Sydney - IP with GF OR Rent?

I am trying to work out the best course of action for myself and would appreciate any advice/ideas for my situation below:

1. I need to (absolutely must) provide a place to live for my parents starting June 2019 (Basic accommodation - 1 bed
+bath, small living area is more than OK, preferably ground floor as one of them has restricted mobility). They’re 70+ with a pretty frugal living, own a car & apart from accomodation they’re self sufficient. I live in north west Sydney (Bella Vista) so anywhere within a 20-30 kms radius would be acceptable.

2. At the same time I’d like to also invest in property over the next 12 months. My capacity to invest is up to 1.5m, and I will be able to comfortably service this over the long run (incl P&I repayments after 5 years). The objective is capital growth, as I have my own home (paid off). I have been avidly reading this forum for >6 months, especially anything related to investing in Sydney, and well aware of what the consensus is (catching a falling knife, Epping/Ryde/Hills overvalued and falling, OTP apartment bloodbath, NG laws changing, Chinese money gone, etc etc). All of these arguments do resonate with me.

Obviously, I’d like to kill 2 birds at once

Here is what I am considering:

Option 1. Rent a cheaper 1 bed unit or a granny flat somewhere in western Sydney for 1-1.5 years, and wait.... that’s approx 20K rent $ gone.

Option 2. buying an older house on large-ish land (600-700 msq+)and building a 2-bedder granny flat at the back, rent out the front dwelling. Might even be able to squeeze in a tenant into the GF (thinking single student type from flatmates.com.au!)

Questions:
- please critique the above as my experience in property investing is limited to owning unit(s)
- would appreciate any alternative strategies to the above
- with option #2 - aiming to build a GF, would it be better to buy a single property in a cheaper area for 400-600K (which allows me to eventually buy 2 IPs with my total budget) or a more expensive area for about 1m (which will pretty much restrict me to a single IP)
- with option #2, what are the pros/cons of buying a property with an existing GF vs buying an older house and building my own GF? (Apart from the obvious like I’ll have to fork out ~120K and a few months of effort)? Will building my own GF always produce more equity for me?
- lastly, but most crucially, what sort of areas in Sydney are the best for option #2?

Thank you!

 

I have yet to find a House + GF combo that is better value than buying one and building one yourself.

The experience in building one (ie engaging a builder etc) is worth more than buying a pre-finished product

No harm in renting, but really, its up to your own circumstances.

As for the "best areas" for building a granny flat, just remember this, a granny flat will cost around $120k to build. It doesn't matter what suburb you build in, the costs are largely the same. However when renting it out, a place in Chatswood will fetch more rent than one in Mt Druitt.

When looking at what suburb to buy in, have a look at rent income for an IP. High price does not always correlate to high rent. Look at West Ryde vs Croydon for example. The cost to get into Croydon is high, yet the rent is the same or a little lower than West Ryde.

An area which i think is nice and commands decent rent is Peakhurst. There are places in the Peakhurst postcode that are actually 1km walk to Riverwood station.

Lately I've seen older places in Peakhurst that are selling for around $850k. With a $1m, after building a Granny Flat and renovating the existing house to a new standard, you'll still have change to spare.

Other than the 12m frontage + 450+ landsize, i wouldn't get too hung up on getting a big block. Its all about layout of the existing house that determines whether a Granny Flat is doable. I've seen 700sqm blocks that are rubbish for granny flats and at the same time, also seen 460sqm blocks where a Granny Flat would work very well.

159 Belmore Road, Peakhurst, NSW 2210
3 Lilydale Avenue, Peakhurst, NSW 2210
10 Walker Avenue, Peakhurst, NSW 2210

 

Why? Personally, I keep my investing goals and personal interests as separate as possible - particularly when family are involved.

 

Exactly.

Take Option 1 and then review in 6 months - it will be financially similar (or perhaps even better) over a 12 month period. If you buy a place the interest (or foregone interest) and other costs will chew up the $20K, so it is not gone. The timeframe is too short anyway to properly research and buy a place.

 

Because ... what’s a more cost effective way to provide a 1 bed accommodation for the next 15/20 years from which I won’t be getting any rental income at all....?

 

Probably by investing in a more optimal way that isn't encumbered by the need to provide suitable accommodation for your parents.

...and then using the increased profits to just pay for the $20k rent or however much it is you want to help out your parents to the tune of.

 

Agree. Also you must have a very nice girlfriend who is agreeing to provide for your parents.