NSW Buying in Sydney to renovate or buying somewhere else no reno??

Hi All,

A bit about me. I moved with my husband to Australia from Venezuela 5 and 1/2 years ago. We came with probably 8k, limited english and no jobs to try to improve our quality of life in this beautiful country we now call home. We are both professionals and had worked hard in saving and educating ourselves in property investment for the last 2 years so when we had enough for a deposit, we decided to buy an IP instead of a home so we can provide for ourselves in future. We bought our first IP early this year in Brisbane.

Now, for 2nd property, I am torn between two options one being more risky than the other IMO. Our original plan is to buy and hold but I have this burning desire to renovate and hold since I believe it is a great strategy especially in this economic environment. So I am considering some things:

Option 1
a) APRA might affect our capacity to buy more IP in the near future. We don't own a home so it might be easier to get a loan if you are applying as OO.
b) If we decide to buy as OO to renovate, then it would have to be Sydney or surrenders so we can move in and do the reno little by little while we learn (never have done a reno before) then move out and rent it out.
c) Worry is: Sydney is at its peak or past its peak and low yields. (Reno should improve yield and create some equity that would compensate any slowdown of the market).
d) Benefit: property in a city always demanded that eventually come back.

Option 2:
a) Buy somewhere else and hope for growth. No chance to do a reno.
b) Might be hard to get a loan due to APRA regulations.
c) Wait more time for the Brisbane market to get hot and then buy more.

Is option 1 to crazy at the moment? Thank you in advance for your insight.. How you see Sydney market moving forward??

 

Hi RM1827,

I don't think Option 1 is crazy but you will be paying a premium for Sydney property right now. Having said that there is always a deal to be had, but you will need to do thorough research and due diligence to ensure you purchase a property for:
1. The right price, and
2. You understand what the value would potentially be post-renovation, and
3. You are spending less than the difference between 1 and 2 (including all costs and expenses)

There is some risk here of course, as a first time renovator you will need to get your head around managing multiple trades, the order of tasks, the cost and the time frame. I believe that first time renovators tend to pay more for a renovation because there is learning involved - the payment may take the form of time or money (or both!).

Also if you want to live in it while you renovate the property needs to be in good enough condition to live in it before you even get started. I'd advise that you look at properties that would benefit from a cosmetic renovation with no or only minor structural work needed.

Good luck!!!!
vtt

 

Hi Vtt,

Thank you for your input. You have given me food for thought.

In a market such as Sydney already overpriced might be difficult to make a profit and might be wiser to wait for the market to cool down a bit...

 

Whereabouts in Sydney is work for you both? If on a transport corridor then you could explore heading north, or south along the coast, or west and do option 1 but only live in it for a limited time during and after the reno meaning you could head out of Sydney by an hour or so, which may mean getting a better price/benefit to reno ratio. Plenty of people who work on the fringe of Sydney happily commute an hour from outside. If you are working right in the middle of town its a long commute and I wouldn't do it even for a year, but everyone is different.