SYD: cheaper housing commision area's out west

Hi Guys,

I just needed some experienced investors opinion on area's that most people dont really favour or think down of. Areas that usually include a fair percentage of housing commision or maybe not very visually appealing. Sometimes I feel as though they were left out in the last boom..

What do I mean?

OK imagine I wanted to buy in strathfield however couldnt afford it I (or most people) would then buy in homebush.... Say i wanted to live in Parramatta but couldnt afford it I would then look at toongabie perhaps. I am not sure if this flow on affect reached to these far western suburbs. I am talking about suburbs like Blackett, erskine park, south part of seven hills, doonside, hebersham etc...

I have noticed quite a few bargains out there these days (depends what you call a bargain i guess)... I guess I am seeing some 2/3 bedroom houses sell for very low 200K's. Rent around 220. I know there are more figures involved ie renovation etc.

But when you compare this to where i live (chester hill), If i had purchased a house for 375k (average house) I am looking at $245 rent. The ROI is more appealing in the other worse off percieved area's.

I know some may argue about CG but surely these slummy houses can not stay like that for ever and I have heard on the grape vine that housing commision is looking to offload ( I dont know how much). Surely these area's are not as bad as most may make out.

I feel that I would be better of purchasing out this way rather than my home town of chester hill. It is outside of my comfort zone but it would mean that I dont have to outlay and lose more $$ waiting for the next boom.

What do most people here think? I already have a 350K (Optimistic) IP house in chester hill with a 300k IO loan ( Still pay extra sometimes, ie tax returns thrown into loan and bonus from work)....

I am looking to buying another one before July and some extra little tips regarding my above dilema would be great...

Do others on this forum have IP in this area? Recommend? not?

Thanks Guys

Look at Campbelltown? It has one of the highest number of designated housing commission areas in the state. I will name the Housing Commission suburbs for you:

-Macquarie Fields (Home of Simmo's Beach, a natural beach area on the banks of the Georges River. Also home of the infamous riots)

-Minto (currently undergoing the Minto Renewal project, basically they're knocking down all the housing commission houses and/or selling them off. Rose to fame with the launch of the 'There's no T in Mino website, which sadly was shut down)

-Airds (According to API mag this area is also undergoing some urban renewal i.e people keep burning down their houses Has a good juvenile facility)

-Ingleburn (Home of the Exeloo, the most space air toilet you will ever see! We are currently developing plans for the multi million Ingleburn CBD precinct redevelopment, involving the Library and Community Centre)

-Claymore (Nothing positive at all to say about this suburb. Even the council garbos refuse to pick up there)

Also the suburbs of Rosemeadow (Roseghetto) and St Helen's Park (St Hells Park) have a high percentage of Housing Commission homes.

I have a house in Campbelltown itself. 3 bedroom, renovated inside, 556sqm block, garage = $249,000. I like it.

I agree that Campbelltown is a good area for the future. A few things in its favour :

1. M7 connecting Campbelltown to Norwest. Huge growth in the Norwest Business Park (we have an office there) and the amount of construction is incredible. Woolworths have moved there entire operations there, Resmed, Wyeth Pharmaceuticals, IBM Operations, Grant Constructions, Hillsong Church are all based at the Business Park. The M7 linkage corridor is also experiencing growth of new business facilities;
2. University of Western Sydney is constructing their new medical school at Campbelltown campus. There are also some plans for further development of the University site;
3. Gated exclusive communities are becoming quite popular in the area. Macquarie Links (which is ironically just across from Macquarie Fields and near the Ingleburn industrial area) has a gated community with premium prices. Denham Court is close by and again a very expensive area;
4. We will have to build a second airport one day and Badgerys Creek is still the favoured site. Give it maybe 10-20 years when the current oldies have died and the issue might be raised again. Would create an enormous influx to the surrounding areas. Wait for a long time for that one.

George, I have 8 houses in Sydney. Two are in Campbelltown (Ambarvale) & the other 6 are in the Mt Druitt area (2 x Willmot, 3 x Lethbridge Park & 1 Tregear).

You say that Western Syndey was missed a little in the boom. Well, that's not quite accurate. Go back a few years & you could get an ex-housing commission home in Mt Druitt for under $100k. Unfortunately I didn't buy into the area back then.

At the moment, if you play your cards right you can purchase for around $200k & get around 5% yield. I bought 4 last year @ $153k, $180k, $185k & $196k. The rents on those same properties, in the same order, $230, $190, $200, & $220. My yields, as you can see, are a little better than average. They are all ex-housing commission.

The Campbelltown properties are in a private area & I like them better than the Mt Druitt ones. They are newer properties than the Mt Druitt ones too. One of them was originally purchased to be our PPOR & then we decided to move. The first of these was purchased in 1996 for $90500. It is currently worth around $240k & gets a rent of $210pw. The other is more upmarket & gets a rent of $265pw.

I am getting a better yield from the Mt Druitt properties than the Campbelltown ones. As far as maintenance is concerned, they are all about the same (with the exception of the Ambarvale one with the pool - don't get a pool). Quality of tenants are variable. The better Ambarvale one has always had great tenants, while the other has had a mix. Mt Druitt gets a mix as well.

