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Sepp 5 zoning villa for investment - What are the risks?

Discussion in 'Real Estate' started by triquee79, 21st Apr, 2010.

  1. triquee79

    triquee79 New Member

    Joined:
    20th Apr, 2010
    Posts:
    4
    Location:
    Sydney, NSW
    Hi All,

    I have asked this question in another forum, but would like to know opinions from various circles. The more info the better decision i can make.

    I am interested in a 1yr old villa which has Sepp 5 Zoning. The price of the villa is acceptable with good rental yield. I would be purchasing this property primarily for the rental yields and steady growth.

    From my understanding Sepp 5 zoning is for over 55's living. However the developer/owner has currently leased most of the villa's to young couples and families. Is this legal?

    Can someone explain why the developer has decided to zone the complex as Sepp 5? What are the benefits of doing this?

    Also what are the legal issues if i was to buy and then sell in the future? As the agent has stated the contract would clearly state the property as Sepp 5. In other words would this make it hard for me to sell the property if needed? Would this scare potential buyers away?

    Reasons for purchase:
    - Good rental yield
    - Reasonably priced property
    - Located in growing area within 10min drive to major town
    - Cashflow neutral/positive
    - High depreciation for new property

    I would appreciate your feedback and knowledge on this topic
     
  2. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Triquee,

    You don't live in Ku-Ring-Gai do you?

    http://www.jillianskinner.com/web related documents/NShore/PDF NSHORE/SEPP 5.pdf

    Cheers,

    Dan
     
  3. triquee79

    triquee79 New Member

    Joined:
    20th Apr, 2010
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    Location:
    Sydney, NSW
    Thanks ASX, I actually don't live in Ku-ring-gai im from the western suburbs.

    Interesting report so from what i gather, there are no issues in buying/renting out this property. Just a scheme for the Labour government to promote urban sprawl and create further development. Good old Carr relaxed the laws, and pee-ing alot of people off who live in these areas.

    Quote "Under SEPP 5, the Government has relaxed development standards in order to increase densities, thus disregarding the planning objectives of local councils. The Carr Government has undermined the integrity of local planning instruments, but has not put anything in their place. SEPP 5 allows developments on an ad hoc basis, without regard to where they are needed, how they should be designed, or what services are necessary and whether they are provided. SEPP 5 is urban consolidation under another name."
     
  4. Billv

    Billv Getting there

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    15th Jul, 2007
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    1,796
    Location:
    Sydney, NSW
    Good reasons for purchasing.
    Can you share the purchase price and expected rental return?
    cheers
     
  5. triquee79

    triquee79 New Member

    Joined:
    20th Apr, 2010
    Posts:
    4
    Location:
    Sydney, NSW
    Hi Billv

    The property will go for approximately $240-$250K depending on my negotiation skills or lack of. It's currently being rented for $310 a week. Revisiting my figures i will actually be negative, but this loss i am comfortable with. Hopefully i will be able to raise rent in the coming years.

    I own another investment property (which was PPOR for 2yrs) so all up i will have an LVR of 90%. In peoples opinions do they believe this is extremely high?

    I do however live with family, and aim to reduce my overall LVR to about 82% by June 2011.
     
  6. Billv

    Billv Getting there

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    Location:
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    Not too high IMO, you are making your money work harder which is a good thing. As long as you can afford the higher loan size it should be fine
     
  7. triquee79

    triquee79 New Member

    Joined:
    20th Apr, 2010
    Posts:
    4
    Location:
    Sydney, NSW
    Thanks Billv, i am only new to IP's but have been doing alot of reading and research on the topic. Taking the plunge into my next IP is a nervous one. Seconding guessing whether you are buying the right property and all the associated questions that go with it.

    I do agree 90% is not too high, i do have a partner who help's with the repayments and expenses.