Whalan, NSW????

Hello fellow investors,

Just wanted comments/opinions/suggestion/views on Whalan NSW. Just drove around the area the other day. Its within 3 kms from Mount Druit Westfield. The property that I inspected was a 3 bed, 1 Bath 1 car. Good size block around 600sqs. Its an old fibro house built in 1970s. I have never bought such an old property, so a bit hesitant. The property is almost neuterally geared. Any help would be appreciated especially on


- Pros and Cons of buying an old fibro house (maintainance,reno)
- Best offer to put in (based on the info above)
- Area and future Capital growth???

Thanks!!!!
 
Aaahhhh....Whalan. One of the better suburbs around there. close to shops station and M4. Fibro is relatvely low maIntenace. Try to buy it for around $230K if poss.
 
I think the days where you could get a property in Whalan at $230k are over but as Datto has said if you can get it at that price then you have done well (unless its a fire damaged house of course).
 
How are you coming to the conclusion that its neutral geared? I have done the numbers and although the yield is decent it is still definitely negative geared.
 
I think its positively geared. You get $300+ pw rent. Say $250K purchase price ( but I reckon you can get cheaper with haggling). Well thats 6.2% gross return. You get 5.3 % on 2yrs fixed.
 
What about the remainder of the outgoings? Insurance, property agent's fee, maintenance, council rates and the other upfront costs, such as LMI (maybe), stamp duty, etc?
 
I'll have to get back to you on that. I need to do the sums . Can't do them now. But look its gonna be close.
 
Thanks Datto and Shahin. Here's why I said almost neutrally geared. Sorry could not copy amd paste the formatting. It could actually be positively geared If I get a better deal on interest rate. I have assumed it to be 5.75

Property Price $240,000
Deposit @ 10% $24,000
Stamp Duty $7,222
Legals $1,750
Bank Loan @ 90% $216,000
Costs of Acquisition $32,972

LMI $3,000
Annual Interest Payable @ 5.75 % $12,593

Weekly rent $300
Annual rental Income $15,600

Strata/Land Tax
Water $700
Council $1,000
Mgmt Fees $1,201
Landlord Insurance $350
Total annual outgoings $3,251

Net Income/Loss before tax -$244
Negative gearing benefit 73.11
Net out of pocket annual $ -$171

Let me know if I am missing something.Any comments on capital growth for the area? Risks in buying fibro homes?
 
You missed building insurance which on a replacement value of $200-220k to rebuild a 3br house will cost 600-800pa.
 
Thanks Dave. Would I need both Landlord Insurance and Building Insurance ??
Apologies if it is a dumb Q....I am quite inexperienced and only starting off...:)
 
Advantedge are offering 2 year fixed at 4.99% and variable at 5.38% which will help that equation but I believe you need to add annual maintenance costs to the outgoings equation.

Technically speaking you haven't included your deposit in those figures. By this I mean you have used your cash monies which could have either earned you interest or if they are borrowed from another equity then interest is also applicable on that portion.
 
Thanks Dave. Would I need both Landlord Insurance and Building Insurance ??
Apologies if it is a dumb Q....I am quite inexperienced and only starting off...:)

For a freestanding/torrens property yes you need your own building insurance. If it is strata/community you usually dont as its covered in common property insurance.

The biggest gotcha for insurance is you need to insure it for replacement value. You may buy a house for $240k with a land value of 120k so house "worth" 120k. The valuer will say to rebuild from total loss + site clearing costs would be, say $250k, so that is the insured value required by the mortgagee. Ensure you factor the whole cost in and not a premium on sale price less land value.
 
Any comments on capital growth for the area? Risks in buying fibro homes?

Capital Growth is the $64000 question. CG has been slow in this area. But I have noticed it goes up in spurts. Real Estate.com. au shows a house in Whalan for $239K, which seems cheap but you have to check it out to see why.

I bought a 3 bedda fibro for under $80K in the 2770 area in late '90s. In 2003 I had it "sold" for $240K ( I changed my mind on the sale). Today, I would be lucky to get $240K.

Between 2002 and 2003 I saw the house prices rise $100K in 2770. Im sure others will vouch for that claim. This is the "growth spurt" Im talking about.
 
