Hi Guys,
I’m quite new to this forum and I’m about to start my IP. I have done a bit of research and found properties in western Sydney, where there is a possibility of renovating and generating dual income by adding a granny flat. Currently lot of investors are in the market and I realised that almost every property is selling with in a week. Most of the investors are working on same strategy, they are adding granny flat to re evaluate and buy next one. I believe its been happening from last year and now rental yield in this area is coming down due to over supply. Rent per week a year ago was $400-$420 per week whereas now its close to $330 for 3 bedroom house.
On the other side I have found few properties in country side where I can get properties in much cheaper price and they will give positive cash flow. I’m not sure how much capital gain I’ll get from these properties in coming years and not sure which option would be better to start with. any advice will be helpful.
Thanks in advance!
Hi and welcome aboard.
I’m not a west Sydney investor but do have a lot of clients who have and continue to purchase in the area.
Personally – I think it’s too late at the moment. The market has moved quickly – I’ve had some valuations come back 30% higher for properties purchased two years ago.
The cashflow from GF’s is pretty good though.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie,
Thanks for quick response. I’m also thinking the same that prices are now gone quite up, few suburbs in that area has shown growth of 30% in a year. I’m starting to build my IP, where would you suggest to look?
Really appreciate your help:)
Thanks
Rishi
I can tell you how to structure your loans but I can’t tell you where to buy your property :-)
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Rents were not typically $400+ a week in Mt Druitt. I don’t know where you got those figures. Or are you talking a different Western Sydney?
Rents rose sharply in 2012 and have been steady or down a little since then.
It’s all part of the cycle.
Rents rise, sale prices rise, wait a little while and rents will have another rise.
In order to grow a portfolio you need Capital Gain (or a big income to save deposits).
Cashflow though is what allows you to be able to afford to buy more also. If they are negatively geared you soon run out of cash to pay the mortgage.
A good balance is needed.Depending on your situation as to where you start. Do you have enough wages to fund negative cashflow? Do you have a big deposit?
Everyone’s situation is different.Agree that it’s very difficult to get anything decent for a reasonable price in Western Sydney at the moment. I wouldn’t be buying there now.
Thanks Jamie, really appreciate your help. I’m considering buying my first property just on my name for mainly these 2 reasons
1. My wife’s income is too low so it will help me getting tax deduction
2. Saving on land tax because it will be my first property.
I’m thinking of keeping loan application on just my name for first property.
What do you suggest?
Thanks in advance.
Catalyst, you are right I was told by real estate agents that rents were high a year ago but I think whatever they say is always not true. I’m not inclined towards negative cash flow properties because I don’t want to pay from my pocket and If i have extra cash I would rather invest in renovating and adding more value to property instead of adding my cash to mortgage instalments.
If not western Sydney, where would you suggest to look?
My preference, although it may not suit your circumstances, is to go for cashflow first, and try to find properties where you can manufacture capital growth (eg the granny flat idea). Waiting for capital growth in the market is speculation, there is no guarantee. You can manufacture capital more cheaply too, eg a coat of paint, a new kitchen etc.
I don’t know the areas around Western Sydney so I can’t tell you specifically where to look. It also depends how comfortable you are with investing in places a long way from where you live. But, smaller urban centres can give better yields. Look for places that have multiple industries driving the economy, reasonable employment, schools, infrastructure…
I can tell you how to structure your loans but I can’t tell you where to buy your property :-)
Cheers
Jamie
Jamie, I’d like to hear what you normally advise, do you normally say, all interest only loans, do you say one with an offset, what would you typically encourage for someone who wants to build a multiple property portfolio?
Thanks,
WTRIf not western Sydney, where would you suggest to look?
researchgeek – with a name like that I think you will do well!
There are loads of options to consider outside of Sydney. They differ widely depending on the population bases, economic activity, growth drivers and stage in the property cycle. You need to think about your long term goals and work backwards. Ie Positive CF is great, but it might be that manufactured equity is your immediate key to multiple purchases. These may or may not be mutually exclusive.
If you haven’t seen a good broker (like Jamie above, he is one of the good ones) then you need to do this and also spend some time thinking about the kind of portfolio you actually want, then choosing individual properties becomes easy.
BuyersAgent | Precium
http://www.precium.com.au
Email Me | Phone MeSouth Coast NSW Independent Buyers Agent - Wollongong to Batemans Bay and Regional NSW. DOWNLOAD OUR FREE 14 POINT PROPERTY BUYER'S CHEATSHEET to avoid painful mistakes at precium.com.au
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