Hey everybody it’s dominic here today. I want to talk to you about some property. We are often reviewing lots of different opportunities, and this is one that came across our desk a couple of weeks ago. It met our investment committee meeting, we took it through it passed. We went out and visited the site and we’re very excited about it.
It’S one that i’m very familiar with because i used to live not far from here. So without further ado, i’m going to minimize my big head and move it to the side. Now, if you can’t read over here, it’s it says bexley now, for all you sydney ciders! This is about for even the ones that aren’t in sydney. This is about 13 14 kilometers from sydney cbd, so you’ve got sydney cbd over here.
This is bexley. Now this is one area that i really like, because it’s we’re able to pick up a really good price point. We’Ve got two bedrooms in this development, so one bedroom, starting from about 5.50 two bedrooms, starting from about 640 000, going up to, i think 800 or 900 um and for the price. It is just extremely close to the city, and i feel like over the next decade, so the next 10 years and we’re talking about this as a big portfolio investment.
It is going to perform very well reason being is now. I have a property here in saint peter’s, now i’ve seen the gentrification i’ve seen urban sprawl and how the prices rippled out from the city and have slowly gotten more and more at the time that i bought this apartment. It was about 670 000. It’S valued at about a million new new apartments. There are selling for 1.
. You know high nine, certainly up to 1.1 1.2 million, and i saw the area change. I saw it get the cool graffiti.
I saw the cafes come in the bars come in. It was that newtown influence coming into saint peter’s that and more influence spreading into marriageville. Now these areas here are expensive. They’Re, beautiful they’ve got a nightlife, they’ve got their own inherent culture, and the incomes in that area has increased over time as well. So what i can anticipate – and you can already see it when you visit it – is that same influence is spreading further south west now already some people already familiar with this area.
Elwood is a really nice area, so the top of the hill you’ve got multi-million dollar houses. Now walleye creek, i’m not that excited about it’s. It’S a concrete jungle. There’S lots and lots and lots of apartments. There’S seven hundred thousand dollars plus they’re there um.
You know even eight hundred thousand dollars for a brand new uh, two bedroom and cliff is slowly starting to change um and then this whole area here is a nice little forgotten pocket that, because it’s not on a train line, hasn’t got the same density. That a lot of this stuff does now what’s interesting is if you go further south, it’s like a um. This pockets just completely missed out. Hurtsville two-bedroom apartments are going for 700, 750, 000 and then some so in here it’s closer to the cbd, but it’s actually cheaper. Now the travel times from bexley into the city, here’s something i prepared earlier is i i haven’t put it on the development.
I’Ve put it kind of in the vicinity in the middle of more or less bexley, but from the middle of bexley. You jump on a bus you’re into the train station, either rockdale or bexley north and then you’re about 30 30 to 40 minutes into into central station. So if you’re working in this area, you’re renting a two-bedroom apartment, you can very much afford to get into the cbd in under 45 minutes. And then, if you want to go driving around and kind of hit the streets you’re close to brighton the sands, you’ve got the bay just on your doorstep, that’s about three to five kilometers away and then, if you want to go and cross the creek you’re you’re. Well and truly into the inner west, which is just a stomping ground of a lot of good times and fun.
So i see this as a really good little portfolio investment. I really like the area and, as i was saying earlier, it is it started to gentrify. I always whenever i go to a new area i always go in, and you know i look with my eyes and with my stomach and i try to pay attention to where i’m going to get a coffee get something to eat both in the middle of the Day morning and at night and walking the streets, so this is this: is bexley uh, the the main part of bexley. This is stoney creek road. It’S a bit of a it’s!
It’S a busy road, there’s lots of traffic that goes in and out of it, but the roads will change over time with the m5, the m4, the m8 all starting to get finishing their construction there’s some things that are happening there with council. Now, as you can see, one thing that i really immediately love is it’s low density. It’S there’s, there’s no high rises, it’s small! It’S it’s quaint! It feels like a village as you come down, the road you’ve got an iga across the road over here.
You’Ve got an anytime fitness. There’S some medical centers you’ve got cafes. This is one cafe that i really liked here. So if you’re going to go, do a site visit jump in here. This is pete’s, artisan, bread and cafe.
You can go and get some amazing homemade. Donuts some local they’ve got different types of greek and lebanese pastries. It’S absolutely excellent and if you keep on going down the road you’ll get some of the best euros in the world. You’Ve got private primary schools down the road as well, so you’re kind of in the thicker things. This is that bakery that i was mentioning a minute ago and here’s some of the shots of the things that they’re making great coffee.
