NSW Regional NSW

Discussion in 'Where to Buy' started by Ardi, 3rd Aug, 2015.

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  1. Biz

    Biz Well-Known Member

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    Sounds good in theory but need to make sure there is demand for that type of set up out there. I had a House/Granny flat set up in a regional area and sold out earlier this year. Just wasn't enough demand for it and the types of tenants it was attracting were not the best either.

    They work really well in Sydney because housing is so expensive so it is a good alternative for some people but out there housing is cheap so not as much demand.
     
  2. euro73

    euro73 Well-Known Member Business Member

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    All bases are covered - this isnt my first rodeo :)
     
  3. RetireRich101

    RetireRich101 Well-Known Member

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    If we get 10k from depreciation, over 20 year this is 200k paying down mortgage. These dual dwelling cost + land probably cost 450k.
    Say mortgage is 400k, it probably take 40 years to pay down all mortgage. have I missed on anything?
     
  4. euro73

    euro73 Well-Known Member Business Member

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    I dont understand your maths...
     
  5. dabbler

    dabbler Well-Known Member

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    Capital growth can be very poor, Orange has also only just got down to a decent vacancy rate.

    Bit hard to use the data in these places, because the town is like a mini version of say Sydney, no go places, cheap places, expensive places, retirement areas, housing areas etc

    Taken me many years to know the area pretty well in Orange, spent many many days there over the last few years.

    Bathurst will be skewed by the many new builds to the West, it is also same, you would have to know each area, I do not know as much about Bathurst, apart from like Orange, the West has more money and new builds.

    Big change in markets there from last year, days on market down, places no longer sitting around, and this extends further West as well.
     
    Last edited: 16th Feb, 2017
  6. dabbler

    dabbler Well-Known Member

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    People generally want house an a decent block of land, 500sqm is considered small, 7,8 & 9's are the norm, and yes, units and flats of any kind are on the nose, you really need to do a house.

    Like you say, it is not Sydney.

    Where did you have yours Biz, Orange ?
     
  7. Biz

    Biz Well-Known Member

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    Port stepehns area.
     
  8. dabbler

    dabbler Well-Known Member

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    Oh, ok, that would strike me as an area where a GF should be ok, at least in holiday seasons....

    But that whole area is a bit of a holiday type thing from what I have read, lot of people prob visit and think it would be a good idea to buy something in a nice area.
     
  9. HUGH72

    HUGH72 Well-Known Member

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    I know Orange had a good run around 2011 from memory, my cheapie there saw the rent increase sharply in a year as the yield went from 6.9 to 8.3% quickly. Values rose but they haven't done much for the last few years.
    I don't follow the market there closely .
     
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  10. WattleIdo

    WattleIdo midas touch

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    Yeah, been wondering the same thing.
    Where in Orange are they?
     
  11. euro73

    euro73 Well-Known Member Business Member

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    Corner Lot on William Maker Drive - only have one of those left.

    The Bathurst dual occ stock will be in the Ashworth Estate. New 4 bedders are selling there for mid - high 400's through to low - mid 500's. New 5 bedders are selling for low 600's. We will be delivering new 4 bedders with double garage + detached 60M2 1 bed granny flats for sub 550K on 650-750M2 Lots .

    New 4 bedders in the area rent for $420-430 per week, and we believe the granny flats will get $200 per week. That's $620-630 per week , or over 32K per annum.

    Take 530K purchase price as an example, + 4K stamp duty for the land ( $0 if you qualify for the NSW new home buyers grant) legals, and 7or 8K for interest during construction, and call it 540K of debt. Borrowed at 4.2% , your interest costs will be @ 23K per annum. Add 4K for property management, rates, insurances, and your total expenses will be @ 27K per annum.

    That should see you generating @ 5K CF+ pre tax. Perhaps a little more. Offset 15K of depreciation ( 2 dwellings) and your taxable position should go from 5K positive to @ 10K negative. This would result in an ATO refund of either 3.25K, 3.7K or 4.5K depending on your marginal tax rate. Net result should be in the vicinity of @ 8-10K CF+
     
  12. Biz

    Biz Well-Known Member

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    Thanks for explaining. I still think there are better options out there though. I did one in Newcastle last year. Older house that I renovated + new granny flat. Total cost 520k (house/Reno/build/) rent $750 p/w. Would be worth around 550k now as the Newcastle market is very strong.

    I still think you are better off buying something established and then adding a granny flat. Established areas have all the infrastructure in place. Not having to depreciate the land developer costs over the next decade either and getting nothing in return.
     
    Last edited: 17th Feb, 2017
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  13. euro73

    euro73 Well-Known Member Business Member

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    You have to remember I run a business. My clients are interested in paying off their PPOR as fast as possible and building a portfolio to deliver a passive income . They live all over the country and cant or wont invest time into managing reno's and granny flat additions.

    Bathurst is an established area. Its hardly the back of Bourke.

    Lots of people buy cars. Very few buy cars that need to be stripped back and restored, whether thats because they lack the skills or the time or the interest or all of the above. Same thing here.

    These are well under the price of other 5 bedders in the area. 100K under.
     
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  14. Biz

    Biz Well-Known Member

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    Understood.

