NSW Is Kellyville/Norwest a good area to buy

Hello members,

I am a newbie and was trying to buy my first negatively geared investment property mainly for tax benefits. A friend of mine has recently bought a 3 BR townhouse in Kellyville; off the Norwest area. The area comes in Bella Vista public school catchment area and is near Fairway drive. The townhouses are newly built and ready to move in. Had a look at friend's property and the finishes are really nice and have Miele appliances and all. The price point is 760k. There is a really nice park Kellyville park also nearby.

I know I come across someone who is not sure about his goals etc. But does this sound like a good investment where I could make some capital gain in 2-3 years? The metro is coming soon in that area and the area has easy access to Windsor road as well.

Thank you

 

What ARE your goals? What is happening in 2-3 years?

Whats the rent? Lots of supply out there, vacancy rates? Thought about where sydney is in the cycle?

Btw wanting negative gearing because you pay too much tax, and your goal is to be rich are meaningless answers. Think harder.

 

The rental is about 550-650. I have spoken to a couple of agents that are active in the area, and they have assured that the property will be easily rentable. I know there is a decent supply there, but all the dwellings in that area are super-expensive. Like look at Essentia town Homes by Mulpha, they are selling them for around 1.3million mark. This dwelling I am talking about is only 1 km behind on Fairway drive.

I want to reduce my tax outgo and I am thinking that there would be decent capital gain there, given its Bella Vista School Catchment and a posh area.

 

Lets try it another way. What are the downside risks here?

 

I can safely say that you will lose about 10% of the purchase price, plus costs, stamp duty, interest and agents commission in the two years. That’s about $150,000 so if you are looking to lose money and have a tax deduction this is for you.
I personally would hold back on buying and donate any spare money to the cancer council of NSW and get a 100% tax deduction and most importantly feel good about what you did with your money.

In this market 7-10 years would be the time frame for an appreciation over cost.

 

100% agree. I don’t understand why people want to loose money to gain part of that. Its not rocket science.

 

The market may go downhill from here, and I may get stuck with it for longer than 2-3 years and then it will be difficult to hold because P&I payment will cost quite a bit of money.

 

hmm does not it look like a doom scenario? Markets in premium areas like Norwest, Bella Vista etc. has not fallen by much..Because of this being new property I will get good refunds like in excess of 10k+ every year..I am expecting to hold it for 2-3 years on an interest only loan and with the tax refunds, it will be almost neutrally geared..After a 2-3 years I could flip it and get some capital gain out of it?

 

You obviously havent read the actual doom scenarios.

Norwest and Bella Vista arent premium. Theyre just new and shiny, with loads of supply coming up and lots of undeveloped land around. In 20 years theyll be good. Now......

 

Premium areas?
Quality schools?
2-3 years?
Flipping a new house?
Neutral gearing and tax deductibility?
You sound like you have been listening to Real Estate Salesmen, rather than doing any real research.
Can you show what your estimates for this deal would be over three years?
My scribbles show a $150k loss.

 

• Cash flow analysis:
○ 12000
depreciation + 1000 strata + 2000 council and water + 2000 insurance and maintenance + 3000 rental loss = 20000
This comes to around 9000 return for me. The depreciation could be even more because first 5 years we could have plant/equipment depreciation
I will be out of pocket by about 900/ month and will get that back at tax refunds

 

I urge you to see an independent accountant.

You honestly should not be buying property with your lack of knowledge on the subject.

$1,000 a year for strata levies on a new building. That is ridiculously low.

You do not get out of pocket costs back as a tax refund. Assuming you earn over $180,000 per annum, you get back about 47% of your losses. Never 100%.

The cost of seeing an accountant is tax deductible.

 

I can't wait to buy properties off vendors like you in 3 yrs time.

 

13 Brett Street, Kings Langley, NSW 2147

This one in Lings Langley is advertised for $810K to $825K and it has 600 sqm of land. It last sold for $880K in 2017. It looks to be about 23 years old? But you could always contact one of the depreciation companies and ask if they could consider giving you a very rough estimate of the depn that might be available on it.

I'm not saying buy this one, (or at least, probably not for the advertised price) but just consider getting something in a good area but not paying an enormous premium for it being brand new.

Someone else might chime in with feedback on my suggestion - in terms of capital growth prospects in Kings Langley?

 

9 Lyte Place, Prospect, NSW 2148

600 sqm no strata fees

And this one also sold higher in 2017 ($850K) - so as you would have noticed, there are some people around who paid over the odds in the last couple of years, and possibly having to sell at a loss at the moment. That doesn't mean that everything is a bargain now though. Because they could be going down some more!

 

https://www.booktopia.com.au/how-to-achieve-property-success-margaret-lomas/prod9780

https://www.booktopia.com.au/armchair-guide-to-property-investing-ben-kingsley/prod9780994

Property investing takes a bit of skill/science/calculation/practice.

That's all the guys are trying to say here. Now, since lending has tightened and we're in a bit of a downward spiral, these two books above may not be perfect.
But they will help you get an idea of how to run the figures on each house you're considering. And keep reading the forum for their detailed feedback to other members, about whether their deals stack up.

 

I think he’s worked out it’s a 20k a year loss and so he will get 9k back in tax based on his tax rate (which must be 47%).

So all he has to do is pay 11k a year for the priveledge of housing someone else while the value of his property goes backwards or sideways for a long time. Let’s not bring stamp duty, selling costs etc into the equation and make the use look worse.

@Alec - you obviously have a good income, but you need to learn a lot more about property investment before you make expensive mistakes.

At the very minimum, learn market cycles and then research where Sydney is in that cycle. You can probably buy your kellyville IP in 5yrs for less that what it costs today and save yourself 5yrs of 11k / yr holding costs.

 

$1000 is the strata that is mentioned in their price list. $9000+ return has been worked out by tax accountant. I know we don’t get all out of pocket expenses back. As @Foxdan has mentioned below, it’s based on my 47% tax bracket.

 

Thank you @Foxdan can you please provide a link to the Sydney property cycle that you mentioned? I am a local in the North West area and the good pockets in it like The Ponds, Norwest etc. gave not fallen by much. With metro trains starting in May this year, it will be a game-changer.

 

Thank you Kate, will have a read.