Capital Growth is the $64000 question. CG has been slow in this area. But I have noticed it goes up in spurts. Real Estate.com. au shows a house in Whalan for $239K, which seems cheap but you have to check it out to see why.

I bought a 3 bedda fibro for under $80K in the 2770 area in late '90s. In 2003 I had it "sold" for $240K ( I changed my mind on the sale). Today, I would be lucky to get $240K.

Between 2002 and 2003 I saw the house prices rise $100K in 2770. Im sure others will vouch for that claim. This is the "growth spurt" Im talking about.

I'd agree with that.

It's been a little slow out West after 2003 generally speaking. There's always exceptions to the rule and I guess that's why buying under market value is so important. We've held a property in the Penrith area since 2007 and it's done very little as far as CG however it is starting to move now. Rents on the other hand have increased well. I guess it's just a matter of CG catching up :D

Jack
 
I see little risk in buying a fibro house. Might need painting every 10 years. Always keep it in tact. I never drill or sand into it or damage it. Mind you when I was a kid I used to use it like chalk on roads etc

Also if you demolish the house there is the extra cost of dealing with the fibro.
 
It could actually be positively geared If I get a better deal on interest rate. I have assumed it to be 5.75


Bank Loan @ 90% $216,000
Costs of Acquisition $32,972
Annual Interest Payable @ 5.75 % $12,593

Weekly rent $300
Annual rental Income $15,600

No budget for repairs - you will need it. Rent 52 weeks a year? Hmmm, you'll also need some luck.

Interest calculations based on current interest rates, while they should be low for a while, it will not be "positive geared" at much higher.

Speaking of "positive geared", common error is to just calculate based on loan amount. What, the deposit funds don't cost you anything? Not even the 4.5% you get in savings account? Use the total cost to purchase in the calculations.

As for fibro, no risk if not damaged (see above). It's not the house that will appreciated, it's the land (in theory anyhow), so long as it rents who cares. In that area most houses are fibro or hardiplank so brick is no advantage. What people want is yard for kids and dog (at least one will be chained up), a veranda for the old lounge, and a phone to call the police (sorry I digress again)
 
Like some of the others have mentioned, there are a few things missing in your calculation, as well as not factoring the deposit into the equation.

When I look at a property, I do the calculation on yield based on the entire cost to me to acquire the property. So....deposit, stamp duty, legals & balance. I don't like to put any of 'my' money into the deal. Of course, if it's your first property, you have to use your own money.

Now, as far as capital gain is concerned, well, the area rose rapidly until 2003, when it reached it's all time high. It then pulled back and stayed steady. Values have now slowly inched their way back up, which is good. I think we will continue to see growth, just don't expect things to move as quickly as they did last time.
 
Good work working through the calculations before you buy! Most don't and many just look at the upfront costs. I have 8 investment properties and over the years I have been tracking my additional costs (like any good ex-engineer I love excel) and I allow between 20-30% of the rental income.

This quick little 3min video might help in explaining the other costs you should look at http://www.investorschoice.com.au/tools-and-tips/the-additional-ongoing-costs-of-your-investment-property/

Or you can download my article as featured in Smart Property Investor Magazine from October 2012 from this link which covers all the costs in depth. http://www.investorschoice.com.au/in-the-media/

Bottom line costs are one thing but the actual property is the other.

I had one of my mortgage broking clients buy in Whalan and after the year long issues associated with building the granny flat (builder going broke, property being stripped by angry drug dealer, you know those 'out of the ordinary' glitches) the granny flat tenant ended up leaving as he was sick of his car being tagged out front. So do your sums but also be alert to the property and the area and do your research thoroughly.

Hope this serves you.

Jane Slack-Smith
 
Hi Jigmeister,

I have attached the MEDIAN sale prices for the last 10 years. Although there is not enough data to give an accurate figure for this year. Keep in mind the median price is difference to the average price.

I believe the average price is a better indicator of what the market is doing. So, divide the volume ($) of sales by the number of sales for that particular calendar year.
 

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Rent 52 weeks a year? Hmmm, you'll also need some luck.

Not much luck needed. Vacancy rates are <1%.

I have an IP in Whalan, rent is $360 pw and could probably be revised up a bit.

A quick check on RE.com.au returns 302 houses for rent in area postcode 2770.

Remember that about 10% of Australia lives in western Sydney.
 
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