NSW IP : An apartment (2b) in Homebush ~725k -- good investment?

Have something around 750-800k to invest in Sydney.

Looking at rental returns of ~ 580$/week for an 2b apartment in Homebush is going somewhere around $725k these days. Strata is between 600-1000$ PQ for these ones.

eg lets say this one :
176/14-16 Station Street Homebush NSW 2140 - Apartment for Sale #125279514 - realestate.com.au

Any thoughts on such property investment?

 

I personally would not buy an apartment in that suburb. Is there a reason you're looking at buying right now?

 

Heavily negative geared and at that price range, opens you opportunities to several other areas to invest in. Buying an apartment in Sydney in general is a pretty risky.

 

Thanks for the responses.
I am still unable to understand how and why this is negative gearing and risk for an apartment in that area ( eg the specific one I posted above)? Really looking for some detailed help for understanding.

 

I've posted up in some of my previous comments in relation to apartment prices in Sydney. From my personal research, I've seen that apartments are experiencing a decrease from their listed prices. Pretty much from Baulkham Hills, Castle Hill, Lidcombe, Carlingford and Straithfield. Up to you but with that amount, I think it's risky and with the strata amount per quarter, it's killing your cashflow.

Negative cashflow- money out of your pocket to pay to keep the investment property. Of course in the past, I've kept IPs which were negative geared but kept them due to the potential of the IP and experienced significant capital growth.

 

That general area has also been over-developed (in relation to location/amenities) IMO. If you were desperate to buy an apartment, I think around Ashfield is the furthest out I'd want to go. Even then, you need to be very aware of the possibility of overpaying at this point in the cycle.

 

Hi Rooster,

Looking at the ad, the cost of the property is 720k. I checked the rent potential and realestate.com says it is around 600pw. That's a rental yield of 4.33%. Not sure what kind of interest rates you're getting but considering that they're getting closer to 5%, this looks to be negatively geared {(600 x 52)/720,000}. This is even before considering strata and other expenses that are involved.

So you're basically paying out of pocket to hold the property and looking to make money from capital growth. Sydney has been good on CG but with interest rates going up at the moment and with uncertainty about when this boom will end, it is a gamble.

Hope this helps, I'm an invest_noob myself so apologies if what I mentioned was obvious and not what you were looking for.

 

Not sure on area but rough figures
Loan 2720 month
Strata 333 month
Water and rates 166 month
Insurance 83 month
Pm 80 month
= 3382 a month
Rental income 2513 a month
869 negative a month

 

Let's say the depreciation is about $7000. Cost is about 900*12= $10800.

NG benefit = 37% x 17800 = $6,586
Out of pocket = $4,214
That's about 0.5% of 750K.
So, you are fine as long as the property goes up by more than 0.5% per year

(I live in Homebush)

 

I'd prefer to buy in Marrickville / Dulwich Hill for the same money - closer to the CBD, and better CG IMO.

 

Yep, I'd definitely be looking around that area with that budget

 

@devank I shouldn't do figures with the big boys lol

 

you could buy 2 apartments in Newcastle 10-15 minutes from beach and city or another city for 600-700k and have 50-100k left over for a shares or cheaper rural place. You would get $300 -350 rent each apartment and $150 for the cheap house. that would be an income of $800-1,000 a week and you have 3 properties, 2 in a growing market.

 

There's are lot happening in the area in the coming years (Homebush, Olympic Park, Strathfield etc). With all this new supply and "shinier" neighbouring suburbs, you may have to hold onto the negatively geared apartment for quite a while before you see any meaningful capital gains, especially in the current market conditions.

$725k budget opens up quote a few options. I agree that Marrickville, Dulwich Hill are more attractive choices.