NSW My First Investment! Apartment where?

Good evening Property Chat members,

I am looking to purchase my first IP after over a year of inertia and indecisiveness to buy in Sydney (I know it sucks, but that's life!)

About me:
1: approx 380k savings/help to play around with (lucky me)
2: 24 years old
3: live in Sydney (unlucky me)
4: would like to use 20% as a deposit for an IP purchase in the next 3 months
5: park the remainder of my savings in an offset and buy a PPOR in the next 2-4 years.
6: going to engage with a broker this week (waited for 3 months at my new role)
7: strategy - buy and hold for CG

Ideally - would like to purchase an apartment in Western Sydney for 400-500k (looking at areas such as Fairfield, Merrylands, Guildford e.c.t)

Reasons
- CG potential
- More affordable prices and stronger rental yields compared to inner city apartments

Questions
1: What would you do in my position?
2: Do I buy an apartment now, particularly in these suburbs? All the talk about apartment prices falling in Sydney weighs on my mind, however I am planning on buying and holding and will be happy to ride out bumps. Also, i feel like rental yields in these areas are strong.
3: Any comparable suburbs in Melbourne for a similar price range but offering better growth potential?

Appreciate any thoughts or ideas! Ready to get this game started!

 

I would not buy an apartment in those areas. The whole idea of an apartment (a good one anyway) is that you sacrifice land for location and amenities. Also, if there was to be any fall or stagnation in prices in Sydney (which seems to be almost inevitable IMO), those kinds of areas and properties will be the first to be impacted.

I would be looking to buy the iP and even your PPOR outside of Sydney as you'll get far more for your money. You may be living in Sydney now but that doesn't mean you have to stay there. Just my thoughts.

 

I would go park your money in a bank account and then go do lots of research on
1. Property cycles (and where Sydney is in the property cycles)
2. Property strategies - why does a unit in Sydney fit your long term goals?
3.Pro/cons of house/unit/townhouse for long term CG and yields.

Read the forums for a few days and you might find that a unit in Sydney right now might not be the best investment choice right now

 

Yields r good for the area but I worry about the quality and gaps of tenants. Not many good PM as well in Fairfield anyway.

 

Hi Schmick! It sounds like you've got lots of enthusiasm and good on you for actively thinking about investing at a relatively young age. I agree with the earlier comments - I would certainly not be buying in Sydney right now. Nobody knows for sure what a market is going to do in the future, but in most cases investing in a market (no matter the asset class) that has been so hot for such a long time is not a good idea.

To really boost your growth it pays to be a bit of a contrarian and look for those assets or markets that might be a bit out of favour at the moment, but have future potential. That's why I personally have avoided Sydney (where, let's face it, hysteria has led to people now paying ridiculous prices for property) and purchased in Adelaide and Brisbane instead.

But as others before me suggested, the best thing is to do lots of research yourself first. Don't dive straight in through a fear of missing out in a crowded market. Chances are you'll end up buying at the top and won't see any growth for another 10 years, à la Sydney between 2002-2012.

 

I'm a believer in Merrylands. Investment in making the suburbs centre more desirable is key for me.
I have money where my mouth is on this.

 

You need to remove the emotion from your decision making. You can buy whatever you like in Sydney but what will it do for you? It may well seriously hinder your progress going forward. Really depends on what your goal is, is your goal to buy something in Sydney or is it to build a portfolio that will get you to early financial independence?

 

Mate, take a look at Belmore, Lakemba, Wiley Park, Punchbowl corridor on the Canterbury rail line. Seriously. You can buy a decent 2 bedder in this proximity with your budget and there is loads of infrastructure development already approved with the Bankstown to Sydenham renewal program. 15kms from the CBD, on the rail line, low vacancy rates and very solid yield for Sydney. Still a lot of room for growth here.

 

Hi all,

Thank you very much for your enthusiastic responses!

I understand why people are so skeptical about Sydney being at the top of a cycle, however I can't see interest rates or unemployment rising in the interim. I don't believe anything significant will happen to the market, bar slower to flat growth in certain areas.

For me, I have a preference of Sydney only because I am aware and educated about the city. Further, I have heard stories of family investing in Brisbane and Adelaide in the past 5 years and not seeing any growth (this could be a pile of bull, have not checked the stats).

What are my options outside of Sydney? Do I look for an apartment/house in Melbourne? Are there any areas/suburbs that if you were in my position, would you consider? Any recommendations for investing interstate? Where do i even begin to look!?

