Investment Property with a Budget of $350,000

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  abb on 27/07/2016 - 16:04

  +5

  "the suburbs like Dubbo and Albury"

  I think you've set a whole new level of "Greater Western Sydney" there.

  • 

    airzone on 27/07/2016 - 19:17

    I saw that and chuckled. But at least Broken Hill isn't included in the mix

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  naritas on 27/07/2016 - 16:34

  +4

  Speaking as credit advisers we've seen the following when looking at rental yield vs capital growth:

  1. Properties with the hallmarks of delivering sustainably high levels of capital growth and high yields are what people in the finance industry joke about because they are unicorns. Many property spruikers will try and sell you 'their secret' to buying cash flow positive properties that rapidly appreciate in value…in reality, the market prices in growth prospects in the sale price (what you'd pay to get the property). Refer to discussions on OzB regarding student accommodation, NRAS and micro apartments with high yields. The high yields normally come as a product of historically low capital growth, impaired prospects for future capital growth or with hidden complexities that can make the returns relatively risky. The cardinal rule of property investing is that beating highly skilled property investors and property investment trusts at their own game is possible…but it involves really understanding the factors that will influence your investment's return and usually making some compromises to avoid risk…which leads to..
  2. Given the likely need to choose a trade-off between high capital growth prospects and high rental yield, err on the side of caution. Do your research using propertyvalue.com.au (CoreLogic) and SQM, or enlist the help of some trusted advisers (certified valuers, legal, tax, finance). If you're relatively new to this and looking to make a buy whilst doing the least amount of due diligence, try and pick up an older unit (10-30 years old, not necessarily an old unit), in greater Sydney, in a small strata block. A block with a history of small strata management fees and a good sinking fund would be considered a relatively safe bet. Fixer upers, new/off the plan purchases and units in high density blocks are considered much more risky at present due to a variety of factors. Suffice to say, the profits may be bigger if you get it right - but you could get it terribly wrong in those markets if people's fears to do with a Sydney property bubble or Chinese investment collapse come to fruition.
  3. Focussing on suburbs or general localities is not a hugely useful approach to urban property investing unless you are planning on buying a significant number of diverse properties within that locality or you are looking at rural/semi-rural locations. Rural locations are generally seen to be more risky because of their proximity to jobs and the size of local population which will likely affect the liquidity of the investment. Just remember that the individual characteristics of a property can often see performance that is totally out of line (for better or worse) than the median property performance for a whole locality. If you're interested in getting good info to make an informed investment purchase, use the collective input of certified valuers, research houses (CoreLogic, SQM, etc) and industry professionals to form opinions on properties you are specifically evaluating.

  If you're evaluating any scenarios and you want some input, please feel free to send us a PM.

  Hope this helps.

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  lehatu on 27/07/2016 - 16:37

  I'm thinking about Gillieston Heights, Hamlyn Terrace, Wyong. Our company do have some projects there price around 400k which can get good rental yield as well as capital growth.

  But yea i do need more information for more in-depth advice

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  tonka on 27/07/2016 - 20:02

  +1

  You can get a townhouse 5 minutes walk to the beach at Gold coast for that. Which is what I did. The rent pays the mortgage, I pay the rates and strata around $4500pa which are high, I had tenants queued up when I put out to rent. I've gotten 29% capital growth in past 2 years.

  I figure as well all those baby boomers have to retire somewhere and they're all into the rock'n'roll lifestyle that is the southern Gold Coast.

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  tonka on 27/07/2016 - 20:24

  With regard to the rural properties.
  Capital growth in rural areas is a fairly new development and I personally don't trust it.
  Used to be 15-20 year periods with hardly any growth. Demand is also very dependent on local industry, prices can plummet to the point houses are given away to avoid ongoing rates. University towns like Wagga and Albury are a little different but I would be wary of the fact that those in the know are the ones buying, building and selling in these towns (mates of mine). Prices have already gone up more in the last 15 years than probably in the previous 50.
  I'd worry about what happens if they create a housing glut in these big towns as they keep themselves employed.
  I think for the best long term investment go a cheap house on a really big block just beyond the urban fringe in a growing small city. I had a mate did this, worked minimum wage their whole life but is now paying cash for million dollar houses in their 40's.

