our-portfolio

Gearing up for our next purchase

By Phillip Tarrant
South-west Sydney property investment

There’s a certain sense of madness about at the moment in the property market.

Being Sydney based, I tend to take a little more notice of the market here, simply because whenever I turn on the TV there’s a piece on the “booming property market”.

You’d have to be living on the moon not to notice what’s going on in the Sydney market, and the calls from friends, colleagues and readers from interstate show that it’s getting plenty of attention. 

So is it boom time in Sydney? We’re getting some pretty reasonable auction results, but other states are also showing an upturn in that sense. 

The figures show there are plenty of properties selling at auction far in excess of their reserve price. Whether this represents a hot market or is simply some smart marketing by agents, or an inability to correctly value a property, I’m uncertain. 

The market is moving

Cynicism aside, I’m pretty happy we’ve got relatively good exposure in the Sydney market right now – especially out west. 

I was on the phone recently to Steve Waters from our buyer’s agent, Right Property Group, musing about the market around the Blacktown to Penrith area.
Amongst a range of things we were discussing were Luxford Road and a property we have on it.

Anyone who has spent some time out west hunting down investment properties is all too familiar with Luxford Road. It runs through a number of suburbs, but at the Mount Druitt end it runs parallel to the Westfield shopping centre out there. It’s a good location – close to shops, the station, other transport lines and infrastructure.

We picked up a ground floor, two-bedroom property pretty cheaply – $179,000 – and spent $15,000 renovating it, as you might have read previously.

Mr Waters was saying how quickly the market has moved out there. Simply to pick up a base, un-renovated property similar to the one we originally purchased has increased in price by multiple tens of thousands of dollars in just a matter of months.

Just to get in on that street now with a similar property you’re looking at $230,000 to $240,000. If we could purchase properties on that strip around the $200,000 mark, we’d snap them up immediately – but they just don’t exist anymore. The market has moved very quickly.

And from what I hear around the traps, it’s a very similar story to other places out west; Cambridge Park, where we have a four-bedroom house rented at $430 per week, is also firing on all cylinders. This is one purchase we’ve been very happy with!

Considering our exposure in the western Sydney market, and the current buy-in prices, we’ve directed our attention to other areas, both in New South Wales and interstate.

Beyond Sydney's west

It’s always hard to set you sights on your next purchase. For us, land tax is killing us in NSW, and that’s one reason why it’s time for us to diversify our portfolio and seek pastures new. But that is just one part of the equation.

We’ve been eyeing the Brisbane market for some time and we’ve made some initial inroads – researching opportunities, the market and getting a good feel of the dynamics up there. We particularly like a number of suburbs in the Logan Shire area that offer similar prospects, and have similar market dynamics to those we see out west in Sydney.

Considering our exposure in the western Sydney market, and the current buy-in prices, we’ve directed our attention to other areas

 

The Logan Shire area is not too unlike the western suburbs of Sydney. You’ve got some pockets of expensive properties in more upmarket suburbs; you’ve also got areas with housing commission and lower-end properties that offer investment opportunity.

While there are a range of strategies for building your property investment portfolio, our strategy has been a straight forward one: purchase under-value properties in the lower price brackets, undertake a cost-effective renovation, draw on that increased equity and repeat the process.

Action stations

While with some of our properties we’ve waited six or more months to extract the equity following a renovation (and some we haven’t yet undertaken a renovation on), others we’ve refinanced immediately to fund our next purchase.

All of our properties are now at different points in their cycles. Some are sitting at a loan-to-value ratio (LVR) of 90 per cent, whereas in others there is significant capacity to draw down on them to finance our next purchase.

In total, we’ve got a little over $300,000 we’re comfortable pulling out of our portfolio to finance our next purchases, and if you consider we’re buying in the $200,000 to $300,000 range, there is scope to purchase and renovate a number of properties.

This equity arms us with the capacity to always be on the hunt for new opportunities, and as mentioned before, the Logan Shire looks pretty good right now. This is an area that’s been burning away for a while now, and the numbers in terms of yields, purchase prices and capital growth show promise.

Are we too late to enter the market there? No. There’s still plenty of room for growth. However, I would have liked to have got into the area some time ago as it’s now flying above the radar, with a number of experts highlighting its potential – which is putting greater upwards pressure on prices as competition for properties increases.

This is both good and bad, but the sentiment is that we need to move now if we want to purchase there. 

So what sort of property are we looking for? 

We’ll keep true to our current strategy: under-valued properties that are neutral or positively geared with the scope to add value. These properties do exist, but we’ll need to do the ground work to find the right buy. 

To do this, we’ll be drawing on the capabilities of our buyer’s agent, who has excellent knowledge of the area and is on the ground, working with agents on a daily basis. 

Our broker is also briefed and ready to go – he’s aware of our portfolio position and is in the process of arranging a number of preapprovals with a variety of lenders to allow us to move quickly when we find something. He’s also finalising a number of refinances to give us the cash on hand for deposits and other related costs. 

It’s an exciting time when you’re gearing up for your next property purchase or purchases. The important thing is to be organised, prepared (with pre-approvals ready to go) and to have a very good idea of what you’re looking to buy. 

We’re ready to go and we’ll be sharing our next purchase with you, so make sure you keep in touch with Smart Property Investment's Our Portfolio series.

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
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    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
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Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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