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
)Hi Vanessa
Welcome to the forum.
There are no real right or wrong answers – just different strokes for different folks.
What are comparable 4 bedroom houses selling for in the area? How much would it cost to by an established 4 bedroom property in the area? What’s the rental demand like?
It will be negatively geared – however, you’ll be able to claim a fair bit of depreciation (as it’s a new dwelling). This spreadsheet will give you an idea of how much it will cost to hold each week – http://www.passgo.com.au/pass-go-investment-property-analysis-tool
There’s nothing wrong with negatively geared properties – providing they grow in value at a higher rate than what they cost to hold.
Renovating and selling can seem appealing – but when you factor in the high transaction costs of buying/selling property (stamp duty, legal fees, selling costs, capital gains tax), the idea might not seems as appealing. That’s not to say it doesn’t work – some people have done very well out of this strategy.
All the best with your investing.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie,
Thanks for your response. Our research indicates that 4 bedroom, 2 bathroom, 2 garage homes go any where between $380,000 (for old homes in need of renovations) to $450,000 (for less than 15 years old). Brand new Townhouses/Duplexes with 3 bedroom, 2 bathroom and 1 garage are currently on the market for $370,000 with rent returning of $400 pw. RP Data indicates that 29% of households are rented in the area (based on research from 2006), however from our experience of the local area we know there is strong rental demand for properties with many tenants seeking the same property to rent on the market.
Where we are looking at building is a mini estate where there will be new developments surrounding our investment. On top established accommodation and businesses the area itself is going through a transition of development with new business centres, many new Townhouses/Duplexes and a development of luxury apartments, which is a completely new style of accommodation for the area. I'm thinking that these developments are showing signs of growth for the area, which would hopefully eventuate in the rising of median prices.
My partner and I have searched council websites and we have discovered that the council has a 25 year plan to establish Campbelltown as a thriving city, evident in a surge of new developments occurring. Over the past 5 years the suburb where we are looking at investing has had poor returns of 1.5% growth and this makes us feel uneasy in developing in this area. However, the area has had a 3 year growth of 7.9%, 12 month growth of 4.9%, a quarterly growth of 4% and an average annual growth of 7.3%. What else should we be looking for to determine the potential growth for the area?
My partner and I appreciate your time and responses to our proposed investment plans as we are newbies to the whole investing process.
Thanks once again,
Vanessa.
Hi Vanessa
No worries at all.
Good work with the research, you’ve clearly carried out some due diligence on the area.
Perhaps start a new thread on Campbeltown – you’ll likely get some opinions from those who have invested in the area.
Stick around and keep asking questions – there are a lot of helpful/knowledgeable folk on here that are happy to help.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Vanessa1985 wrote:Over the past 5 years the suburb where we are looking at investing has had poor returns of 1.5% growth and this makes us feel uneasy in developing in this area. However, the area has had a 3 year growth of 7.9%, 12 month growth of 4.9%, a quarterly growth of 4% and an average annual growth of 7.3%. What else should we be looking for to determine the potential growth for the area?HI Vanessa – I don't have all of my Sydney figures at my finger tips but I would think the Campbell town figures would pretty closely mirror the rest of Sydney with a few exceptions both ways.
While median prices are a guide they do report 'yesterdays' figures. A lot can happen in a suburb and this is far more important looking forward. The question you really need to ask yourself is, "Does your research tick most of the boxes for Campbelltown moving forward?"
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