    Of course but it's only a small area population wise. 30k odd. The cashflow might be ok but what are you going to be left with after 10 years? A tired property in a low value regional area that only appeals to investors. As I said, because you are dealing in new estates your paying a premium purely because of the developer margin. 80-100k over established land values.

    Single bedroom granny flat in an area with 4 and 5 bedroom homes could be an issue also. What family would willing choose to rent next door to a single mum or single guy? Two bedroom you're talking young couple or couple with a kid which is more palatable for whoever takes the house.

    I think it's good what you are doing, just not the area so much. Could work quite well in an infill type development somewhere in Logan. You can do a slightly bigger flat (70m2) and you're in a big growing city, would cost around the same price too - $550k.
     
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  15. euro73

    euro73 Well-Known Member Business Member

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    Im going to be left with a dual occupancy property generating 2 rental incomes. And in 15 years I will still have 2 rental incomes. And in 20 years. And in 25 years.....

    Logan is choc full of investor stock. Only a matter of time before every man and his dog are cannibalising each other for a finite pool of tenants. Also, cant find builders there who will deliver the specifications I can get in Orange and Bathurst, for the price point. The scale builders in SEQld are locked up with marketers and I am not going to spend months putting deals together that can be done elsewhere with no hassle, by less greedy operators. There are also all kinds of issues around the legality of detached dual occ in SE Qld LGA's. So what you see is areas starting to be flooded now with dual occ under one roof. RThese guys arent doing 20 or 30 per year. They are doing 200-300 per year. That's just more oversupply and poor rental yields coming the way of those locations. NO thanks. Just like I did very succesfuly with NRAS , I will run my own race and go where the others arent. I will control price points and deliver under market value. In the case of dual occ, it will be done in in small batch , high products in regional towns - at price points that are affordable. And importantly, I will work with builders who will deliver these on 10% deposits and not require progress payments if you choose , so they can be purchased by SMSF's as well. Cant find that very readily elsewhere, either.

    I am putting together deals to suit the new credit environment and address its challenges. The aim is to buy quick income for quick debt reduction and improved borrowing capacity . Not quick equity - which is useless without the capacity to harvest it.

    My philosphies are always going to rub the old schoolers up the wrong way, because they did it all pre APRA when it was far easier to harvest equity without reducing debt. But I think more laterally than them now and place debt reduction and passive income creation at the centre of what I do. I have taken tens of dozens of clients from 1 INV property to multiple properties in 3 or 4 years, with massive inroads now being made into their non deductible PPOR mortgages. So when those who continue to pursue old methods that were effective pra APRA, are complaining their borrowing capacity is exhausted and their ability to expand is exhausted , my clients will keep soldiering on and end up with a far larger footprint and a far higher income from their portfolio. And thats where the bragging rights are - in the end game.
     
  16. beachgurl

    beachgurl Well-Known Member

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    More palatable, hmmm. Can't have your tenants catch an infectious disease from us deadbeat single mums. No wonder I struggle to get approved for rental properties...
     
  17. Biz

    Biz Well-Known Member

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    Didn't mean it in a bad way. It's just a one bedroom dwelling is an odd thing to have amongst 4 and 5 bedroom houses. Would you move into a 3 bedroom house sandwiched between 2 student share houses? Renting out duel occs is about getting the mix right.
     
  18. RetireRich101

    RetireRich101 Well-Known Member

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    @euro73, aren't these deals easily put together at most location?

    I am look at the land cost in Orange 130-160k, say average 150k
    Looking at your corner lot: Main 214m2, GF 60m2
    Not sure the cost to build per SQM out there, but say $1350/SQM
    Main 290k, GF 80k, total build cost 370k
    Total 150k + 370k = 520k

    I must admit the land out there is quiet cheap...
     
  19. Biz

    Biz Well-Known Member

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    When the land component of your IP is barely 30% of the overall value that's a red flag for me. Too much building.
     
  20. euro73

    euro73 Well-Known Member Business Member

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    Pretty close. 160K land and 370K build. Same costs in Bathurst.

    You are right these work anywhere they are allowed...but the problem is that most LGA's around Australia only allow attached dual occ, not detached dual occ. In NSW it's allowed as a complying development up to 60M2. No council approval required.

    Saves time. Saves money. Valuers value them properly and its an all in all better version of dual occ.

    I could do these in Oran Park or Gregory Hills or Schofields or Marsden Park or anywhere in NSW really, but I cant do them at low 500's in those locations. The land is $1200 -$1300 M2 in those places nowadays .. 650M2 blocks arent easy to find, and after building, the end price would be $1 Million or more.

    And I wont get proportional yield, either. I wont get 1200-1300 per week for a 4 bed house and granny flat, 50KM out of Sydney in those new estates. But I will get 420 for a 4 bed house and 200 for a granny flat, in Bathurst or Orange

    So at 530K, with 620 rent and depreciation, a person borrowing at low 4%'s can get 8-9K after tax.

    If I did these in Sydney's new estates ( mentioned above) they'd rent at 800 - 900 per week total rent , and would maybe be 2-3 K positive with depreciation.

    So I had to look at that and ask... how many of my clients want to or can pay 1 Million + for an investment deal that maybe makes them 2-3 K CF+ , when they can buy 2 at Orange or Bathurst for the same amount of money and get 16-18K CF+ and pay their PPOR off in 10 years or less?

    Everything I do , I have debt reduction and post APRA servicing calculators front of mind.
     

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