Why I Love Mt Druitt

Four years ago a young couple from the Nth Shore came to see me about buying an investment property. It was their first acquisition and they were mustard keen to get going.

After discussing their goals and objectives, they wanted to know what areas I had in mind. Without hesitation I said the western suburbs, in particular west of Parramatta. I thought it was a gold mine.

Expecting their jaws to drop in complete surprise, they just laughed in my face instead. (Not the first time!)

They were also offended because they assumed I thought they couldn’t afford anything else, which was partly true.

Eventually they bought a unit in a block of 300 on the upper Nth Shore with very expensive strata fees. When I asked what made them decide on their purchase they gave me a very vague, round about answer. Perhaps I should have asked the Joneses instead.

Shortly afterwards I met another couple from the Nth Shore, Bob and Betty. They also had similar investment goals and were very amenable to my ideas but were keen to learn more about why I liked the west.

The Corridor

To keep everything simple, I said I liked the corridor west of Parramatta in between the M2 and M4, bound by the M7.

At the time, it was not hard to find a property with a rental yield above 4.5, 5%. And if you believe that growth generally follows yield (which it usually does in the city), then they could expect good capital gain.

In particular, I was especially attracted to Blacktown city – Seven Hills, Rooty Hill, Mt Druitt, Whalan and Lethbridge Park. It has all the major landmarks of a great area to invest in – good infrastructure (M2, M4 M7 plus rail), stacks of sporting facilities, an abundance of education including private schools and universities, plenty of major shopping centres and hospitals.

Importantly, investors got a lot of bang for their buck in the west at the time. Not only is the average block of land bigger than closer to the city but the average cost per square meter was cheaper (still is).

The bigger blocks have another advantage. They are ripe for DA’s or putting up granny flats, thereby enhancing the value and income potential per square metre.

The problem is Blacktown, Mt Druitt et al has an image problem. Too many think every potential tenant has a criminal record, or is related to someone who does. They don’t. Just like you and I there are scores of people who want to do a fair days work for a fair days pay and get on with life.

The Reason for my Bias

Of course, there will be some who say I’m only trying to curry favour with my clients because I do nearly all my business in the west. Before we jump to that conclusion, here’s a better question. Why did I go there in the first place?

One word, growth!

The west is a massive growth area and that’s not going to change anytime soon, if ever. I also love the way John and Jenny in Westville live within their means. They may be best friends with the Joneses but they run their own race.

So What did Bob and Betty Eventually Do?

Well, they bought two investment properties – one in Mt Druitt and one in Whalan, and in the last 4 years they have creamed it.

Yes I know Sydney has experienced phenomenal growth the last 3-4 years but these guys bought two good properties without busting their budgets to get started. Best of all, their cash on cash returns (return on equity) have been excellent. Cash flowing the properties has been easier too because they haven’t been eaten alive with expensive strata fees.

Profit for Mt Druitt is up about 55% and Whalan almost 65%. Better still, their gross rental returns are 5.55 and 6%. Whalan was renovated and the rent was increased.

Last week SBS ran a senseless documentary about some Bogans in Mt Druitt. I spend a lot of time in the west and I’ve never found my car up on bricks after visiting a client or myself in a mad rush to get out of the joint.

I love it out there, and so do a lot of my clients. Perhaps when some of the hot air leaves the property bubble, you might want to head out and have a look around for your own nugget of gold.

Have a great week!

Adam

Back Paddock – “The days are long but the decades are short”. Sam Altman