NSW Parramatta - Is this too expensive for a 1br apartment?

Hi Guys, First time buyer here, currently looking to take advantage of the grants and buy owner-occ and possibly turn it into an investment later. It feels like I'm effectively spending half a million dollars to be allowed to have a cat, but I've run the numbers for it to be an investment property anyway.

Property I'm looking at is a 1 bedroom apartment on floor 10 of 23 Hassall St, Parramatta. This seems to be the listing: 23 Hassall St, Parramatta NSW 2150 | Domain
I live in the area though, so I'm going through the developer.

I want to buy it for about ~560k, and have some sample numbers from a combination of the brochure and my own research. Strata should be $2800 a year, council $1000, water $800 and Insurance about $1200. P&I at 2% (Unsure) could be $466 a week. The total amortized cost comes to about $580 a week. It's a lot for a one bedroom unit, both in purchase price and in expenses. The thought of having my own place is exciting, but $580 a week in housing costs alone is quite a lot.

I've seen a few rental appraisals for this buildin. For this unit, I'm leaning towards $450 a week because of the location and view. I'd be looking at a cashflow of about neg $160 a week, gross yield of only 3.8%.

After deductions for depreciation, total cashflow is still negative $100 a week.

Are these numbers normal? I'm still new to this so it's hard to tell if I'm overreacting or if this is normal. I've turned down 2 other properties so far, and weirdly enough this one has the worst numbers despite seeming the most legitimate at face value. Also, it would drain pretty much my entire savings just to get in the door.

 

Sydney is unlikely to have properties that pay for themselves. In some regional areas and perhaps still of fringes of Brisbane, maybe. But I can’t remember last time I’ve seen a positively geared property in Sydney

 

Do you have a decent deposit? Depending on the square metreage of the internal space and the lenders appetites for that building it may be difficult to borrow with a 5-10% deposit.

As an investor I would go with a property in a smaller complex. I would assume that strata would be much more expensive than a small unit block, and if there are issues with the building you would have little to no input on how to remedy any problems. Perhaps something that need a little cosmetic reno to increase value and yield which could mean for quicker access to another deposit to buy again.

 

When your first sentence says to take advantage of the grants, its a bad sign.

But this market is crazy enough you might still make money on this.

 

I thought Sydney apartments took a nosedive anyway. Well at least based on data I have!

 

After tax (depreciation etc) that $100 pw could be cashflow positive. Run the numbers in our property estimator tool which even calcs cashflows before and after tax. I often find people look at loan repayments and they really should be using the interest element and they often vastly under-estimate the Div 40 and 43 depreciation available. Depreciation is a non-cashflow deduction that gives positive cashflow. A 1 bedder multi level new build apartment could easily be $14K a year and possibly far far higher initially. Its worth finding out exactly what it is.

 

Do you need to buy a NEW place. You usually overpay on a new apartment.

 

u need to factor in depreciation costs for a new apartments when using it as an IP

 

I don't know. But in the long run, it could be the numbers you're working with that make you happier than the view. Of course, it would be great to get both but not so easy.
Both you and your cat need a good aspect - east, north east, maybe south east; you need easy access in and out of the building ;and you need to know you can stay there if and when things get tough.
Do put the numbers before the view; much easier said than done. As others have said, older and smaller is not a bad way to go. Good luck, I hope adds up for you but if not, and you don't like the other options, keep looking.
P.S. wow, it is a very nice 'view'.