NSW Orange, NSW

I live in Sydney, currently close to the city.
I've been watching Orange for a while now, as I have friends that live out there and work in the wineries.
You may have seen an article today on domain.com.au and people seeking a 'treechange' buying up out there - Treechange buyers are loving Orange, but there's one thing the town hasn't got

Any thoughts on Orange as a first investment? Annual CG currently around 2.7% and median prices trending up... tenants maybe a possible problem?

My other option is an entry level home West of Melbourne around $360k budget at this stage (which is booming at the moment as we all know).

Brokers and buyers agents engaged for Melbourne, just need to make the move soon.
Any input/thoughts would be appreciated.
Cheers

 

I love Central West NSW. I think Orange has a bright future because it's so beautiful. True, tenants can be a problem sometimes
1/ lack of
2/ rough
It has swings and roundabouts like any country town. It was booming a few years ago so has had a hangover for a few years. Appears to be making a modest comeback.
I think a lot of babyboomers move there for retirement.
Driving is bad there - no idea why.
As for comparing and contrasting with West Melbourne, I will leave to others.
I'm interested in the place too. I'm biased because I've spent time there. I bought in Parkes.

 

Any new thoughts on Orange 9 months since the last post? We visited it last year (we live in Sydney) and really loved it- so many lovely cafes, restaurants etc. It's such a horrible drive from Sydney though- 3.5-4 hours of windy roads and traffic...! It seems houses are selling VERY quickly at the moment- being listed and coming under offer within a couple of days. I'd love to have a house out there to visit on weekends (and maybe Work from home one day) to get some fresh air (whilst still keeping my good Sydney job

 

Millthorpe looks nice, it seems very expensive tho

 

@euro73 does duplexes down there and bought quite early on. I considered it probably about a year or so ago and kinda wished I had the money to buy from him at the time. He can probably give a better insight into the area. CG seems pretty good but haven't looked into the yields aspect to see how much the negative gearing is for the property... unless you buy from @euro73 where you would had been positively geared from the start. A town with a pretty diverse economy so it's pretty safe in terms of investment. Not sure about the potential of diverse demographic as it's not near a beach so it's losing out on one demographic.

 

Yes we really like Orange and Bathurst. Since early 2017 we have been selling dual occ properties in Orange and Bathurst ( Kelso and Raglan) and they are outperforming our expectations.

They are 4 bedroom homes and 1 bedroom granny flats, usually on blocks of 800-900M2. I've done a deal with a local builder and he delivers the product turn key for 550K ( 165K land 385K build) which we think is well below market value for 5 bedrooms of accommodation. If you were to search for a new 4 bedders in Orange or Raglan or Kelso ( the two new estates in Bathurst) you would find very little available for under 500K. If you added a granny flat for 120-130K , you'd be well over 600K .

Valuations have been on the money with every lender/every valuer...

But most importantly, the yields are outperforming what we had hoped for. We had expected combined rents of $600-620 per week, and we achieved $620 on the first 6 properties completed. But the 2nd and 3rd tranches which have just been completed in late 2017 have seen rents grow from the expected $620 to $640-650 per week , in less than a year. And because depreciation is very strong (because there are two dwellings, and you get full value for depreciation as first owners) the numbers are really good. Typically 7-8K CF+

They are being tenanted very quickly... everyone told me the granny flats wouldnt fly, but I knew they'd be in great demand because I had done 1 bedroom villas for NRAS 2 years earlier and they had been heavily oversubscribed by applicants and still constantly have waiting lists whenever someone vacates. The granny flats ( against all naysayers expectations) are being tenanted within days of being available... without exception. The houses are taking 2 weeks or so to be tenanted. All in all, the yields have been better than I had anticipated and our clients have been exceptionally happy with their purchases.

I visited Orange and Bathurst just before Xmas , to inspect some of the recently completed properties. While I was there I sat down with several local agents and they are all reporting that there is very strong demand for rentals. One thing you will notice in both towns is that there's a decent amount of new housing being built. I wouldnt describe it as a construction boom but its certainly a strong construction market. Land is almost impossible to get hold of and anything being released is gone in hours.... What I wanted to know from the local agents was how vacancy rates could be dropping at the same time as supply was increasing. They all told me the same thing. The houses being built are tree changers and younger families moving from Sydney... so there is no additional rental supply being created. Its certainly not a majority of investment stock being built in either location. If it was, vacancy rates would be rising and my clients wouldnt have seen rents increase from $620 to $650 in a year.