I think it’s spanakopita in here as well. They this here it eludes me it’s delicious as well, so you’re, really getting that uh mediterranean cultural vibe in the cafe. So it’s which i absolutely love. This is another cool cafe which is just down the road as well, which i thought was really um had great great food. It’S um, it’s a little delicate.
When you go in it’s great looking sort of facade, it has this cool kind of steampunk vibe, and it’s early signs again that the area is changing here. This is what i was just mentioning earlier. I won’t sign in so i’ll close all that off now we’re going to get a little technical. I said that it’s relatively low rise and what i mean and how i know that is because you can jump on this little tool here. It’S free!
It’S planning portal new, south wales, and it tells you about the different zonings and you can click in the different areas. It’Ll tell you what the zoning is. It’Ll tell you what the minim the lot sizes can be and then it’ll also tell you how high the buildings can be. So that’s saying that in this little area here it says r4, which is typically high density. It’S got 11 5 meters and you can typically calculate how many stories that is by dividing by about three seven point: five divided by three three and a half about four stories, is what they’re going to get.
Probably not four, it’s going to be three b4 is essentially that business sony. So that’ll tell you about that, and i like that, because it’s a village you can walk around, has great walkability and it doesn’t have a lot of supply. There’S not a lot of supply that can come here because it’s all r2 around it r2 is low density residential. When you go over to rockdile, things start getting really high and tall, and then, if you follow the train line, which we all do earlier, i was talking about earlier. Will i creak again you’ve got that high density zoning, but the heights get much more aggressive.
So, let’s just pick a street name: um 95 burner street. Excuse me: 95 street walleye creek. Let’S go to heights 28 meters, so you can see here that they can get a lot taller buildings in the air 28 divided by about three, your nine story towers. So that’s one thing: we’re talking about the supply. There’S.
Certainly a nice demand drivers with everything i was talking about, but this is now talking about the supply. So, let’s move along and we’ll ask ourselves how has bexley performed as a suburb houses over the past 12 months have grown at the median house price for houses about 1.3 million and it’s grown by about 8 percent per over the last 12 months. We go into units the median sale price so for use for those of you that don’t know what median is it’s the middle number? It means that half of all the apartments sold in the area sold above seven hundred thousand and then half sold below seven hundred and ten thousand and the change in price over the last twelve months has been grown faster than houses.
At nine point. One percent – and here you can see this – is capturing all the old sales, so you’ve got old apartments and the median value for two bedrooms is 624 000 Normally, people don’t want to buy new apartments because it’s significantly more expensive than the existing market, but we’re able to get access to brand new high quality design. Good features for sort of 640 650. So that’s a tiny about a tiny little amount more than a the median sale price for the existing market. Here we’re talking about some of the recent sales in the area.
Two bed, one bath, one car it sold for 689 000.. We can go further down. This talks about some of the local schools there’s a lot of stuff, that’s within walking distance and certainly within a short drive, and then this is talking about uh. The the population here you’ve got quite a young population where the bulk of the people are between the ages of 20 and 40.
So it’s a young demographic. It’S young people with children they’ve got good strong incomes between that 78 and 130. 000. A lot of people with children in the area 53, in fact, and if this is an important one that i like looking at it’s the the occupancy, so you’ve got 35 percent of the people in the area that own their sites outright. So if there’s changes in the market, they don’t care, they don’t care about interest rates going up because they have no debts.
Then you’ve got 35 percent of the area that are purchases they have a mortgage and then 26 are renting. So, there’s not a lot of rental properties on the market. It’S a tightly held market, there’s, not a lot of supply. So, if we’re going to take it a step further, let’s do a little bit more research and i’ll show you what i mean specifically right now, if we’re going to put a two buying a two bed, two bath, one car i want to put on the market, The cheapest one is renting out for four hundred and eighty dollars per week. This is a little bit old new, but just a little bit older.
This one here is certainly much newer, so it’s going for 520 and you’ve got one two, three, four, five, six, seven. Seven apartments that are two bed two bath one car that are currently for rent in bexley. Now we’re going to do a cash flow analysis in a second. So what i want to do is take a two-bedroom um rental estimate, so they’re going between 590 and 480. That one’s a lot older so somewhere between 520 and 590 i’d say about 550 Okay, let’s do the cash flow now.
