Newbie from Sydney :)

Hi All

20Yr old from Syd here.

Been working and saving since I left school and between my sister and I we are looking to buy our first property. Currently buying as an investment but will be living there initially for a while (6months-1yr) depending on financial circumstance (also for capital gain tax purposes).

Currently between my sister and I we have 90K saved for an investment, with my father holding another 120K (from refinancing the equity from our home) which we can use (but he would like to hold at least 50K for a safety net)

We have a mortgage approved for 505K with ANZ, who has a 5 year fixed rate of 4.99% or 3 years 4.49% all noted as interest only. Our budget is between 500 - 650k.

We are looking for a property with growth potential, as we wish to use this equity for an individual investment for each of us to have after 2-5 years depending on growth. Whilst buying as an owner occupier, down the line it is possible (likely) to be rented out and thus the rental yield will hopefully cover interest.

We are also considering buying within the lower end of our budget and using our fathers input for a granny flat to create cash flow. this would either be built on our home property or on the investment if possible/approved.

We need to buy a house with within the next 3 months, as my sister has unfortunately stopped working and thus her cash flow has stopped. thus making reapplying for a loan by myself less likely to be approved. Short time I know but we were majorly screwed around by our broker for months and should have gone elsewhere earlier.

My father is not very experienced but wishes for us to buy locally in Sydney as we can easily visit homes and service any issues or renovate easily if needed. I understand where he is coming from but most people I have spoken to do not recommend Sydney as it seems the boom has come to a halt and prices will stagnate over the next few years. Some others I have spoken with believe there are still pockets of Sydney within our budget with growth potential.

If I push, there is possibility we can invest in Newcastle or possibly interstate but is unlikely with such a short time to purchase.

We have been looking at houses weekly over the last few months in:
St Marys, St Clair, Mt Druitt, Penrith, Glendenning, Kingswood, Richmond, Windsor.

I have been watching the market for areas such as Liverpool, campbeltown, oran park also.

Mainly we have been looking for a 3-4 bedroom house with rental yield to cover interest but are open to smaller apartments closer to the CBD if this is a better investment. Also open to the idea of a granny flat which seems very popular around here.

I am looking for any tips or advice on kickstarting my portfolio, please critique my plans as I wish to learn as much as possible before I make a purchase.

 

If your really that pressed for time I would engage a well recommended BA and purchase a middle ring home in Brisbane that appeals to OO, something with add value potential, even a cosmetic reno for later on. But it really all comes down to your plans, goals, risk profile, etc of which I really know nothing about.

A word of caution. If you're going to purchase in Sydney, be very, very careful where and what you buy. Many Sydney markets (due to where Sydney as a state is on the property clock) will be commanding premium prices right now which is never a good thing for any investor looking to buy and build a portfolio asap.

While you on your investing journey, self education is the essential key for long term success.

Good luck

 

Thanks for the prompt response Leo, much appreciated.
This seems to be similar advice a work colleague has given me also.
How does one go about finding a reputable BA? Do you use a BA personally?

Long term plan ideally is a modest cash flow and a personal home, but in order to get this i believe il need some equity first which is what I'm trying to gain from my first property. As I'm still young and living at home I'm ok to take larger risks than someone tied down with dependants and rent.

Is there any areas of Sydney you would definitely not recommend?

Thanks again for taking your time to reply.

Jimmy.

 

Sorry It slipped my mind,
It seems investing in QLD would be out of the picture as the NSW home owners grant would not be valid (My sister and I work in NSW so if we moved wed lose our jobs and be unable to pay the mortgage) thus requiring the higher capital tax for investors (taking into account that it is unlikely to even be allowed by the bank for a loan on investment property from what I am aware of the current state of lenders)

 

HI Jimmy,

I have used a BA before and would again in the future if it suits my needs. The only reasons I suggest it is because you said you are pressed for time and you seem very newbieish so if you were to look in an interstate market, engaging a good BA who understands your goals etc might be a good option considering. I would search the forum for recommended BAs and then interview a couple to see what you think.


When you say long term goal is modest CF, you need to be a little more detailed. What is modest to one person is luxury to someone else. Basically, roughly speaking, for every 1 mil in equity you have, you will be able to turn it later on into 30-35k net at 5% yield minus a little which I have calculated. might be more, more be less. So you can do the math to see what you need.

Over the years I have found that being able to buy deals which have a good chance for CG and also being able to manufacture equity in some way is a great way yo build up your equity. How you do it and what strategies you employ will also depend on your income and in these APRA times, it is more difficult and requires careful planning imho.

Anyway you need to build up a portfolio that will grow in equity for you asap but also needs to match your serviceability needs. I would be engaging a very good broker who understands property investment and invests themselves. They need to be able to help you map out a plan for your 1st,2nd, 3rd etc acquisition, once they know your financial parameters. This is of crucial importance otherwise you can be stuck at 1 property for a very long time.

With regards to Sydney, I am not actively buying in the markets there because I believe there are better, lower risk areas to invest in atm so I can't give you advice of where you may look to buy there. I will caution you again, if you're going to buy in Sydney, be very careful of where and what you buy. Most markets there are raking in premium dollars from buyers.

Your best chance to succeed in this game long term is to buy the books, learn the basics and build your knowledge. It will help you avoiding some big pitfalls and give you clearer direction. Also network with other successful investors.

 

Do you have to get the home owners grant? Could you live at home longer while buying elsewhere?

 

This will put a stop to your immediate plans. Formal approval (not the 3 month preapproval you have) requires updated payslips etc

 

The home owners grant will help our budget a lot so if possible id like to use it but it is not essential. We will only be living in the property temporarily in order to gain capital gain discount later down the track when selling.

 

I did confirm this with my broker several times previously and he is aware of my situation but I have just emailed him to confirm whether this is the case. thanks for the heads up

 

Hi Jimmy,

My 2 cents.

You are young and on the right track. Just don't rush and lose the advantage of being able to buy your first property. Consider the free advice you got here and can read here on the forum very seriously as this is years of pain and suffering that is now words of wisdom for all of us.