澳洲Australia property First time investor advice | Sydney


在澳大利亚 I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo


Hello all,

My partner and I are looking for some advice in investing, we are first time investors and currently trying to make a decision on our investment path.
We have located land in Sydney, Campbelltown for $210K, 502m2 and are considering building a 4 bedroom, 2 bathroom, 2 garage home for $176,000 including site costs. So our total investment will be approx $386,000 and eventually hoping to return $450 per week in rent.

We are trying to figure out if this is a good investment, we understand that this investment would be negatively geared and are tossing up the idea of doing something a little more creative like renovating and selling.

Just hoping to get some feedback from some experienced investors, all posts would be greatly appreciated.

Thanks :)  

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Don't buy a house, prices heading down so you will be making a loss, especially while negatively geared.

*hides*  

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jamie1982 said: ↑
So our total investment will be approx $386,000 and eventually hoping to return $450 per week in rent.Click to expand...
+ $38,600 (10%) for budget blow-outs = $424,600

Are you 'hoping' to get $450 in rent or are you forecasting it based on research?  

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It being a buyers market have you considered buying an established house -newish or otherwise - and expanding your search?

If you prefer newish for the depreciation consider buying one already built. This way no price blowout (ianvestor is correct), you have a more accurate estimate of rent and market value, you know what the suburb is doing and there's a good chance you'll pay less than the one already built.

You may even be able to pick one up at well below replacement cost, if there's a glut in the particular market, which is sometimes the case in a new development.

Otherwise keep looking till you find something with a much better yield or with the possibility of a small cosmetic reno to increase the rent.

Do you need to spend 400K plus as a first IP. Often a cheaper home or unit has a better yield, allows you more wriggle room and can allow you to buy more, sooner.

It's all about doing your DD, and sums for getting the best deal you can.  

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my advice is to set a goal from what u want to achieve from your investing

Regards,

RH  

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Stick to the fundamental

Hi Jamie,
Everyone you talk to will have a different opinion. So much so that it will spin your head. You need to stick to the fundamentals.

First, whatever you do with property or any other investing you will need to spend your own time on it. After working with property investors doing all different shapes and sizes of property investment one trend is clear - do what turns you on, avoid what doesn't.

So sit back and think about the day to day of what you will have to do and work out what excites you the most - is it renos, building, subdividing, ......, or none of the above.

Secondly, work backwards and do your maths.

You make your money in residential property investment from capital growth. The formual here is simply:
What you make = Sale price - selling cost - purchase price - purchase costs.

In between buying and selling you want to minimise your net holding costs through rental income and good tax planning. In the best scenario you might get a small net positive cashflow. The big issue here is protect your income so you don't end up not being about to cover your holding costs.

Thirdly, Do your research

We use market research reports from companies like Residex who provide predictions of capital growth in each suburb. I can head you in the right direction for these if you want - that will help with predicting your future selling price and also give you a good idea about whether you are buying well now.

You then need to reseach how to minimise your purchase price and holding costs (selling costs can come later). For example:
Purchase costs - Minimising stamp duty is one big factor here, so building or off-the-plan can help here.
Holding costs - minimise your borrowing costs, and get good tax planning (eg. look at the difference in depreciation between new and old properties)

This may be teaching many of the people on this forum to suck eggs but I've worked with a lot of new investors and home buyers and restating the basics is the best way to start.  

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Some questions to ask yourself:

- How much finance can you get?

- What are all the buying costs?

- Is there a strong demand for this type of property in the area?

- How much will the property cost you to hold each week during construction?

- How much will the property cost you to hold each week once rented?

- How will you make repayments if the property is not leased for xx amount of time?

- How much can you afford to contribute on an ongoing basis?

- What is the purpose of buying this particular type of property (negative geared in that area)?

- What are similar properties renting for?

- How much are similar properties that are already constructed?  

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Add Value

Hello Jamie,

Most of the advice above is spot on. Don't rush things is the main advice I can give and plan what your strategy is - short and long term. How involved do you want to be and what return are you comfortable with?