Before the prices started to rise, it was not unheard of to get a 10% yeild in both areas.

If there is anything else I can help with just let me know.

thanks for that skater. good to know.
I am looking around these areas at the moment for an IP but i wont buy unless its way below market value.
And 5% yield.

What do you think are the prospects for CG in these areas?

Personally i think its not that bad as there not that hard to hold onto in anticipation for the next boom...
Next boom: 2013
I could so be wrong but looking at past trents and wage/price comparison thats my bet regarding inflation and rents and wages catching up with property prices

tigerGT said:

What do you think are the prospects for CG in these areas?

Click to expand...

When there are more people looking to buy, they will buy in these areas as they are affordable. You will get the same level of CG as in other areas, but you do need to wait for the ripple effect.

As a whole, the Mt Druitt area is getting better as more & more home buyers venture out here. You do need to be aware of the fact that there are some unsavoury characters out this way, but it is not as bad as many make it out to be, as there are many lovely people out this way too. Over time, I believe the area will grow a little more than the surrounding areas & be priced at a similar level. Already the difference in price is not as great as it was pre-boom.

Further to Skaters comment


In the previous boom Prices reached around 100 K ( ealry 90's ) but then dropped back considerably with some places selling around 60 K and sales of 80 K being standard.

I've been working out here for 18 years ( s...t , that long .... ) and I havn't seen an overall change in the area I work in. There are some good streets and as skater mentioned a small but at times highly visible rat bag area.

Skater has a different opinion to me about when to buy out here, though as we have different styles of investing ( they buy cheap and reno doing all the work themselves ) their timing may well be suitable for their style. Personally I prefer to wait untill prices have bottomed and then buy. With places like Mt Druitt , I've found that for us it works better to buy houses a couple of steps up for the bottom , that attract nicer tenants and need minimal if any work . We then follow the rising tide during the period of strong growth and then either revalue or sell some .

Given that the Sydney market as a whole is declining , I wouldn't expect to see significant improvements in price until the upswing in the next cycle is well and truly established in the next cycle . That's what happened last time and I don't see why it won't be different next time.

At 6-7 % yield it will be no where near cash flow neutral ( let alone positive ) so you'll be paying to hold what has the potential to be a problematic property for a number of years before you see capital growth. Any property in places like Mt Druitt or Logan or Elizabeth has the potential to be problematic , if not from the tenants , but from the neighbour from hell ( several of them are my patients ... ) ... I'm not saying don't buy there , but you need to go in with your eyes open. I've met people who've bought in Mt Druitt who've ended up moving out within a year because of these types of problems.

See Change

At present the market is fairly flat, however a further drop is still very much on the cards. The cost to hold on to property in this market is high and the holding period is expected to be long. This does not mean you shouldn't get into the market, just that you should be aware that it is not the best time.

Personally I'd be waiting to see where the market goes closer to the CBD. When the city prices show a better return that's the time to quickly snap up a bargain (or three) on the fringes. This will give similar capital growth without the painful hold costs.

Obviously if an absolute bargain comes along (providing it is really a bargain and not someone else's headache) then grab it.

Regards

Andrew

Personally I'd be waiting to see where the market goes closer to the CBD. When the city prices show a better return that's the time to quickly snap up a bargain (or three) on the fringes. This will give similar capital growth without the painful hold costs.

Click to expand...

Bargain Hunter said:


Hi Bargain hunter,

At the moment the returns out west in these areas is much better than closer to the city as you mentioned. I can not see the inner city properties providing a better return for the next 2-3 years at least! teh rent would have to dramatically increase and prices drop significantly. Whereas out west in these areas you can grab up a unrenovated bargain for 180k and have it renovated at 200k and rent it out for 220 per week. Only 5.5% but where can you get that anywhere else in sydney closer to city?





p.s I am looking for absoute bargains. I agree with your last comment

As Seech says, if you go into these areas, go with your eyes open. There are pockets that seem to attract the less desireable elements. He also mentions that his style is different to mine & he wouldn't be buying into the area yet.

I have to say, that out of the four more recent purchases they were each assessed for their usefulness & none are a straight 3 x1 buy & hold. The first one is on a sub-divideable block in a small pocket where there are many new houses. The second was a 4 bedder that we reno'd & got well above average rent. The third was a 4 bedder (converted to 3 - who in their right mind would do that) with a granny flat. It needs some work to get a better rent but we don't have time at present. The fourth is another 4 bedder in a nicer area with all the elements that we need in a PPOR, but don't have. It was bought knowing that we would get a reasonable yield, but with the option of perhaps later (after a reno of course) moving into it.

I'd also be looking for something that has maybe a granny flat, as this will increase your yield. A four bedder will get a higher rent than a 3 bedder. There are a few coming on the market these days that are reasonably priced. But be aware that it takes time to find the "bargain".

vacancy rate

HI Skater,

How is the vacancy rate in the area. Did it take long to get the tenants?

Glenn

just do it said:

HI Skater,

How is the vacancy rate in the area. Did it take long to get the tenants?

