Western Sydney - Rental Yield - Is it real?
- Thread starter neK
- Start date
Everyone says the yields are good and i agree..... But the thing is that there has got to be a catch, its too good to be true in my opinion. Question is, what is it?
What is the additional risk one is taking on when compared to buying a place in the Inner West, Northern suburbs, north shore etc....
What is the additional risk one is taking on when compared to buying a place in the Inner West, Northern suburbs, north shore etc....
Please share these sentiments with all your friends!
Leaves more for us.
The better returns arent simple buy and holds. You have to look for solutions to problems nobody else wants. What works for one doesnt work for the next investor.
As for good. Prices are going up, already looking at areas with similar to better returns with a lower buy in price. They do exist.
It may be cheaper to buy there than rent if you have the cash. But some people are simply using there as a stepping stone and see it as temporary. Others love the area (they grew up there, it is home).
Our properties are in Canada, and some of our rentals are even more extreme.
A couple of years ago we bought a 3 bedroom mobile home, on a rented lot.
Purchase price was $10k and the monthly lot rent is $170, which only includes water.
We bought this property with our credit card.
We have tenants currently paying $700 month. The property taxes are approx $230 year, and insurance around $400 yr.
We spent about $2000 fixing it up.
We still can't figure out why somebody didn't just buy this property for a PPOR.It is in the middle of a nice town of approx 10k.
This isn't an isolated case.At any given time there are several available for 17-25K
Nhg, without even trying very hard I've located properties (one that appears to be fully renovated) that when you crunch the numbers appear better than the rest of sydney (from a cash flow perspective).
Obviously better deals are to be had if you put some elbow grease into it, but for arguments sake, im trying to keep it simple by using renovated homes or decent condition homes as examples.
Datto, i agree you with that western sydney doesnt get the same rent dollar wise. But if you simply look at the net cash flow (ie what it costs you vs what you get), Western Sydney wins.
What good is collecting $2800 rent per month when my mortgage repayments are $4500 per month. Im short $1700 per month. In comparison, Western Sydney can collect $2000 rent per month and the mortgage repayments are $2100 per month. I'm short $100 per month.
As for the good tenant... thats exactly what i put it down to, its a lucky dip, (sterotyping here) the tenant is on centrelink etc. But from all the replies it doesnt appear the case. There are good tenants out there. And this applies to all of Sydney, the question is how good your PM is.
But with all this, it still irks me....... theres something im missing here... i just know it (i just dont know what it is im missing).
neK, dont forget capital gain.
Western Syd won't get anywhere near the same capital gain as Nth beaches (unless you buy about 5 properties in Syd West)
Then there's also the stigma of western Sydney. This scares people from investing there because of some perceived risk. Remember, the higher the risk the higher the yield.
Western Syd won't get anywhere near the same capital gain as Nth beaches (unless you buy about 5 properties in Syd West)
Then there's also the stigma of western Sydney. This scares people from investing there because of some perceived risk. Remember, the higher the risk the higher the yield.
Einstein
(just for fun)
neK, it IS true. Our average gross rental return in the area is 8.1%. And we only started buying there in 2010. As others have said the market is certainly moving. People ARE paying asking price on something that is cheapest/comparatively cheaper to other similar properties.
There is always a risk with any investment. I always remember a quote from Kim Kiyosaki that says that you have to be aware of the downside of every investment as there is no investment without a downside. Cashflow lowers the risk and in the current market, Capital Growth is great. (Great as in...it's the first CG cycle I'm watching, and to me any CG is "great"
)What I think of Mount Druitt is - great infrastructure - trains, buses; schools; hospital; train station; Westpoint shopping mall (it's huge); Proximity to Bunnings; A business park being developed; There is new development in the area.
Look at it this way, these properties that are now selling for $200k for example, will eventually be worth say $300k or 400k. It's inevitable as the rest of Sydney is a lot more expensive for majority of the first home buyers.
I don't like my life style being impacted too much financially, so I am happy to buy where I can see high returns, so my tenants pay for the property and more; and potential for capital growth.
You can still find >7% return deals if you look harder and act fast to get the best deal for yourself. Although most properties are selling within hours of coming on the market with "Under Contract" marked on them, I think there is more CG to come - especially with another few impending rate cuts.
All our tenants are decent people who pay rent on time. I couldn't care less why they choose to rent and not buy a property. We may never know. One of my tenants has his own tax business.....so there you go.
We have a reliable property manager. Do not be turned off by the picture painted by many as you can minimise risk by choosing a quality property manager.
All the best with it!
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I would have thought it would. Northern beaches are already so expensive. A lot of people cannot afford there so where do they go? I think there is room for some nice areas out west to get some good CG - Seven Hills, Girraween, Toongabbie etc. We've already seen it with Wentworthville and Westmead. I live in Cremorne and prices there have gone down if anything in the last 3 yrs
Maybe I am wrong though?
That's such a wEIrd rule!
Haha. Society, sovereign. And... wierd...
all exceptions. Another failed lesson from primary school.Meanwhile. Yes you wont experience as much capital growth $-wise like the north shore unless you buy 5 and it compounds... but wait, you can buy 5.
A year ago my borrowing capacity was $400k. 3 properties later it is now like $550k. It keeps going up. If I had bought a north shore property, my capacity would be lower.
datto, I thought you loved the west
Don't get me wrong. I was merely stating there is a stigma attached to W Sydney. Especially evident when you speak to some of our cousins in the city. I like the west because its cheap and thats why I have properties there.
Television:
"That's such a wEIrd rule! "
Yeah, you got me there. I'm bending over, go easy!
itxrd:
the point about capital gain is that a $300K property in W Syd might be worth $500K in 5 yrs time. Whereas a $1.5m property on the Nth Beaches might be worth $2m in that same time.
devank:
Proper nouns don't count.
Hi Vaughan, i think you're missing my point. Im not saying that all properties in the west have good yields. I'm saying that even if you scan domain for a few mins you can find renovated properties for sale. Then if you compare properties that have been rented in out (that are in a similar condition and in the same street), the numbers stack up very well.
Now if you tried to apply the same formula elsewhere in Sydney (say inner west) it just doesn't work. You would need to find not so nice renovated properties and put in elbow grease to bring it up the scratch. Only after that does it the yield come close to the example above.
I understand what you;re saying about the numbers: I did them myself and only 2770 comes close to CF+ in an area that is commuting distance to Sydney. The other place is Umina Beach if the property is a dual occupancy.
What I'm saying is, if you want a cf+ property then you don't want one that is renovated. You want to buy it cheap and do a cost effective reno to lift the value and the rent yield.
All those renovated places you see for sale are the places that have already been made-over.
What I'm saying is, if you want a cf+ property then you don't want one that is renovated. You want to buy it cheap and do a cost effective reno to lift the value and the rent yield.
All those renovated places you see for sale are the places that have already been made-over.
