NSW Options for a new investor?

Hi everyone, been observing this site and the older sommersoft site for a while.. not very actively but from time to time. the wealth of knowledge is extraordinary.

I am actually living in london at present, but back in town for a couple month. I have always wanted to buy a property and two years ago i almost did, but in my hesitation on price (a mere 5k) i let one go in parramatta which in hindsight was a mistake. But Im grateful for it cause i got the opportunity to travel and land a job overseas (cause i was free of debt).

I am 32. I dont really have a high paying job (converted to AUD its only 100k before tax). So far I have saved about AUD$180k with an additional AUD$40k in shares.

I have been thinking of settling down in the UK and buying a property to live in (probably borrow there with my income) but before that i wanted to buy something in Sydney since I am here now for a couple months.

My plan is to buy a either neutral or positive geared property (preferably something with land but open to units too) with reasonable yield (either in regional nsw or coastal). I was thinking regional places like Parkes or coastal placed like wollongong or bateman's bay after reading some posts about the ripple heading out. Coastal is interesting because for $300k i can have a property which i could retire to when im old enough is it wrong to think this way?

One option i was thinking was finding a place that's between 250k to 350k positive geared and later in the year when i come back for a couple months buying a separate property regionally up to 200k. With an 80% lvr ($110k total deposit for both property) That would give me enough left over for stamp duty and coverage in case the place isn't rented out for a longer period (a rainy day so to speak).

Since i currently pay rent in the UK, my approach will be to find a place there where my outgoings (low interest rates) is about the same if a little higher than my current outgoings. That gives me enough left over to support any Australian investment in case the unforeseen happens.

Firstly is my strategy for getting two lower priced higher yielding property vs one property in Sydney itself the right approach? (i'm very new to this and still readying all the posts)

The other option is a 400-500k property in sydney (if i'm lucky)

Is Bateman's bay a good location? Or Catalina which is right next door? the prices seem very low for the amount of land in some cases. Im just worried about the vacancy rates.

Sorry for the info dump.

 

$100k is not a low income And with $180k saved you, in theory, have enough to buy approx $750k-$1mil of property depending on whether you're borrowing 80% or 88%.

Most folks around here favour capital city properties but regional stuff can work. Just be sure to do your homework.

As for buying an an investment you could retire in.. well... is it an investment, or a future home?

On location. It won't be easy to find cf+ or cf neutral in Sydney. But it is possible. Keep in mind, Sydney has had a bumper run of growth the past 3 years so the question is...how much is left?

The vast majority of my clients looking for neutral or positive cashflow are buying in the $300-$450k price bracket within 25km of Brisbane.

 

Well done you have saved a lot more than most people your age.

Many of my clients think this way and I think it is ok if that is a long term possibility. A more important question is "how much future demand can I see from OTHER people retiring to certain parts of the coast?" As this is one of the key drivers for capital growth.

As per Steven's response above +cf in Sydney is very tough. Even Wollongong and near Sydney coastal is a bit tricky to find it, and it often needs some value add or renovation to unlock it. If you get it right there is a chance you will be approaching cf neutral down in Batemans Bay and surrounds, be careful though there are some good areas and some not so good areas, and some renovation projects are money pits whereas others are more profitable.

 

You don't need to be lucky Sydney's western suburbs have plenty of properties in this price bracket. Even a well located unit in a mini CBD (like Parramatta) within walking distance to city transport still represents good value in our international city.

 

Thanks everyone for your advice

@steven - im def looking for investment (cf neutral is ok but i prefer cf positive but then id be aiming for capital growth)... Ive always wanted to own a piece of land near the coast somewhere... but the counter argument could be made not to invest in coastal now and once i accumulate a few ips then go for coastal .. tell the truth it doesn't have to be sydney.. its just the logistics wont allow me to travel to other states during this trip atleast...

@BuyersAgent - You raise some really good point.. for cashflow neutral id probaby want to aim for capital growth... otherwise is there a point owning that investment? unelss its for retirement.. in which case im going for investment first....Coastal just had an appeal to me but i'm not tied to coastal property or anything...

wrt batemans bay, i realize its a retirement town, not much jobs and more a holiday destination for Canberra. When you say the right areas and money pit.. do you mean the surrounding suburbs? which areas are are considered "Watch out zones".. is there area around the hospital worth investing in? it further from the beach but not far i guess...

@Jacques: Def my fist pref was western suburbs..near parramatta.. but i keep hearing from people the whole sydney and surrounds market is over saturated with units .. and since I really feel like securing some land with a house.. these are prices at exorbitant levels in sydney and surrounds... mind you im a noob (still reading) so i might be speaking out of my arse lol...[/USER]

 

Correct @infinityx you should keep both cash flow and capital gains in mind when doing property selection and the balance of which will include your goals and current servicing needs etc. I like to measure things like sales rates, stock on market, vacancy rates and time on market to find trends. When I see an established trend of improving market I like to purchase before too much growth has occured (counter cyclical investing) which is hard to do psychologically but more rewarding financially. The flip side is not to buy too early as you might have a few yrs of no growth which is a little inefficient in terms of opportunity cost. Its fine if you have a long term outlook but why not get some growth in the early yrs if you can I rekon it has the potential to speed everything else up. Coastal vs non coastal is not a magic button the coast is just another desirability factor to add to the mix for consideration. If you are going to buy in a coastal town however you should at least try to understand how locals and visitors see the town and where the desirable vs non desirable vs up and coming areas are. As per the posts above there are lots of options including western Sydney etc I don't advocate only buying in one spot, the long term goal is a diverse portfolio spread across a mix of property types, towns and states. (in my view)

 

Thanks BuyersAgent. You are correct its really important to "try to understand how locals and visitors see the town and where the desirable vs non desirable vs up and coming areas are". How do people normally do this? is it reading local news, visiting the place and staying overnight for a few days etc?

Guys, I have started to look outside my narrow field of vision set the search to everything. I started coming across 1bedrom and studio units in melbourne cbs with pretty good 6 to 8% yields!

whats the catch?

eg
Onthehouse.com.au: Your Home for Property Research

Onthehouse.com.au: Your Home for Property Research

Onthehouse.com.au: Your Home for Property Research

Onthehouse.com.au: Your Home for Property Research

Onthehouse.com.au: Your Home for Property Research

and a very low cost to entry.

Looking at it in more detail I noticed a few things
1. Capital growth isn't doesn't look very high (i.e. 0 to 10%)
2. Some of these properties have been on the for sale market for a while (one of them is for nearly a year)
3. I am reading that there are plans for more unit being build in Melbourne CBS and surrounds.. would this push up supply lowering rent in the future and lower price of units further?

given the location i feel these are red flags .. otherwise everyone would jump at this opportunity.... am i missing something?

 

I think you have the answer in your post.