Glenn

Click to expand...

Hi Glenn,

Vacancies were a little of a problem about 12-18mths ago as a lot of investors purchased out this way. Yields also dropped.

At the moment the vacancy rate is a lot lower & rents are going up again. Some of the investors have cashed out of the market, so that, of course, puts some upward presure on yields. There are still a lot of rental properties out this way, but there are also a lot of potential tenants as many of the renters are long term renters.

A lot of the low income earners seem to drive better cars than myself & have better quality furniture etc, but can't save to get a deposit to buy a house. Go figure!

Speaking to some of the Real Estate Agents there are few investors looking to buy, but there are still a few first home owners as the price is quite affordable.

There is a huge amount of auctions going on in the area. They are mainly Mortgagee Sales or Housing Dept surplus. These will usually be sold to investors, as the home owners are wary of auctions, & since there is less investor activity in the area, the prices are sometimes very good. If I was looking to buy another one, this is where I would be looking.

Hi,

I just came back from driving around these areas, mainly i was driving around doonside and trying to get a feel for the suburb, good streets and bad streets. From what i gathered the areas south of kildare road are mainly housing commision. (I was actually worried even driving through, quite scarey and I would be very worried renting out a property here).

On the northen side of the station closer to Quakers hill and woodcroft though wasnt so bad. Also pockets of housing commission and some below average houses however there was a lot of new activity going on with owner builders etc... I would defintly be looking for a bargain only though..

I think tomorrow I will be driving around mount druitt area. As an investor I particularly prefer auctions especially in this market where everyeone seems afraid to bid.

I recently bid on a house in seven hills and it was mine for 165k before the vendor bid of 200k. Nothing happened after that. The bank (mortgagee auction wouldnt lower its reserve ) wants 250k. However if it was housing commision or something I would have picked up an awesome bargain for 165k as i could have rent it out for $220.

Oh well still looking for something like this..

The reason most people in this area cant afford to buy is because they live on a fortnightly basis, around the paycheck. I guess home ownership may not interest them...

tigerGT said:

Whereas out west in these areas you can grab up a unrenovated bargain for 180k and have it renovated at 200k and rent it out for 220 per week.

Click to expand...

If you're looking in the Mt Druitt area, an ex-commission house at 180k should'nt require much work to get rented. It would have been a great buy at 165k in Seven Hills. When we first moved to Sydney from the Gong we rented at Seven Hills. Quite an OK area, access to the M2 or M7 within minutes.

Good Luck in your search

Andrew

Hi guys,

I just came back from a quartile presentation on the sydney market (www.quartile.com.au)

Really good presentation I thought, I'd share with the forum the 2 areas they are currently considering are Mount Druitt and North Paramatta. They seem to be more interested in units rather than houses I didn't get a chance to chat properly to Brett to discuss why (his theory is houses don't necessarily appreciate historical figures like residex don't take into account capital inject from renovations).

Just curious on thoughts on Mount Druitt I"m thinking of taking a drive up and having a look on the weekend.

Main reason I"m looking to buy a house after owning units and the prices there are reasonable enough for me to enter the market.

They wouldn't happen to be trying to sell some of the units that have been built in Old Mt Druitt recently ....???

Stock standard houses with no reno's trippled in the last boom.

The units didn't move in CG untill well after the houses had moved. You could still buy units around 60 K in Mt Druitt well after there had been significant movement in the house prices. I think any new unit in the area would be over priced at the moment.

Last few sales in Lethbridge park for houses have been in the 170-180 price range. If they rent at 220 - 240 ( with minimal depreciation ) they will be negative everything.

See Change

My view on Mt druitt, I went to a few auctions in this area, both department of housing and private, If i was to buy in this area I definitly wouldnt buy the worse house in the best street. At the end of the day i believe that if you have a nice house then it would be easier to manage with respect to tennants. I couldnt convince myself to buy some of the houses. Personally couldnt live in them myself in the condition that they were in (no one could). And i dont have the experiene to renovate myself.
Better yields are also attainable in these area's compared to the rest of sydney
What area of MT druit are you looking at?

.
P.s units in north paramatta? Also excellnt yields... But too many units there!

Your views on this ppls?


thanks
G

see_change said:

Last few sales in Lethbridge park for houses have been in the 170-180 price range. If they rent at 220 - 240 ( with minimal depreciation ) they will be negative everything.

See Change

Click to expand...

Hey sea change,

But isnt this still better than what would you would get in most parts of sydney? I mean thats nearly 7 % ??
thanks

tigerGT said:

Hey sea change,

But isnt this still better than what would you would get in most parts of sydney? I mean thats nearly 7 % ??
thanks

Click to expand...

Yes , yield is better, but at the moment the market is going down out there, so why buy to watch a negative cash flow and negative growth ??? When I see yields of close to 10 % I'd think about buying , or when I see sustained growth every where else in Sydney I'll think about it .

The market won't go up untill other parts of Sydney have been moving for a while. In last Cycle , Eastern Suburbs went up for five years before the west started moving.

See Change

This time it actually is happening the other way around. never try predict future by past i guess.