Where to buy in Sydney

[Fisher]

Hi,

I am planning to buy my first IP in the coming months. I want to buy in Sydney as I believe it would be too risky to buy your first IP in another city with no experience. My budget is around 400-450k and I am thinking of buying a 2 Br somewhere closer to the CBD rather than somewhere in Penrith. I also want to aim at something better than average in the area so in bad rental market I still have tenants. My aim is to achive good capital gain in the next five years.

What you guys think would be a good suburb to look at given my a bit controversial expectations.

Thanks.

 

[silversands]

"somewhere closer" is a broad description. What suburbs have you researched so far? - Regarding which of these suburbs would you like more advice?

 

[kweh]

For under 500K, I think you could go south. Sutherland Shire seems nice at the moment, comparing to the Upper and Lower North Shore area the price is reasonable.

Also, consider Bexley or Kogarah where they have devalued in the last few years, and predicting good growth by some in the near future.

 

[BV]

Fisher

For that money you could get something with land further out.
I wouldn't be worried about the shortage of tenants, because there is none.
There is severe shortage of rentals and it's Sydney wide problem so as a lanlord you will have the opportunity to choose the best applicants.

Cheers

 

[evand]

About 4 years ago Sydney landlords were giving away up to 4 weeks free rent and competing on price to get tenants in. Any tenants.

This current rental under supply/over demand wont last. Its just part of the natural property cycle and will last another 2-3 years at most.

Fisher

For that money you could get something with land further out.
I wouldn't be worried about the shortage of tenants, because there is none.
There is severe shortage of rentals and it's Sydney wide problem so as a lanlord you will have the opportunity to choose the best applicants.

Cheers

 

[coastymike]

In the current market you can get some properties around Randwick and Kingsford for those prices. Good rental demand from people wanting to live relatively close to the beach, is in the Eastern Suburbs, have some great architectural character, close to the university and major transport links and only 10 minutes into the CBD.

I think for the moment however cash is king. Let's say properties increase in price by 10% over the general Sydney metropolitan area next year. It means you miss out on about $40-$50K capital gain and the potential upside as the market has turned from flat to turning around. However if you get in and the market does stay flat for two years then your interest costs will be significant. Unless it is your PPOR I would be waiting and watching. Interesting 6 months ahead.

 

[FelixL]

Try places like Kogarah, Hurstville, Rockdale etc, apartments prices have been declining for the last few years while rent is rising. They've got direct express trains to to city from 25-35mins, not far off the coast line, shops/schools/resturants a plenty. 400k will get a very good 2 br apartment or a lesser built 3br one.

 

[Fisher]

"somewhere closer" is a broad description. What suburbs have you researched so far? - Regarding which of these suburbs would you like more advice?

I looked at the prices from St Leonards, Artarmon, Lane Cove, to North Ryde and Gordon. St Leonards is already out of reach for me. Lane Cove and Artarmon are on the edge, but it is already hard to get something decent with my budget.

I am not limiting myself to North Shore though. I am trying to find a suburb with good potential where let say future development may add value. Like train station in North Ryde. This one is too late already: prices gone up much since last year.

 

[Fisher]

Fisher

For that money you could get something with land further out.
I wouldn't be worried about the shortage of tenants, because there is none.
There is severe shortage of rentals and it's Sydney wide problem so as a lanlord you will have the opportunity to choose the best applicants.

Cheers

My budget is bound to the return of the property. If I get a house somewhere in Hornsby for 450k, but the return will be not 4.9% but 3% the amount the bank would lend me will go down.

 

[Jacque]

Hi Fisher

The lower your purchase price the higher your gross yield is likely to be.
For a budget of $400-450K you shouldn't have any problems picking up something in the LNS area such as Lane Cove, though if you're particularly stuck on 2bedders only, you will find it difficult going securing something decent and closer to the city, even on the northside, for this money.

$450K will easily also buy you a duplex or house in many western (and north western) suburbs of Sydney. Keep looking and asking questions- there's many of us here who've had experience buying in several Sydney suburbs.

 

[Fisher]

In the current market you can get some properties around Randwick and Kingsford for those prices. Good rental demand from people wanting to live relatively close to the beach, is in the Eastern Suburbs, have some great architectural character, close to the university and major transport links and only 10 minutes into the CBD.

I think for the moment however cash is king. Let's say properties increase in price by 10% over the general Sydney metropolitan area next year. It means you miss out on about $40-$50K capital gain and the potential upside as the market has turned from flat to turning around. However if you get in and the market does stay flat for two years then your interest costs will be significant. Unless it is your PPOR I would be waiting and watching. Interesting 6 months ahead.

I bought my PPOR in May last year. A month ago they sold a property worse than mine (11sm less in size, not so good view, closer to the road, only one garage not two, etc) in the same block for 11.5% more. There were 35 people in the first inspection and it sold in five days! I don't think Sydney RE is flat now. Areas closer to the CBD are getting expensive.