Look, lots of people are anti regional... but I'm all about the numbers and affordability. An investor can get NRAS like yields from one of these types of properties. ie 7-8K CF+ And the purchase prices are affordable enough that owning 1 or 2 or 3 of these is achievable for many - even post APRA. And 2 or 3 x 7-8K is 14-24K that can be going back onto a PPOR mortgage. Its just a continuation of the dividend reinvestment strategy I have been using with all my clients for the past few years, which will see most of them PPOR mortgage free within 10- 12 years. Thats going to give them equity and borrowing power they wouldnt otherwise have....

And another great reason to like regionals such as these is because the land component is 165K, so owning 2 or 3 of these doesnt threaten NSW land tax thresholds...

It ticks an awful lot of boxes in my mind.

And as others have said, Orange is just a really nice, pretty, cool town.

 

Just saw this thread and thought I would share my experiences with Orange. I purchased my first IP there, a 2/1/1 villa, in mid 2017. I liked the idea of Orange due to its diversified economic base for a regional area (agriculture, mining, tourism, education, healthcare plus some government agencies), increased popularity as a tree change location, enhancements to local airport services offering direct flights to Brisbane, Sydney and Melbourne and development of the North Orange area (new Woolworths, McDonald’s, Bunnings etc). I grew up in Orange and that was essentially the primary reason for buying there so it may have also just been a case of justifying to myself it was a good idea too.

I purchased for $230k and renting for $280 a week. Finding tenants was an issue as previous tenants vacated the day before Christmas closures and was then empty for 8 weeks as there was a ridiculously high level of stock on the market at that time of year for the area.

I still have property alerts set for the area and definitely noticing a significantly drop in the number of properties coming onto the market under $300k these days, and if they do then they tend to be in the rough parts of town. But in saying that another villa in my complex just sold for slightly less than I paid so go figure. Will be revalued soon for a refinance so interested to see what they come back with but will definitely be a long term hold to get any gains worth writing home about.

 

@euro73 and @tcl915 - Thanks for your insights. Whilst it's clear from your posts that Orange is a decent investment destination for yield play, there's a slight contradiction in both posts and that presents two possible challenges that may be present in the market:

- Lack of capital growth (no matter what the end goal is, one still needs growth especially when they are betting as high as $550k-600k on a regional market)
- High vacancy rates as a result of high levels of stock (I understand the yield is high ONCE you find a tenant but it seems to be taking weeks to find tenants at times as per @tcl915 's post.)

Any more thoughts on above two issues?

 

Hey @virhlpool,

DH and I have a dual occ in Orange we bought land and built from late last year, we don’t regret the decision. Actual rent was higher than expected, no issue with Val’s and we have already had good capital growth. I think it’s been rented it out from about November so not the best time to get tenants but we had no issues. About a month ago, my lender sent me a residex report for the area and capital growth for the area was 10.7%, in the same period capital growth for Sydney was 4.8%. Residex also put growth at 5% over the next 5 years. There is lots of infrastructure hospitals etc being built, it’s a growing area look into it...

Kassy

 

@virhlpool following up on the vacancy rates component I think the main issue for me was the high level of stock coming onto the market in the new year. Taking a look online today I can see 29 properties for rent < $300 a week whereas In January I recall there being in excess of 80!

My family have several IPs in Orange (3-5 bedroom houses) and have had no problems with finding tenants and will generally end up with low tenant turnover (one property has just moved onto its 3rd set of tenants in about 23 years). I have a feeling you would probably fare better with a house as opposed to a 2 bedder in this market also.

Unfortunately I will be looking for tenants again in 6 months as tenants were only looking for something short term while they built a new house so hopefully will be an easier process next time fingers crossed.

 

I dont know why @tcl915 had issues getting a tenant. Perhaps they were just unlucky. But what I do know is that single experience is the complete opposite of the experience I've had with over 50 sales there in the last 2-3 years.