  • 

    virhlpool on 21/11/2016 - 00:49

    I think for the best long term investment go a cheap house on a really big block just beyond the urban fringe in a growing small city.

    Any recommendations for large city, i.e. Sydney?

    • 

      tonka on 21/11/2016 - 01:37

      Not much chance for $350K, maybe north of Brisbane or take a punt on where there may be faster rail in the future to bring some satellite cities into commuter range, like Nowra and Goulburn. Either way these types of places should grow with Sydney and are subject to their own urban sprawl which is what you would be trying to cash in on.
      Retiring baby boomers will probably be pushing populations up right along the coastline, so look for proximity to hospitals etc.
      A super fast rail link in the future could change things up a bit, maybe put places like Gundagai less than an hour train trip away.

      • 

        virhlpool on 21/11/2016 - 01:53

        Thanks. For Sydney, $350k won't work but what if it were $700k? Any suggestions?

      • 

        tonka on 21/11/2016 - 23:43

        +2

        @virhlpool:
        You'd be flat out now getting a house in Sydney for that, harder to get one that's an above average investment.

        I did well when I bought my house as it's been rezoned to high density, I wish I could have bought acres but I never could afford it. My friends who could are now quite well off. Anyway I'll try and impart the little knowledge I have.

        Australia's population is planned to grow dramatically. Roughly - 18M (1996) - 24M( 2016) - 34M(2036), so is planned to grow more in next 20 years than the previous 20years and to quote Lex Luthor , people need to live somewhere.

        So you look at what happened in the last 20 years and invest assuming the same will happen again.
        Farmland on the edges of the city will turn into new suburbs and malls.
        High rise apartments will grow around train stations.
        Old dagy suburbs will get trendy as the inner city expands.
        Older houses on bigger blocks will be knocked down to build duplexes.
        Parramatta and other CBDs will get taller and even more city like with more infrastructure and facilities.
        Some of the undeveloped suburban centres will start growing up into new cbds
        Small towns will grow into big towns

        In Sydney for that price range, Glenfield and Macquarie Fields around the train stations, maybe Warwick Farm try for either a larger block with a wide frontage or try and get a spot close enough to the station that it may eventually get rezoned for high rise.
        If you can spend more (a fair bit more) look for 1-2 acre block with house around Leppington and Bringelly.

        Don't discount just buying where you want to retire to and renting whereever is convenient in the meantime.
        That is, you buy a daggy house on your dream retirement block now, rent it and negative gear it your whole working life, then build a new house and move in upon retirement and never pay capitol gains tax.
        In the meantime, pay rent in the big city where a mortgage is unaffordable and you'd be stuck in a crap house, live where you want, keep your commutes short by moving close to work or schools as you need to and have a nice lifestyle.

        I do think if I was buying now I'd be looking at either southern gold coast townhouses (affordable limited commodity), houses towards the coast north of Brisbane (future urban sprawl), acreage inland of Bris (urban sprawl and rezoning), or the same in any of the coastal NSW towns and cities.

        I would think in 20 years with the forecast population growth, Brisbane will be as big as Sydney now. Plus any seachange type property like Goldcoast or new waterfront estates that open are limited commodity so supply and demand rules apply.

        BabyBoomers are gonna want to cash in their city houses and move somewhere cheaper so they can spend all their money before they die as well. So you would also be looking for seachange type areas with clubs and hospitals, close enough to airports for all their holidaying.

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  Sshanaz on 28/07/2016 - 09:59

  I would start looking into Gold Coast. Is there any other area to consider?