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NSW Strategy. Sydney still works out to be profitable.

Discussion in 'Where to Buy' started by bobbyj, 13th Jul, 2015.

  1. bobbyj

    bobbyj Well-Known Member

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    Hi guys,

    I have done some number crunching and surprisingly Sydney is still working out to be profitable (in my books).

    I just want to bounce some ideas around and see what you think.
    I know there are many variables at play here and short/medium/long term consequences based on portfolio serviceability/land tax etc

    Liverpool 3 bedroom unit. I've seen a 3/2/2 unit on Bigge St Liverpool. Less than 5 years old.
    Sale price $519,000.
    Rent for similar properties $450-480.
    Yield is 4.5% on a conservative estimate.

    Including management fees, interest rates, landlord insurance, bills etc, it works out to be $1500-2000 negative geared.

    Here's the catch though, capital depreciation is approximately $10,000. Based on my income I can get back at least $3700.
    I can service it without a problem and each year I'll end up at least $1700 ahead.

    Given Sydney may grow a bit more over the next year then flatline, it seems to be a reasonable investment. Mind you I think half a mil can do a lot more elsewhere.

    Thoughts?
     
  2. sash

    sash Well-Known Member

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    Nope......more potential in Brissie....you can buy two..I can't see that unit being more than 550k and that is tops...and easy to replace at that price.

    There are places in Brissie at the moment where there are houses are in the low threes and the land component is about 235-265k. So essentially you are buying the home for 65-75k!

    The rents are about 345-365pw....



     
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  3. bobbyj

    bobbyj Well-Known Member

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    I was thinking that was the likely path I was going to take. I have to admit that SMH article on Brisbane dropping 8% did make me frown a bit. Pays to be sceptical!
     
  4. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    Sure, might make you some pocket money.

    For me, I'm aiming a bit higher so I'm buying in Brisbane.
     
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  5. Be Developer

    Be Developer Property Developer Business Member

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    @bobbyj

    Since you posted info here...forget about that one....time to look for a new deal....good or bad..it won't take long for that one to be under contract now;)
     
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  6. bobbyj

    bobbyj Well-Known Member

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    Double entendre!
     
  7. WinDyz.

    WinDyz. Well-Known Member

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    Yes Sure there are houses in brissy for low 3, but if you look at re.com.au majority of area in Brisbane with the low 300k prices has negative growth if you look at in 10 years period.
    Yes they might have 5.5-6% yield, however insurance and management fees is more expensive than sydney.
    Majority of units in Sydney has growth around 5-7% over 10 years.
     
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  8. HUGH72

    HUGH72 Well-Known Member

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    Dont you mean 40-50% in 3 years with little before that?
     
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  9. D.T.

    D.T. Adelaide Property Manager Business Member

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    For the same $519,000 you quoted, in Adelaide you get 2 x $259,500 places (half)
    Combined week rent about $650 instead of your $450, so your serviceability takes less of a hike, which is important now given the recent policy changes.

    So including insurance, PM, bills, etc instead of being $2k negatively geared in your scenario, probably be $6k positively geared.

    Probably less depreciation than you quote... but guess how many of the above you can afford to hold onto? :)

    And given the state of both markets at present, which do you think will see the most percentage gain over the next 3 years? :cool:
     
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  10. WinDyz.

    WinDyz. Well-Known Member

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    Last edited: 13th Jul, 2015
  11. HUGH72

    HUGH72 Well-Known Member

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    Any suggestions DT where to spend 260k in Adelaide?
    Edit sorry I know its off the subject
     
  12. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    You're right, it's a reasonable investment, but plenty of reasonable around, is that all you want?
    You gotta be unreasonable to achieve extraordinary.
     
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  13. WinDyz.

    WinDyz. Well-Known Member

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    But for me Investing in an area that you have completely no understanding what so ever is more speculative. And if you do look history, Sydney prices has hold its value in GFC. So if you're intended to invest for long term, i don't see anything wrong with buying a 2 bed unit around the median value with 5-6 in front.
     
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  14. HUGH72

    HUGH72 Well-Known Member

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    Definitely easier buying in an area your familiar with, no doubt
     
  15. ej89

    ej89 Well-Known Member

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    Go on realestate.com and go on the sold section and look at whatever suburb you want. Sort it by lowest to highest. You will see the cheapest many houses were sold were during the GFC... Dont just look at median. There were bargains everywhere, especially in the west.
     
  16. bobbyj

    bobbyj Well-Known Member

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    I'm just quoting percentages on properties in certain streets that I've kept my eye on rather than the suburb median/averages.
    I picked up a 3 bedder towards the end of 2014 and in under a year it's gone up about 36%
     
  17. HUGH72

    HUGH72 Well-Known Member

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    Thats a great return, I don't think I was responding to your post but the idea that a 10 year average return of 5-7% implies greater stability. It doesn't, all that gain has been in the last 3 years, expand the time frame a little either way and you see that extended periods of nothing are following by short bursts of buying madness
     
  18. sash

    sash Well-Known Member

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    Ditto....negative over 10 years....heard of counter cyclical investing....stop looking at stats and get on the ground! The you will understand how things are rolling up there.

    The insurance cost is the same as Sydney and most agents will do 6.6 to 7.7% (inc GST) to manage.



     
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  19. Befuddled

    Befuddled Well-Known Member

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    Felt the same way as you. Overcame that fear after thinking of land tax thresholds.

    The chances of obtaining financial freedom through investing in 1 state is, in my opinion, very low. You can probably hold 3-4 apartments or maybe 1 house in Sydney before you tip over the NSW land tax threshold. Is that going to give you a reasonable passive rental income to live off? I'd say no even if they're completely paid off...

    Therefore, the only way to go big without being hamstrung by massive land tax would be to spread your properties around in other states. Once that understanding was reached the idea of buying interstate begins to sit a bit more comfortably.
     
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  20. sash

    sash Well-Known Member

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    Great point...Sydney might be gang busters now...but there will come a time when it stagnates for 7-8 years again...having properties around the country has a consistently growing portfolio.