My husband and I are planning to buy our first property and have been looking at buying a one-bed or studio in or around Sydney CBD. The idea is to buy something for around $250-$350K, rent it out and try to pay it off quickly, then have it as a crash pad for when we move out of Sydney in around 10 years. We are currently renting a 3-bed near the beach for a really good price and are happy here for the moment. I know everyone says don’t buy 1-beds or studios, esp. in Sydney, but given that it will eventually be for ourselves long-term, does this still apply? Sorry if I sound terribly green, any help/advice would be very much appreciated!
Hi Niki6,
Firsly I know nothing about Sydney and the market there so can’t hlep with specifics, but I guess the things I’d look at are:
A) why do people say not to buy them, is it a good reason or is simply a personal view they are airing?
Check what vacancy rates are for these type of places ie: ring agents in the area and pretend you are looking for one to rent, is there a huge amoutn availalbe, if so then it may mean that you may have trouble renting it out yourself until you do want it. If there’s not much supply then try and find out why ie: are tenants looking for them but can’t find enough to rent in whihc case you should have a problem renting it if you bought one.
c) I’m assuming these are strata titled so when you purchase, check out the strata fees and the company that manages it, see if you can get a hold of the last minutes of the last meeting as it may give you an idea of what’s happening ie: are there any major works planned, do they have money if anything comes up that needs fixing, do they have a plan for future maintenance etc?I don’t know if this is of any hlep as I don’t know the market at all in sudney, but hope it gives you a lead or two.
Regards
PKThanks so much PK, that helps a lot! Will definitely keep all those points in mind.
Cheers
N
I am looking to buy my first investment property in sydney as well. I am looking at a one bed walking dist to cbd. I think one beds are a good option..you can pretty much always rent them for younger workers. I would not bother with a studio..resale value less. You have a target market for resale as well.
Hi ugez009
Do you mean a 1-bed has a resale market for younger workers? Where in Sydney are you looking? We are looking around Darlo/Potts Point/Elizabeth Bay. The latter is probably my preferred suburb.
N
Do some research around Drummoyne & Rozelle, not quite walking distance but good prospects.
KateSnap! I am looking Potts Point and Wollom…Elizabeth Bay is better I agree, but a little more expensive and more established. I am thinking more for capital growth, long term as I certainly will be negatively geared, so better to be slightly less established, next to established.
My comment is studios less resale value than 1 beds. Anyway, rentals demand strong around Potts points for young workers.
Hi Niki
The fact you currently enjoy (renting) a 3 bedroom place near the beach now doesn’t seem to agree with a long term move to a one bedroom/studio in 10 years time. I think you need to decide first where you want to be in 10 years time in terms of lifestyle, finance, wealth, etc. Then having decided that, investing in any location depending on your strategy (ie high cash flow, capital gain, a few IPs, etc), may focus you better.
Put it down on paper and then work back from your gaols in 10 years to present day. Use a number of interim targets between now and 10 years based on some entry level strategies. You might be surprised with what you come up with.
Gary
Author of “Property Millionaire: The Guidebook to Having Great Australian Dreams”
Creator of “Property Millionaire – The Boardgame”
http://www.888abundance.comThanks Gary, I did mean purchasing the 1-bed as a crash pad for when we’re in Sydney, as we plan to move to northern NSW/Qld within the next 10 years. In that case, do you still think it’s a bad option?
Cheers
N
Hi Niki
it’s not a bad option, if you can do it comfortably, and you’re looking at as the one & only IP for awhile. I’m basing this on a lower rental yield which would impact your serviceability.
If you’re plan was to get into IP and develop a portfolio, I would look at getting an IP in regional centre with higher postive cashflow first, and then undertake the Sydney option later (which would still be viable), thereby giving you two or three IPs.
An alternative would be to buy in Qld/North NSW for the same price as a stepping stone for your move in 10 years time. It would give you a ‘beachhead’ in the area of your ultimate ‘retirement’ and allow you to leverage the value/or sell for your own place, and be already on the ground floor for rising values.
BTW, this is only my opinion.
You can PM me if you like, if you want to discuss this more in private.
Gary[aacool]
Author of “Property Millionaire: The Guidebook to Having Great Australian Dreams”
Creator of “Property Millionaire – The Boardgame”
http://www.888abundance.comHi Niki
In 10 years time, how often will you be using the crash pad? Even just keeping it once it has been paid for may be expensive. Expenses such as insurance, body corporate fees, rates etc may make the strategy unfeasible. It may be cheaper to just stop over in a motel.
Another option may be to purchase one or two IPs in a different area and sell up when you head Nth then buy your crash pad.
This will need some more research I feel, as I personally wouldn’t use such a strategy unless I was planning to use the crash pad at least half of the year, even then I would consider renting and all other options.
aussie
All the best…aussie
(formerly giraffe…New Year, New Nick, New Opportunities)
“Real Estate – The Foundations of Wealth”
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Check what vacancy rates are for these type of places ie: ring agents in the area and pretend you are looking for one to rent, is there a huge amoutn availalbe, if so then it may mean that you may have trouble renting it out yourself until you do want it. If there’s not much supply then try and find out why ie: are tenants looking for them but can’t find enough to rent in whihc case you should have a problem renting it if you bought one.
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