NSW WTB First IP Albury

Discussion in 'Where to Buy' started by Ashory, 7th Jun, 2017.

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  1. Ashory

    Ashory Member

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    7th Jun, 2017
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    Northern Beaches
    Hello,

    Complete newbie here and have quite a few questions in terms of where to start. The only place I have owned a home was in Buffalo, New York and it all seems quite different.

    I am not entirely sure if I am on the right track or not so would like some advice on what my understandings are and if this is something I should really even be considering.

    I really want to start off small and by that I mean a unit for <$150k. Ideally the unit will be in neat condition but likely not renovated at this stage, at least 2 bedrooms, close to shops, schools and other amenities, where possible would also like it to be tenanted. My partner and I have settled on Albury and are looking in North Albury/Lavington area.

    - I am aiming to pay enough of a deposit to avoid paying mortgage insurance - is this something I should be doing or do people generally just pay the mortgage insurance?
    - Because this is an investment property do I opt for an IO Loan and if so what are the benefits?
    - If the property is built in the early 1980's is it still eligible for depreciation to be written off?
    - In terms of ongoing costs I understand there to be PM fees, strata, council rates, water rates, insurance and repairs and maintenance as they arise. Is there anything I am missing? How do I factor these costs in when I am not sure what they are?
    - In terms of owning a unit how does the strata work and what should I be careful of?

    I suppose my question is, where exactly do I start?

    I've seen the below few properties that seem interesting to me or am I totally missing the mark?

    3/189 Union Road North Albury NSW 2640 - Unit for Sale #121103654 - realestate.com.au

    2/378 Fallon Street North Albury NSW 2640 - Unit for Sale #125644394 - realestate.com.au

    1/738 Lavis Street East Albury NSW 2640 - Townhouse for Sale #125203042 - realestate.com.au

    Any advice on the Albury area would be greatly appreciated.

    Thanks.
     
  2. Tony Fleming

    Tony Fleming Well-Known Member

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    Hi @Ashory I invest in Albury so know the area quite well.

    A lot of your questions really come down to what you want to achieve? Are you just looking to buy one passive cash flow property or build a large portfolio? LMI has its benefits if you are looking to build a portfolio up quickly. IO is preferred especially if you have any non deductible debt, as you will want to tackle that first.

    Strata gets paid quarterly. There are two parts a Admin and Sinking fund. The most important part of purchasing strata properties is to get a strata inspection report as it will outline how much funds the complex has available and any structural/repair issues.

    Units have a certain tenant demographic of young uni students and elderly people generally. So make sure any purchase suits there needs for example close to shops, unis etc. As you mentioned I would try and get a unit that needs a little work but has a tenant in place. If a tenant is in place get the tenant ledger to check they pay on time.

    The average figures for mine and clients properties for units in NA and Lavington are:

    Council rates-$680pa
    Water-$850pa
    Strata- Really depends on the complex I'd say the average would be 1250pa
    Property Management- 6.6% on rental income plus a $5 monthly account fee

    You can just call any agent on properties you are interested in and ask for the figures. Hope this helps and any further questions just ask or PM.
     
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  3. Yinka Dare

    Yinka Dare Well-Known Member

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    I am about to sell my house in Lavington. You need to be very careful buying cheap units in Lavington though as the renters these places attract are usually low income earners or undesirables. Lavington has improved a lot over the last few years though as a suburb. The capital growth has been very low though. Id buy near a school or the shopping centre though. Like many suburbs it has its good areas and very bad areas. I'm biased but I would rather spend 240k on a 3-4 bedroom house than a unit.
     
  4. Ashory

    Ashory Member

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    Thank you both for your responses @Tony Fleming and @Yinka Dare!

    Ideally, we'd like to build a portfolio and own several properties. I'm hoping that it will eventually generate some sort of an income for us but understand this could take quite some time.

    Eventually we'd like to move towards purchasing freestanding larger homes but feel like an apartment is less maintenance and upkeep to begin with, also a little bit less exposure. Unless of course you want to give a girl a once in a lifetime deal on your house Yinka?! haha

    In terms of location are there areas/streets/landmarks that should be avoided at all costs? We have only spent a small amount of time in Albury so our knowledge is limited. We are planning a trip in the coming weeks to visit again, is there anywhere we should focus our search or pay particular attention to when we are there?

    I grew up in a rough part of Western Sydney, several actually, so I have a good eye for spotting these things but being so new to the area any advice is welcome!
     
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  5. Yinka Dare

    Yinka Dare Well-Known Member

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    Stay away from G block in Lavington. Places are cheap there for a reason. Basically the ghetto of albury. Not many people there I'd invite over for a BBQ lol
     
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  6. Tony Fleming

    Tony Fleming Well-Known Member

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    Try and avoid upper Lavington if possible. Try and stick close to Lavington square as location is a high priority for most renters.
     
  7. Ashory

    Ashory Member

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    Thanks for the info.

