NSW Nervously Entering Market

Discussion in 'Where to Buy' started by Hillzy, 25th Dec, 2018.

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  1. Hillzy

    Hillzy New Member

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    Location:
    Hills District, Sydney NSW
    Hi Everyone,

    Firstly Merry Xmas :)

    I've been following the PC threads for a few weeks, really impressed by the condensed knowledge on these forums.

    So my wife and I want to invest in residential property but we are really stumped when it comes to location. I have diagnosed us with "Analysis Paralysis" lol.

    Our "strategy" is to accumulate enough net assets to pay off the PPOR and potentially live off unencumbered rent (one day!) As it stands, quick snapshot of our situation:

    - BC is $600k -$650k
    - Equity is $150k (not saying this is the deposit, but the Equity available)

    I understand that the Sydney Market is cooling down, and labor may potentially stave off the feasibility of IP's so we are keen to have get in soon to have the NG grandfathered if needed but also hesitant as we don't know where is best and don't want it to be a disaster. I know the fundamentals i.e. if H&L infill is best, and always hear that beyond looking for golden pockets of resi areas for IP purposes, within 10-15kms of CBD with good amenity and infrastructure will always be good "long term."

    However our goal is to create as much new equity as possible within a short time period to allow us to invest again, and so on. Understand BC may get capped if I keep opting for NG properties (not a preference, just having trouble finding PG+ property with good CG potential.)

    Thoughts on Brisbane on our budget?

    Also Sunshine Coast with all the new infrastructure? (Think we may have missed the boat here though...)

    We are also interested in Sydney...I live in the Hills District and get the impression developers may be struggling to hit pre-sales thresholds so potential opportunities may pop up around new estates (i.e. Box Hill).

    We have also looked around Melbourne a fair bit - but 5 to midnight in areas 10-15 kms from CBD so may not be ideal.

    Just want to make the right decision and feeling a bit lost - interesting time to be entering the market, just doesn't seem like "Business as Usual" at the moment. Any feedback?

    Thanks
     
  2. Trainee

    Trainee Well-Known Member

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    You use a lot of jargon that is not common making it hard to understand what you are saying.
     
  3. The Y-man

    The Y-man Moderator Staff Member

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    ...assuming you can access the equity. The name of the game these days is "serviceability" - without it, you would need to sell and buy which carries a lot of transaction costs.

    If there is one thing your analysis should tell you - property is (usually) a long term game, and there are occasions you get spurts of huge growth, it's like growing a fruit tree from seed.....

    The Y-man
     
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  4. Hillzy

    Hillzy New Member

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    25th Dec, 2018
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    Location:
    Hills District, Sydney NSW
    Hi Y-man,

    Great analogy with the tree - a sound perspective. I may be overthinking the first step. I mentioned in my post the balance between Negatively geared (NG) growth assets and positively geared (PG), this was mainly due to the serviceability purposes (my understanding is in some serviceability calculations the bank takes as much as 80% of the rental income from Investment properties but only 30% of employment income).

    Sounds like I should start with something positively geared or at worst neutral but still with potential for Capital gains.

    Sorry about the abbreviations Trainee, I do that when I get lazy!
     
  5. The Y-man

    The Y-man Moderator Staff Member

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    Not sure where you got that from. Employment (wage/salary) income is king. Rental income counts for jack-all (relatively speaking).

    The Y-man
     
  6. Lacrim

    Lacrim Well-Known Member

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    If my budget was $600-650K, I'd be looking at house in Inner Brisbane - suburbs like Morningside, Norman Park, Camp Hill and Holland Park, Toowong etc to the west, or Wilston, Kedron, Newmarket on the northside etc.

    Watch the market intently like a hawk - I mean every hour - and when one comes up with as much land as possible (405 sqm at a minimum, but ideally 607 sqm and up), snap up the bargain of the month/year.

    Narrow your search to suburbs that are just outside your range that sell for $700K and up.

    Also, attend every auction via phone if need be...you never know.
     
    Last edited: 25th Dec, 2018
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  7. marty998

    marty998 Well-Known Member

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    I think he means that 30% is the rule of thumb for mortgage stress so the banks allow 70% for "other living expenses" and 30% for debt repayments.

    Hard to know. OP needs to come up with a strategy, instead of thinking a bit of everything will get them there.
     
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  8. Hillzy

    Hillzy New Member

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    Location:
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    Thanks for feedback all. Marty/Y-man - the 30% for wages and 80% for rental income was from a basic property investment video I watched. Here is a screen grab:
    upload_2018-12-31_9-56-46.png

    I'm aware the benchmark rate (numerator in above equation) is well above the +2% P&I now..

    Lacrim - Brisbane was being recommended by Michael Yardney (Metropole) recently. I know there is additional due diligence with flood zones etc - any idea how to check this? I have been looking at Kedron but seems mostly older stock and i am a little worried about ongoing out of pocket maintenance costs. Aside from that it seems quite well regarded and within 15 mins of CBD...have you purchased any there?
     

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  9. Lacrim

    Lacrim Well-Known Member

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    Flood checks in Brisbane City Council? Dead simple.
    Flood Information Online
    Yes I have purchased close to Kedron. Older stock would not phase me if the issues aren't structural.
     
  10. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Firstly how are you calculating the equity? The formula you need to use is the valuation amount (provided by banks by either system vals, full vals, etc) then take either 80% (can go higher but you head into LMI territory) and deduct the existing loan amount from this figure.

    Here is an example, say the valuation is $1,000,000 and you have an existing loan of $720,000. At 80% LVR the equity available is $1,000,000 @ 80% ($800,000) minus $720,000 which equals $80,000.

    Secondly, try pulling out the equity as our first step as you do not want to leave this step to the last minute and this way you know exactly how much equity and deposit you have to contribute towards the new purchase.

    Lending has become very difficult so there are a lot less buyers than there used to be and this would be applicable for all areas so definitely a good time to low ball and see what sticks.