Advice - Looking to buy an investment property in Sydney

[abpanther]

I've decided on which general area I wanna buy in (10 suburbs), just starting to do some research to gain an understanding of what the market value in those areas and what people are currently paying. From those with experience just wondering what info I should be gathering (e.g. past sale prices, average discounts, days on market, etc) and also what are the best sources to get this info from?

Any other advice would be greatly appreciated

 

[Chook Herron]

http://www.somersoft.com/forums/

 

[roopy]

Don't do it.
Wait till the real estate bubble bursts and buy 2 houses instead.

 

[madunit]

lol, the real estate bubble was supposedly going to burst 3 years ago but it hasn't.

If you have a few properties you are interested in, check out www.rpdata.com

they are the leaders in real estate/property analytics etc.

The only suburbs that have shown solid growth in value are mostly located in Cronulla/Sutherland.

 

[abpanther]

Thanks for your help guys.

From that forum that Chook posted, most people there are saying that if you're gonna by in Sydney, west is the way to go (e.g. houses in Blacktown for under $300k)

 

[roopy]

If you are buying an investment property you need to commit for 10 years.
Your buying and selling costs will be typically between 20 and 30k, so you need to make that much capitol gain before you break even.

I can't tell you the date the real estate bubble will burst, but i can tell you it will happen within the next 10 years.

I've owned 7 investment properties in total over 26 years, and i made good money on them overall, but at least one property i owned for 10 years and broke even or lost money on.

It's a massive committment for a very long time, and frankly, the average 8% return people make on real estate is only a bit better than you can get by sticking the money in a term deposit - and that's when you buy at a good time - this is not a good time.

The real benefit of it is negative gearing, or writing your losses off against other income to reduce your tax bill, so you need to be certain of earning good money at your day job for 10 years as well.

 

[abpanther]

Well my motivation is a bit different, not buying it to make massive amounts of capital growth, my wife and I are hoping to buy our home in Sydney in about 5 years (when she returns to work after raising little ones into school), however we can't do it now on one salary, so we figured in the meantime we should purchase something to make use of our money.

The people I have spoken to suggest that we buy an investment property (unit) in the same area that we wanna buy our home in to ensure that we don't lose out on whatever capital growth happens in that area (Southern Sydney). At the moment looking at $300k one bedroom units in places like Kingsgrove, Carlton, etc. Just wondering whether I should take the risk of trying to buy in an area with more predicted growth (eg Blacktown), the idea will be to sell it in 5 years when we are ready to buy our place (or sell our existing investment property in Parkes, whichever one is better worth selling).

And yes my job is secure, we have already been enjoying the tax benefits of the Parkes place for a couple of years now.

Oh and Roopy, did you utilise interest only loans??

 

[roopy]

Oh and Roopy, did you utilise interest only loans??

They weren't very common in the days i was doing it, but if i were in a position to do it now, i probably would. If you have the gearing right, there is no point paying off a few thousand capitol each year - all it does is muck up your sums.

 

[roopy]

You should also think about capitol gains tax.

I don't know this for sure, so look it up before doing it, but i believe you can call a house you rent out your primary residence if you live in it for 6 months and you don't have another primary residence. The benefit of that is you don't have to pay capitol gains tax on it when you sell it - and that's about a quarter of any profit you make, depending on your tax rate.

 

[miguel de cervantes]

Do people buy houses to live in anymore?

 

[Coaster]

This may sound silly, but i use Bunnings as a guide for investment properties.

Look where they are building, or about to open, 9/10 that will be a great place to buy a cheap property that will in 5-10 years be worth a healthy profit.
They do all the hard research for me, they have enough pull for governments to change the infrastructure to suit them, and big investing builders watch for there movements for quick returns.

I have 3 investment properties atm, and about to acquire a Commercial property. Dont fall into the trap of buying close to your current residence unless it is a high growth area. Look right across the country and only look at potential return, and another tip do not buy something with a pool, i have tipped so much cash into a property because of it.

 

[madunit]

West is only going to show very short term rapid price growth before it flattens out and stagnates.

Because new developments are going on out in the west it will push existing house/unit prices up, but only until the new developments are finished. Then they'll stop growing.

It's a bit riskier taking on those sort of properties, because it's difficult to determine the properties true value, meaning you may struggle to sell it at a high price quickly before the market settles out there.

Go to an area where developments have been in existence for some time and are still showing good growth. Large coastal areas such as Manly, Bondi and Cronulla are the places with best growth.

If you're looking for a cheap unit etc, then it won't resell for much more, if anything, when you go to sell it. Keep in mind, if you are buying outright then any increase is good. If not, then you'll need to get at least a 10% increase in value to break even on your mortgage.

 

[Cletus]

You should also think about capitol gains tax.

I don't know this for sure, so look it up before doing it, but i believe you can call a house you rent out your primary residence if you live in it for 6 months and you don't have another primary residence. The benefit of that is you don't have to pay capitol gains tax on it when you sell it - and that's about a quarter of any profit you make, depending on your tax rate.

The CGT exemption only applies on a pro rata basis for the time you live in it.

 

[roopy]

The CGT exemption only applies on a pro rata basis for the time you live in it.

It's a moot point because the original poster has already said he owns another property, but if you only own one property, and depending on your circumstances and intentions, there is some wriggle room on that.
An example - a girl i know bought a house with the intention of living in it, but after a year found she couldn't afford the repayments so rented it out and moved back in with her mother. She still gets the CGT exemption because it is her only property and it was her intention to live in it.
Some people have been known to manipulate that loophole to their advantage (but my friend is 100% genuine of course).