    I have a few more questions that perhaps you could shed some light on?

    It's actually more of an approach. I'm not all that interested in the Interest Only Loan. It scares me to think that I am not paying down the debt that I actually owe and feel as though Prn and Int is the way to go. I understand this increases my holding costs significantly but I'm not quite understanding where I'm making money with the IO loan. Between the IO payment and holding costs i.e. strata, insurance, council etc there is a positive cash low of maybe $40/week which from my understanding will then be taxed and reduced to $20 / week. Is the benefit in this approach all from the tax incentives? Given the small yield I could potentially negatively gear this scenario with depreciation and other expenses such as traveling to the property etc?

    What I have been considering is going for a unit around 140k paying a 50k deposit on the place and having a 90k mortgage of which I would pay the prn and int loan at approx $110 week or $440/month.

    The place has potential for rent of $210 a week and holding costs weekly are:
    Council $1250 or $24.04 weekly
    Strata $900 or $17.31 weekly
    Water $440 or $8.46 weekly
    PM @ 6.6% +5 or $18.86 weekly.
    Insurance $1000 or $19.23 weekly (this is a guesstimate and I could be way off?)

    for a total of $87.90 a week.

    Holding Costs plus mortgage total $197.90. There is no profit in this however, it is paying for itself. In the mean time I can pay the mortgage off in 2 years and now I have a property that I ow outright and is generating an income which I can use to buy another property at which point I can consider an IO loan because I have the property to hold me up if I need it?

    Is this a REALLY bad approach? Should I give this up now?
     
  8. larrylarry

    larrylarry Well-Known Member

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    Sackie and Tony Fleming like this.
  9. Tony Fleming

    Tony Fleming Well-Known Member

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    Do you have PPOR, CC or personal loan debt? As you would want to pay non deductible first before tackling IP debt.

    As @larrylarry mentioned there has been a number of changes to IO loans so I would read up on them or have a chat to your broker to see what works best for you. The $50k could be spread out for two property deposits which is why most people go IO at the start of their journey. Build a portfolio and once they are at a happy level start paying them down. All depends on what you feel comfortable doing and your end goals.

    Are those numbers still based in Albury Region? Council rates seem very high and water is very low. Insurance is around $450 for strata properties.
     
  10. Ashory

    Ashory Member

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    Thanks @Tony Fleming.

    I have spent a good portion of today reading up on IO loans as suggested by @larrylarry (Thank you) and am a little more comfortable with the idea. I'd like to do more research and speak with my broker about them also so I'll see where that takes me.

    The only debt is an auto loan which is about 12k other than that there's no other debt.

    Yes the prices above are based in Albury, I believe those specific numbers are in East Albury.

    I had one real estate today advise me that water should be a flat $850 + usage in Albury? Does this sound right?

    I'm wondering if perhaps the $1250 includes the $850 water rates and the $440 (or $110 per quarter) is usage. I'm waiting for the agent to email some documents so will try and verify once received.

    My end goal is to generate a supplemental income that's going to eventually allow me to reduce my hours at work. I was recently diagnosed with Multiple Sclerosis so am trying to be proactive now whilst I'm still capable of working full time but don't want to put myself in a position where I HAVE to work full time to keep my head above water just in case.
     
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  11. Tony Fleming

    Tony Fleming Well-Known Member

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    Even for East Albury the council rates seem very high. Yep that's right 850 minimum. All my units have never gone over $950pa but I'd do my numbers on $1000 in case.

    Good idea on getting a copy of the numbers beforehand. Try and get a tenant ledger as well if there is a tenant in place,

    Sorry to hear :( at least you are been pro active now. Albury is great for cashflow and East Albury has a average 3.4% growth pa so a good medium to long term investment.
     
  12. marty998

    marty998 Well-Known Member

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    I've got a friend looking at Albury at the moment. A couple of properties in Thurgoona... nice part of town or not?

    Got me wondering whether I can buy one down there too :) Rents seem to be around $350 a week on a $350k house, as opposed to $425 a week where I am on a $650k apartment.

    The rental yield is certainly attractive.
     
  13. Tony Fleming

    Tony Fleming Well-Known Member

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    It's a good area as a whole. There are only a few streets I'd personally avoid(the old side of Thurgoona). They are putting a lot of new estates in against the old houses. It's very popular with Gen Y's at the moment as it is close to the University and young families like having brand new houses.
     
  14. Yinka Dare

    Yinka Dare Well-Known Member

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    Just sold my house in Lavington. Not sure there will be any or much capital growth in units in the area. Canget a house for 220k.
     
  15. yorkie

    yorkie Well-Known Member

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    Location:
    sunshine coast
    Hi guys just reading your post and thought I'd how you guys went? Did you buy anything yet?
    I have 3 X 2 bed units which are strata titled but no body corp as I own them all. If interested pm me and I'll give you the address.for sale $160 each tenanted at $200 PW - 6.5 %yield
    Thankyou
    Take care
    Yorkie