Starting your journey with a development may be a big step up for you, depends on your entry level, but there are many ways to skin a cat.

Myself, if I was starting out again, I would look at buying an established house on a block where you have multiple options. By that I mean, you have various options to add value and every one of them can be instigated at a time you select. For example, a house on a large block could be renovated first to increase rental return and be revalued to release your renovation funds or provide you with funds for stage 2.

Stage 2 could be subdividing the block - you can keep it or sell as is.

Stage 3 could be getting development approval with plans and permits - again you have an option of selling the back block ready for a small developer/builder

Stage 4 could be building/ developing the subdivided block

Stage 5 could be selling the renovated front property or using the income from one of the previous stages to pay down or pay off your mortgage on it.

Each stage has a reason and a separate return for you but is calculated on an individual basis so you can do each one, stage by stage and all have a positive outcome. That's where your due diligence and cost analysis is critical. You would have worked out each for cost and outcome. Each stage also provides you with an exit strategy which is most important when the market or your personal situation changes.

A carefully selected property today, will give you multiple returns down the track, including capital growth, but the main asset you have is selecting property that you can add value to and create that financial growth yourself, without relying on the current property market. It is also a great safeguard against the market turning on you.


sapphire101  

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Why are you talking about developing when he hasn't even bought a house before? It's the old 'running before you can crawl'  

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Wunderbar said: ↑
Why are you talking about developing when he hasn't even bought a house before? It's the old 'running before you can crawl'Click to expand...
Because the OP is looking to buy a block of land and then build a house on it.  

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I wouldn't be building if you don't have any prior experience. It will be a very expensive lesson  

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Thanks for the replies everyone, it is much appreciated.

If buying land and building a house is a bit of a hassle, what would people suggests as a good investment strategy for a first time investor in Sydney?

I have been thinking about my investing options for about 1 year and a half now and still can't decide on the best way to go. I have thought about buying a cheaper house in the South West and renovating and selling to make lump sum cash profits, but have heard from others it is very hard to make money doing this.

To buy a unit closer to Sydney CBD would cost put me at my maximum of $400,000 as a purchase price and then this would be negatively geared. I have been thinking of some where around Petersham to buy a unit.

However, now I am starting to become confused with all the plans and strategies to invest. I would be good to hear what other experienced investors would recommend for my situation.

Cheers Jamie.  

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Dont listen to wunderbar, I dont have a clue about what he is talking about. Building a house is not difficult. You buy some land if you know how to breathe you could probably manage to buy some land. Talk to some builders who have been around a while and people who have built new houses . Chose one that has a good reputation , you are comfortable with and can build the house you want at an acceptable price. sign the contract after it has been checked by some-one who understands it. The most difficult thing is chosing the color scheme, but at least you get to chose. You can build cheaper than what you can buy the same type of house for, you know the condition of the house you are getting and you even get a warrantee, save on stamp duty, get more tax deductions with building writeoff allowance and get more depreciation for longer. It is easier to get tennants,have more choice and get better quality tennants, which results in less hassles not more, can get higher rents. Less maintanence on house can have low maintance garden once again less hassles. I would say it is easier to read and sign building contract can do it in about half an hour. Than do all the DD required for an old house, and you never really know what is hidden from view, an old house could give you alot more hassles than a new one and probably would. anyway the best way to get experience is by doing. You will always find people who will tell you why something cant be done but they are uaually wrong there are no problems only solutions. If you are familiar with property values you should know what is good value.  

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buster in all honesty why should he though? once ALL costs are considered, is he going to be significantly in front (or in front at all) compared to if he bought a 1 yr old house in the same suburb? this 1 year old suburb will have the same plus points as everry single one you listed apart from chosing his own colour scheme which, unless hideous, will not affect his rent. it also wont have the holding costs and extra work and time involved in building. if he has found an area where there is a good amount of fat just from building then sure, go ahead.  

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