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.
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.