What i want to do in this cash flow is to inflate all the numbers in this one. Here, i’ve made it a 700 000 purchase. So, let’s assume that you are a first home buyer, so you can actually go and live in it. You would be saving 20 nearly 27 dollars in stamp duty. So let’s remove that.
In this instance, you’ve got a twenty percent deposit and i’ve put a a growth rate of five percent. I’Ve put inflation at one point: five percent that impacts the price of the rent, the growth rate impacts the price of the property over time at five hundred and fifty dollars rent per week. That equates to about twenty eight thousand dollars a year with a two percent vacancy rate, and then i’ve put a interest rate of three percent principal and interest so you’re paying down that debt. So twenty thousand dollars coming in sixteen thousand seven hundred and forty eight in uh interest costs going out of your pocket plus you’ve got to pay down the principal component of eleven thousand seven hundred and sixty eight. Then you’ve got some holding costs.
We’Ve got some agent fees at five and a half percent for renting that property out you’ve got rates: water, council fees, um your landlord’s insurance. So if the property is untenated for a time, we’ve got uh maintenance and then we’ve got a little bit of strata. They pay for your your building insurance, which is normally about five six hundred bucks and they look after all the grounds, keeping and make the building look. Nice excuse me: okay, so after you’ve received all this rent and you paid for all of the costs, your out-of-pocket expense would be 9 300, approximately 9 300 divided by 12 or 707 dollars per month, which is pretty good i’d, say to pay down a 700 000 Asset then, because it’s brand new we’ve got all that good depreciation two and a half percent on the building uh over 40 years. Then we’ve got about thirty thousand dollars in fixtures and fittings.
I’Ve just made estimates here because i haven’t yet got a quantity surveyor review for us. I’Ve put some loan costs, which can be written off over five years, which means with this property we’ve got a grand total of thirty seven thousand two hundred and forty dollars in deductions. That’S the interests all of your expenses and the depreciation, so that amount there goes towards lowering your margin or lowering your income. Let’S assume you’re on a hundred thousand dollars in this instance, which would mean that you’d approximately get three thousand five hundred dollars back. So if it’s costed, you 9300 and you and you get back from the tax man 3500, your out of pocket expense – would be thousand eight hundred dollars.
So 5 800 divided by 12 It’S less than 500 bucks per month to have a 700 000 property in sydney; that’s 14 kilometers away from the cbd, pretty good. Now what i want to do here, some of you have watched our videos and know the difference between principle and interest. Let’S just close that, so what i’m going to do now is make it an interest-only loan. Let’S make it a bit more expensive, 3.3 percent and see what happens to the numbers.
So this is that pre-tax cash flow again. You’Ve got 28 000 in rent coming into you. We’Ve got to give out 18 600 in uh interest and then a further 8 800 in expenses. So this property will be positively geared 600 bucks, yes, property in sydney structured in such a way that before tax is gon na put money in your pocket, then you go through and lodge your tax return, get a four thousand dollar four thousand one hundred dollar refund. So it will be making you four thousand seven hundred and fifty three dollars per annum, so you have a two bedroom, two bathroom unit, it’s making you money before tax and then it’s putting another 4 700 in your pocket after tax.
Now, that’s great considering that if we assume it grows by an average of five percent over time in ten years, this asset may be well worth. 1.1. 1.4 million 1 14 million, which means it’s going to create an additional 400.
It’S going to have 576 000 in equity over 10 years, but let’s just see how much additional equity, so it’s going to be. 5. 7. 6. 1.
2. 3. Minus your original deposit amount, which is one three six one, two three, whilst it’s putting five thousand dollars in your pocket every year, it will then also be worth four hundred and forty thousand dollars so that five thousand dollars a year over ten years is fifty thousand. So four hundred and forty thousand plus fifty one two three four, so it’s nearly half a million dollars in uh in return for very little cash outlay and um a passive passive play. There’S there’s no crazy renovations, there’s not a lot that you need to do to this investment.
Now i’ve made a lot of assumptions in here. This isn’t financial planning advice. This is a cash flow to help you get an understanding of what this type of investment would look like now, if you want to know more, if you want to see specific plans, floor plans renders all that fun stuff, let myself or the team know reach out And we can take you through more detail. I hope you got some enjoyment out of that and if you’ve got any questions, let me know
