Where to buy given my circumstances?

Hi,

Some advice would be great.

My situation:

- I am rentvesting in Sydney with my unit being in Dee Why (2 bedder near the beach)
and it is costing me about $10k a year to hold. (Have about 130k in equity on top of 20%)

- Have saved $100k plus still saving each month

- Looking at buying a second property but it needs to be cashflow positive or close to it to keep lifestyle, low stress and later look to buy third property possibly with equity if cashflow allows.

- Open to buying interstate but would prefer capital cities not regional

- Was thinking of one bedder in Richmond Vic, being inner city, good rental yield for trendy area but
I am biased due to knowing Melbourne better than other interstate capitals. Have seen a lot of talk about SEQ and would be able to buy a house for that price but not as many drivers in my mind (population and jobs) but land will be scarce in future and no strata fees if buying a house.

- would be looking to invest in 2018

Any thoughts welcome.

Thanks

 

Ok so you are looking for a high-yielder, but restricting it to cap cities only?

Thats not impossible of course, but it does depend on how you define the word 'high' in yield. E.g. ib Syd-Mel; anything above 4% right now would be deemed high yield (sadly!), but perhaps in an Adelaide or Perth or perhaps outer-Brisbane; 6%+ yield might be deemed 'high'.

But remember... whatever the number is above, thats the GROSS yield. Net yields after costs are usually much more meek.

Many investors moving into 2018 are shifting into yield-plays/strategies (myself included) so I get why you want to do this. Your post doesnt mention capital growth but the vibe I'm getting is that you want that too. Gonna be tough to get much decent CG in 2018 short term (I imagine you want this so you can unlock funds for property #3 asap).

Most cap cities arent forecasting huge CG in 2018 (multiple data sources are saying this) but of course they can and DO get it wrong, too!

What Im saying is; to achieve at least neutral-positive yeilds whilsy ALSO having a decent whack of CG within say the first 12 months holding... that will be difficult to do.

I can't really tell you 'where' to buy, but perhaps go beyond the 8 cap cities in your search? Open it up to say the next 5-10 by population and research those too. Looking at the top 8... syd-mel are pretty much topped out (you cant afford a house in either, itd be units and those are topped out = be careful). Darwin-perth are both massively depressed and could present some opportunity, perhaps look there? Brisbane-Adelaide are pretty much in a similar state each. Both are plodding along but nothing huge just yet for CG (though gross yields are great). Canberra-Hobart are also nearing their tops. Canberra I think is a smart CG play with low yields, Hobart might have a bit more CG puff left, and yields are pretty stellar there too.

But like I said, do a bit of research on those next-tier cities:

GC
Townsville
Cairns
Newcastle
Wollongong
Central coast
Geelong
Ballarat
Bendigo
Launceston
Mount gambier
Bunbury
Mandurah

You might find something interesting in some of these.

Good luck!

 

Good post.
Just wanted to point out that the yields in Perth are terrible. I was thinking of there for the same reason you mentioned, but the oversupply has ruined the yields. I don't know how to run numbers on what it will be when the oversupply is soaked up - does it return to pre-oversupply numbers within 1-2 years?

I have wondered about how much value-adding can help in this situation.
For example, if you buy a very run down house (but with no structural problems) and have a major renovation done, then
1. you get depreciation
2. you get higher rent since the place should be pretty nice afterwards
3. you (hopefully) get a higher value at the end than the cost+reno

I depends a lot on how much depreciation you can claim though, so I am curious how much you can get back - not sure how to find that out yet though.

 

Thanks guys,

I am not expecting big CG but rather something that would move up after a few good years.
Holding it for this time would not be an issue if it is cashflow positive and helps pay a bit of my Dee Why property and allows me to keep saving or acts as a bit of defence when interest rates go up.

High yield for me means enough to make it near or cashflow positive. So this will depend on how much of a deposit i put down to reduce the loan/repayments.

Not in a rush to buy the 3rd property for another few years.

Hope this gives a bit more clarity but I see your point regarding markets topping out so may be a point of just saving for a bit longer and getting a smaller loan.