 

1)Too much emotion in Sydney atm...
2) Apt market esp. Off the Plan quite topish (IMHO); terrible yields esp. with terrible strata fees
3) Go as far down the Penrith train line until i can afford a house (not apt)
4) Research into suburbs benefiting the new Badgerys Creek airport...

all the best!

 

If you agree that Sydney is near top of cycle and are fearful of buying in Brisbane or Adelaide due to a recent history of no growth - do you see any irony in wanting to buy in Sydney right now?

Go check sydney property values from 2005-20013 and google the phrase "property cycles" Before you spend half a million dollars.

Remember if you think that Sydney has no growth potential in the near future but you really want to hold an IP Sydney - wouldn't you be better off buying it near the start of the next property cycle for the same price but without the years of holding costs?

 

Merrylands will highly gain from all that is happening with Parramatta at the moment. So that'll be my first choice.
After that would be Liverpool to think about if thinking west only. Its a major hub around south west area.

 

I am watching this thread closely because OP basically said everything that is in my mind for what I want for my next purchase. I mean pretty much word for word.

- I would like to spend around 400k which means Western Sydney, same as OP.
- I am worried about Brisbane/Adelaide/Perth for the same reason and I know that Sydney (and I think Melbourne) will always have high demand over the long term (20-40 years), even if there are corrections along the way.
- I am from Sydney so I know a little about it, whereas I know nothing about the other areas which means much much higher risk of making a mistake. I was originally looking at Brisbane until I found out I could either get an apartment 5km from the CBD or a house 35km out which I am told compares to being 60km out from the CBD in Sydney, and both of these options are not likely to appreciate as well as Sydney/Melbourne in the long term. I know people say "yay, yield" but that does not make up for the lack of growth.
- After giving up on Brisbane, I was looking at western Sydney also (inc. Liverpool and Fairfield) and looks like there are 2bd apartments for about 400-ish.
- Problem is that I read that they are planning a lot of development there, to meet the high demand of projected population growth that is expected over the medium-to-long term, so for this reason I am wondering now if it is still safe to purchase there if supply will be increasing more easily than inner west where (I think) land is already chok-a-block full.
- I am also concerned about buying in Sydney at a time when it looks like it is the peak of its property cycle, but of course a peak could continue for 3-5 more years and then could just level off and not go down for a few years more with the "correction" just meaning no growth but also no drop, and then start rising again. So waiting seems sensible but also has its own risk.

I assume if he actually had some knowledge or confidence in how to find out where to buy to build a portfolio to get early financial independence he would not have needed this thread.
Point taken though - look elsewhere - but some way to find out how to look elsewhere would be more helpful.
I know that every thought I have ends up as "no don't do that" with no direction where else to look.

Yes this is my thought also - hold off and wait for Sydney to correct, but as I mentioned earlier in this post, you can not predict it and it could take 3-5 years before growth slows and it could also then level off for a few yeas instead of actually coming down, and in which case you have actually done worse than just buying now. Not that I am saying buying now is the right way to go - just making a point that you don't know that the future holds and waiting might turn out to be a mistake in itself.




Anyway, I will be watching this thread closely because I am in the same boat.

I am assuming you will will mostly get advice not to do it (which probably is very helpful) but with no real direction of how to find where else to look (which is not really helpful and very frustrating).

 

For 500k, you can buy a house on land 9-10kms from the centre of Canberra. About 6% yield if you buy well and high rental demand

 

Wow. Maybe go with @virgo's idea... I'd go with a house in the Mount Druitt area possibly. Matches your budget and you get land and the house... not just the right to some air in the sky.
You could do the Bankstown line but you would struggle to get a townhouse there for your budget.

Re: financing, I'd maybe go a 88% loan, and keep your cash for your future PPOR. In the meantime put your cash into offset or shares. (Read the shares threads).
Re: Melbourne... yes absolutely that's do-able. I reckon a house in the Northern Suburbs or Western Suburbs.

 

$380k cash but want to buy a $500k apartment?
Asset comes second.
Goal/desired outcome, then strategy, location, then asset selection.

 

Hi all,

I definitely see the logic in not buying an apartment right now. If anything it would be a house in an area that fits my budget.

Open to the possibility of taking a plunge and buying interstate, however would need to engage in a quality BA to assist in the purchase process.

Some areas that come to mind include:
- Brisbane
-Melbourne
- ACT

- Newcastle

 

Brisbane is your go. Or maybe in Mel but it would be far out.
I wouldn't do Sydney- it will be in a highly speculative area.
I wouldn't wander from these 3. Long term, these 3 will offer the highest cg as well so stable and decent yields.