2020 Starts Strong | Solid Yielder in Sydney | What Not to Do When Buying Property
Welcome to the March 2020 edition of the Adviseable newsletter!
While a certain health threat seems to be garnering all of the headlines of late, property markets continue to quietly thrust ahead with many already achieving considerable price growth since late last year. Low stock levels and dropping interest rates remain as the key ingredients fuelling these competitive buying conditions.
In other news, we’ve recently overhauled our website including the addition of many new features. These include a showcase of recent purchases, success stories, and client video testimonials. For easy access we’ve also catalogued our past newsletters and videos, which include area analysis, webinars, finance updates, and property investment tips.
Now that the revamped website is live, we’d like to take the opportunity to say a big thank you once again to those fabulous clients who contributed their time to making these updates possible. Not to mention for saying such nice things about us too! J
Recently Purchased by Adviseable: 10/51 Fennell St. North Parramatta NSW
We recently snapped up this generously sized 2 bed apartment in quite frantic buying conditions. Positioned on the top floor at the rear of a block of just 10 apartments, this one ticked all of the boxes including double balcony and 2 car lock-up garage. Located in a quiet leafy street, yet only a short walk to all the amenities and conveniences that the bustling Parramatta CBD has to offer! Purchase price $550,000 with a rent return of $420 per week.
City of Parramatta highlights:
- Major commercial and cultural hub positioned 25km west of Sydney CBD
- Current population forecasted to nearly double by 2041
- $10B+ Sydney Metro West transport infrastructure project
- $2.7B Parramatta Square redevelopment (one of the largest urban renewal projects in Australia)
- $1B Westmead Hospital redevelopment
- 3.5% vacancy rate (North Parramatta)
Question of the month:
Q: I bought my first (and only) investment property a few years ago and it’s already gone up a fair bit in value which is quite exciting. But despite this capital growth it’s becoming clear that this one property isn’t going to be nearly enough to fund my retirement. So how many investment properties do I need?
A: While this question certainly fits into the ‘how long is a piece of string’ category, it’s also one of the single most important ones for the property investor to answer.
Naturally the answer is dependant on a whole bunch of variables relating to the individual investor, such as their risk profile, what other investment assets they may own (including superannuation), debt levels on the home they live in, and quite frankly their expectation of what constitutes an acceptable retirement income stream. The answer may also vary based on investment performance, investment cash-flow, rate of inflation in future years, deposit amount, and chosen debt reduction strategy.
But if we can assume the following…
- a maximum tolerance for investment/debt exposure
- an investment portfolio consisting exclusively of property
- zero debt on the home the investor resides in as of retirement
- a target retirement income stream of $62,269 for the investor couple*
- 5% capital growth rate for the investment property portfolio
- 5% net rent return
- 1.82% inflation rate
- investment property purchases funded entirely from borrowings (i.e. $0 cash contribution)
- zero principle repayments towards investment debt
…the numbers pan out as listed below:
- If you’re planning to ‘retire’ in 20 years on $62,269 (= $89,317 adjusted for inflation) – You would require $1,100,000 worth of investment property NOW
- If you’re planning to ‘retire’ in 15 years on $62,269 (= $81,615 adjusted for inflation) – You would require $1,500,000 worth of investment property NOW
- If you’re planning to ‘retire’ in 10 years on $62,269 (= $74,577 adjusted for inflation) – You would require $2,000,000 worth of investment property NOW
*The Association of Superannuation Funds of Australia (ASFA) suggests that mortgage-free couples need a minimum annual net income of $62,269 and singles require $44,146 to retire and lead a “comfortable” lifestyle.
Disclaimer: Please be advised that the information contained above is general in nature and does not constitute personal financial advice. To determine whether the strategies and concepts contained within are suitable for your specific circumstances, Adviseable urges you to consult with your appointed licensed financial professional.
For more information about where and what we’re buying right now, or to find out how we can help you take your property portfolio to the next level, please contact us on 1300 077 766 or via firstname.lastname@example.org