NSW IP House Far West Syd VS Townhouse West Syd

Hello there.
I am looking for an IP that can utilise some of the FHB benefits (mainly stamp duty discount). My budget is around $700k (can stretch up to 750k).

With the rising property prices, I am not sure which of the following has the greatest investment potential. I am currently based and work in Western/South west Sydney. I don't mind doing some basic reno (<30k budget).

I am considering either
a) Townhouse in Western Syd
~650k in Auburn/Granville/Guildford (rental return $450-500)

b) House in South West Syd
600-650k ~ Campbelltown Area (rental return $350-400)
700-750k ~ Casula/Lurnea (rental return $450-500)

c) House in North West Syd
650-750k ~ St Marys ($350-400)

I would prefer to buy a house and buying a house in Campbelltown would be very comfortable under my budget. However I am concerned that it would be difficult to rent and less capital growth compared to the North West. North West Houses also seems to have low rental yield for the time being.

All opinions are greatly appreciated!

 

I believe you have answered your own question.

For reference, we hold property in Both Campbelltown area & Mt Druitt/St Marys. Rental returns have been similar as has ability to rent. CG has been similar with the exception that West grew a little more last time, which is probably due to the anticipated rail line and creation of jobs.

 

Thanks for your input. I thought buying in Campbelltown wouldn't be a bad idea but my family advises I buy a townhouse around Auburn area as it would be easier to rent out. That's their major concern. Glad to hear that Campbelltown have decent rental return and turnaround time.

 

their experience in property and knowledge of auburn and campbelltown being based on....?

 

St Marys. Easy one.

 

A lot of my family members own townhouses around the auburn area and have not had any issues renting out their IP and have made good CG.

Some of my family members work around Campbelltown area and feel that there is less demand in the area and are concerned it would be hard to find a tenant.

 

I think St Marys will have the greatest price increase (as freq mentioned in the St Marys IP thread) however having gone to a few open houses in the last few months, places around $700k mark are generating rental income of $350/week which isn't great rental yield, thus my hesitancy.

 

St Marys would be my choice.

 

If your worried about this well I've got one of my places in St Marys for rent only a few weeks ago. I increased the rent by $25 per week from $375 per week to $400 per week, it got leased after the first open home and had over 35+ registered parties in the first week. Thats how strong that market is

 

If your chasing rental yield and this is a cashflow play I dont think any Suburb in Sydney is what your looking for. Prices in Sydney are so high the yields are very low.

For a yield/cashflow play go up North to Brisbane and catch that property wave. Yields can still be had close to 5% some even more. Plus Brisbane is booming right now. Its just started as well (its only around the 7 O clock position of the cycle) so your still not too late to ride the boom out.

 

If its an investment, how are you going to use the stmp duty concession?

 

No matter which area you choose, you need to be comfortable with the yield. After all, rents have not moved upwards in a meaningful way in any of the areas you have mentioned, so you will be heavily negatively geared for a long time.

No matter which area you choose, there should be no issues with finding and keeping good tenants, but please use a decent property manager.

Personally, I live West, nearby St Mary's and this would be my own choice if I was buying at the moment, but you have to do what is best for YOU. All the people that have been telling you to buy in St Mary's have been investing for a while now, and are possibly in a more comfortable financial position to someone starting off.

I highlighted Campbelltown in my original post to you, as you had said that this option would be more comfortable to your budget, and this is important. Homes are not cheap, so this is a big deal and ideally you should be prepared to hold onto this for a long time.

@thunderstrike888 is correct in saying that yields ARE better in Brisbane, but you need to be comfortable with buying interstate, which many that are new to investing are not.

No matter where you choose, a house on a decent block of land, I believe, is better than a townhouse any day of the week. Good luck.

 

With yields hovering around the 3-3.5% in the St Mary’s area (slightly more than the Sydney average), what’s the reason investors are still investing here in St Mary’s? There’s a lot of expected and current growth already here, but where’s the yield to sustain with expanding the property portfolio?

 

Most buyers are FHOs at the moment, so yield is irrelevant.

 

Sorry, was talking for investors. Why are many investors investing in St Mary’s? I know there’s a lot of growth there and you can get in at what many would consider an affordable price range for Sydney standards, but the yield is so low that if you buy a few of these (1 or even 2), you can’t borrow anymore. There’s growth, but doesn’t seem like there’s enough yield for an investor. Just asking.

 

Investors dont just buy for yield. Interest rates are low too.

an extra % or two in yield wont move the borrowing capacity much anyway.

not everyone wants millions in debt. Buy two, with a ppor, and it might be 3m exposure.

Other questions might be, if you are an investor, do you want to compete with oo’s who dont care about yield? But can you afford to sit it out? If you already have some property, maybe you can. Will the numbers look better (yield wise, not necessarily price) in a few years?

 

This!

Also, many of the investors buying, are seasoned investors. Imagine you've already got a swag of IP's under your belt. LVR under 50%. High income! Not everyone is holding everything at today's prices, and have diminished serviceability. While I can not speak for others, I do know of people paying cash.

If you've been in the game for a while, you may be happy with how it is today. The yield is not what I USED to look for, but I don't need the same yields as I once did.

 

There is some irony to this. If you went hard in the last cycle before Apra changes, you cant borrow any more anyway. Or maybe you dont want any more exposure. So theres no decision to buy more or not.

 

Or maybe you went hard (wish I had gone harder), then sold at the top, and have plenty of dry, just waiting for an opportunity.

 

How long have you been in this game for?
What’s the reason yield is no longer the priority for you? For early stage investors, you reckon it’s best to focus on Capital Growth, eg., large block of land with a small house in St Mary’s (high land to build in ratio) than rental yield?