I've done @50 NRAS properties in Orange and there is always a waiting list any time one of them is vacated. They are 1 bedders and 3 bedders mainly. Several PC members own them so some of them may care to corroborate what I'm saying about strong rental demand and yield. I'll leave that to them.

I've also started doing dual occs there in early 2017, and as @Kassy has stated above, she got tenants quickly and she has seen 10%+ growth as well.

I can tell you that local tenancy managers - with whom I obviously speak regularly as they manage a lot of properties for my clients and I ( I own 2 properties in Orange myself and am about to add a dual occ to my SMSF ) - tell me there is a shortage of rental accommodation. How else do you explain the dual occs going from $620 per week in mid 2017 to $665 per week in early 2018? They believe they will be able to achieve $670-680 by the end of 2018.

So it's clear there is both solid growth and solid rental yield being achieved there. The sample size ( 50+ properties) is more than enough to be considered reliable.

There are some other benefits worth considering with regional dual occ's as well - especially in an era where growth is likely to be limited in more expensive markets .

1. If you have little or no PPOR debt you can set these loans up a P&I and simply let them pay themselves off over @ 20 years, just using the rents. Of course, if you decided to top that up with the money you are no longer spending on a PPOR mortgage you could own the property in less than 10 years. That's pretty potent stuff.

2. You can hold 3 of these and be well under the NSW land tax threshold.

3. Loan servicing is assisted by the relatively low entry point and high rental yield.

Here are examples of the 2 most recently completed dual occs and the rents they achieved just 2-3 weeks ago. If in doubt, call Gail @ Raine and Horne Orange and ask her for yourself how quickly these are being snapped up by tenants


5A Young Street, Orange NSW 2800 - Apartment For Rent - $225 | Domain

5 Young Street, Orange NSW 2800 - House For Rent - $440 | Domain


7 Andres Street, Orange, NSW 2800 - View Sold History & Research Property Values - realestate.com.au

7a Andres Street, Orange NSW 2800 - Apartment For Rent - $220 | Domain

 

I had to giggle. A traffic jam in Orange is like a suburban street in Sydney

But by regional standards yes its a very buoyant, busy and bustling town centre, so I can understand how people might feel the traffic is bad when comparing it to other regionals.

 

What do you think about toowoomba?

 

I think it's in SE Qld, where every man and his dog is now promoting dual income properties... so while right now the numbers look fantastic, will they look fantastic in a few year time when hundreds of the same dual income properties have been built around yours?

One of the reasons I am focused on regional NSW is that others are not focused there. In Bathurst and Orange, no else is delivering dual occ. That's just how I like it. I'm doing 15-20 per annum. That's it. I dont want to see my clients rents being cannibalised by massive oversupply.

Unfortunately ,I believe dual occ in regional SE Qld is going to end up just like apartments in Brisbane....massive oversupply and the rents will take a beating. It will take a few years but its going to happen. It is inevitable because all the property companies are pushing that type of stock in that type of location.

Just pick up a property mag and see what everyone's promoting now... SE Qld dual income

 

meanwhile, in Orange...

 

I like Orange as a NSW regional.

 

I like Millthorpe. Super expensive though

 

Orange is going gangbusters right now... really strong rental inflation and good solid growth , as is Bathurst. Actually - in Bathurst no new land is being released as the city infrastructure has been caught short - which is forcing land prices upwards - sadly it is almost impossible to find land that isnt in a shi&&Y part of town.

Dubbo is warming up too... I suspect it will really do well in 2019 and 2020 ...playing a bit of catchup to Orange and Bathurst .

Bottom line is that the regionals are doing very well as affordability bites in Sydney and Wollongong and Newcastle. You only need some treechangers and some young families making the move each month, and its more than enough to push things along nicely.

If you have never visited Orange - it will really surprise you. Lots of beautiful, wide tree lines streets full of federation style housing - a lot like some of the nicer parts of Sydneys inner west and lower north shore. It offers lots of great food, wine, coffee, etc... has excellent medical services and is within relatively easy reach of Sydney by car. It's just got a really nice feel to it.

 

Orange is very nice. Me and my husband only spent 2 days there and decided to bought a cottage in Dalton street. We will probably move there when we retire.