pull some equity out and buy something cheap (<400k) in QLD (if they let us borrow 85%+ that is).

I am lucky that my PPOR now has enough equity for another IP deposit, so still actively looking at QLD regardless of relying on the new place to generate equity short term.
 
And then, I went against what most forumites are saying and bought something locally (2200).

There is nothing wrong with buying locally if the purchase stacks up. I've bought locally twice recently - one was only 200 metres away.
 
I bought one because my previous tenants moved into the block, it was really close to trains (and the associated noise). When I asked them about train noise, they said it didn't bother them at all. So a bit later I saw this great undervalued property listed in the complex and I snatched it up without hesitation.
 
I am new(ish) to this property investing game, so I have hesitated buying in Sydney simply because there is a real risk of prices not going further up, hence no equity to buy more for a while. I doubt that my area is in a (massive) bubble, so not anticipating prices going down a lot.

But then, I may have equity generated by this Sydney IP faster than if I invested in let's say Brisbane, I just need another 6 months. A risk I decided I am willing to take.

My point - Propertynewby, if you are not looking to buy again any time soon, and you have a chance to buy a well located unit in Sydney that doesn't cost you much to hold, AND you may use it as PPOR later (to me, the most important point you made), then, imho, the cycle doesn't matter?
 
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I have spent many hours on this great forum and also researching Brisbane, Gold and Sunshine Coast areas to buy IPs.

And then, I went against what most forumites are saying and bought something locally (2200). I went through the numbers many times, thinking I am missing something but it just looked good even at the peak of the market. It doesn't have any reno potential, but the place is only 12 months old, so depreciation for years to come. Guaranteed no vacancy for the next 18 months (contracted with the government), I know how much rent I will be getting, and given these low interest rates, the place is cash flow positive by $5-10/week before tax (yes, I thought that my calculations were not right, but I am certain now that I took everything into consideration). Looking at $4-5k CF+ per year after tax/depreciation. Could not resist this offer, I know the area well...

It is worth mentioning that my calculations are based on nil vacancy and nil expenses for repairs (the property is 12 months old).

In my opinion, I only need another 6 months of moderate growth to be able to pull some equity out and buy something cheap (<400k) in QLD (if they let us borrow 85%+ that is).

I am lucky that my PPOR now has enough equity for another IP deposit, so still actively looking at QLD regardless of relying on the new place to generate equity short term.

Have you also considered your strata cost(if it is unit) and insurance cost? I usually find strata cost kill most of the positive funds...
 
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