Investing in City Apartments

Hi Sunny,

My colleague recently showed me a one-bedder that sold in inner Sydney that was a prime candidate for positive cash flow. They are out there.  

My suggestion would be to use a mortgage repayment calculator to help you crunch the costs. Can you reply with figures on both those options?

Cheers, Adrian

Sundeep I have my answer in Hawthorn 3122 for you.

grab the local listings in 3122 .. and scroll to the lowest priced properties.

I will now mention some addresses, and its almost guaranteed you will find one or more properties from these addresses on the market.

71 Riversdale Road

383 Burwood Road

1 Queens Road

But wait .. werent they offering at least 6.5% return? So why is everyone selling?

Some are now offering up to 10% return (thats how much discounting has happened on them)

As I have been watching them I can tell you that most were sold initially between the 160k – 250k mark depending on facilities and size. With a GUARANTEED return of 6.5%

The answer is simple .. Six years after they were built .. they just CANT BE SOLD.

People literally have been selling some of these places for anything up to a year or more. Without success.

There are two legitimate reasons why. Banks require 35% or higher as initial deposit on them. And thats a lot of money.

Second reason is more simple. After six years .. there has been no movement on pricing on these places.

Except for .. down.

If you reduce the price to a level where it just becomes too cheap .. people will purchase on the premise the initial numbers work. Except .. thats what the previous owners thought too.

And thats where you come into the scene .. you are someone who is looking at a bad property invest .. albeit in the city and not Hawthorn … which has been discounted so the 6.5% original return is now more like 8 or 10%. Wow .. big numbers ! .. Ok .. lets assume you can pump together the 35% on 175k = 61,750 dollars. And you can borrow the rest. You'll be working away to repay money on an investment that already is proven to move nowhere on pricing. So considering what you'll be putting in .. you are guaranteed to start with a loss vs initial amount invested.

Geelong suburbs, Sunshine and Albion, Greater Dandenong. All still have investment properties that qualify for bank loans, are under 250k and can produce returns of up to 6%, with the possibility of ongoing growth. And because they qualify you can borrow at normal limits from as low as 10% (depending on financial situation)

The reason i qualify the above Hawthorn area scenario is because I have watched these properties stagnate now for years .. waiting for something to make them turn around. In the meantime my investments elsewhere have done the right thing .. because they were quality investments to start with.

Hello everyone,

I am thinking to invest in a city studio apartment around the $175 k mark. After going through many threads regarding the lack of capital growth in these markets.

Why do people keep looking at properties where the cash flow is not that great and the growth will be zero

Buy out of the city, the city for apartments will be a major problem for a number of years look to better suburbs and dont buy tiny studios or student properties.

You are now on the right track. What I would look at is the potential to create dual income on the property. This would allow you to live in one and rent the other out. You wouldn't need to do this today but it will allow you to do this at a later stage. Get a property with decent land content and compromise on the house content.

Regards

Shahin