 

[Fisher]

Hi Fisher

The lower your purchase price the higher your gross yield is likely to be.
For a budget of $400-450K you shouldn't have any problems picking up something in the LNS area such as Lane Cove, though if you're particularly stuck on 2bedders only, you will find it difficult going securing something decent and closer to the city, even on the northside, for this money.

$450K will easily also buy you a duplex or house in many western (and north western) suburbs of Sydney. Keep looking and asking questions- there's many of us here who've had experience buying in several Sydney suburbs.

Hi Jacque,

Suppose I find a semi-detached or a town house somewhere, but what I tell to the bank to get 450-470k (450k purchase price + stamp duties) loan is: I am going to get something returning $420 pw on 450k purchase price. Do you think something with lend would give me such returns? If not than my budget would be lower. My PPOR is currently in Lane Cove, and from what I can see rented out in my block such returns are realistic. As for duplex, semi-detached, house or town house I am not so sure.

Could you please suggest some of the suburbs for example? I could research on the price and the rents and probably make some conclusions.

 

[Jacque]

Hi Fisher

Best money to spend here, to further educate yourself, is on a Residex quarterly report- for approx $90 you'll get NSW median prices for both houses and units, median rents, cap growth figures for last year and averages for last 10 yrs, rental yields and total returns for same. Worth every cent when you're indecisive about which suburbs to buy in.

www.residex.com.au
Happy reading

 

[BV]

Fisher,

I was investigating some DHA properties the other day and came across a few
houses that offer > +5% returns.
So you have a reasonable return with a good tenant base
in a Sydney market which IMO is about to turn and with interest rates predicted to come down.

I normally don't go for DHA properties because they have long leases
but these particular ones only have 3+3 years lease, ending right in the middle of the next boom

here are a couple of them

http://www.invest.dha.gov.au/dha/ho...ls.sok?ProductID=031U1E9V2Y6H070W6H7L3Z3F6W5D

http://www.invest.dha.gov.au/dha/ho...ls.sok?ProductID=0C1A1I9X3W73962G8A714Z8V9480

Cheers

 

[sash]

About 4 years ago Sydney landlords were giving away up to 4 weeks free rent and competing on price to get tenants in. Any tenants.

This current rental under supply/over demand wont last. Its just part of the natural property cycle and will last another 2-3 years at most.

Evand

I beg to differ if I may?

The Sydney market is severly undersupplied and builders are not able to deliver new product at affordable prices. This means that supply will be restricted till someone in the NSW govt. wakes up from their slumber and realises what their pay as you go infrastructure levies are doing.

I see this as a problem that will take 5-7 years to resolve.

I just visited the Canterbury-Bankstown area to get a view of the rental market and was shocked to realise that rents on units and houses had increased by at least 40% over the last 18 months. For example 2 bd units (old) in Wiley Park which used to rent for 165pw are now renting for 230-240pw...even at these prices they are flying out the door.

On top of this building costs are going through the roof due to a shortage of skilled labour. This in itself is also affecting supply. Currently we are about 20,000 properties short in NSW and it is going to get worse.

 

[evand]

Sash

I agree with your findings. The only divergence is the time frame. I see the under supply easing in 2-3 years. As rents rise and more investors enter the market, more properties will be available. Same old property cycle merry go round.

As always time will tell, we're only guessing really

 

[alexlee]

I remember reading those articles and ads around 2003 about 4 weeks rent free, oversupply, etc. Within 3 years or so, all that suppy had disappeared. Markets do turn faster than we think, mainly because the immediacy of the current situation makes us think it'll last a long time. I say we make hay while the sun shines and just jack rents up as much as possible, because the good times won't last forever.
Alex

 

[PrimeCommercial]

...I just visited the Canterbury-Bankstown area to get a view of the rental market and was shocked to realise that rents on units and houses had increased by at least 40% over the last 18 months. For example 2 bd units (old) in Wiley Park which used to rent for 165pw are now renting for 230-240pw...even at these prices they are flying out the door.

Wiley Park hey? mmmm then what about this little beauty in Lakemba

Block of 6 x 2 bedroom units for $990k
currently rented out at $52000 pa so thats about $165 p/w per unit.
Bit of a tidy up and bump the rent up to $240p/w ..$74880 pa to show a return of 7.56%

All good in theory hey

 

[Nathan]

i like look of lakemba 1 hey....

 

[peastman]

thats about $165 p/w per unit.
Bit of a tidy up and bump the rent up to $240p/w ..$74880 pa to show a return of 7.56%

Probably not much of a tidy up required. The cheapest 2br for rent there at the moment is $230PW. Makes the figures sound rather good. Being a Melbournian I have never heard of the place. I presume its a bit of a rough area with a lot of unemployment, would that be right?