This is a useful website for short term lets of flats/apartments: http://www.stayz.com.au/short-term-rentals-accommodation/nsw/sydney

Surry Hills or East Sydney (inner East) are within walking distance of the city and are good area for restaurants and bars.

A good website for discounted hotel rooms is www.wotif.com - try them out too.

Lavandula

G'day Gabi, for the money and location you probably can't go past Hotel 59 in Bayswater Road. Check them out on Tripadvisor

http://www.tripadvisor.com.au/Hotel_Review-g255060-d259208-Reviews-Hotel_59-Sydney_New_South_Wales.html

try potts point/ kingscross...rels of ours stayed on victoria street...good area

Kings Cross is the red light district, I would not recommend staying there. Potts Point is the suburb right next door and a good place to stay.

And double check with us any place listing itself as "Potts Point". Some of them are in of Kings Cross, as was a Ward Avenue apartment recently.

victoria court hotel in potts point...thats the place i was thinking...ive been inside
its a boutique hotel...the rooms are quite ok size wise..the only thing i remember thinking is that on one occasion the room of our relatives looked out onto the courtyard which is covered in, roof as well so there wasnt a lot of light at the time...but maybe there are other rooms
i think the rels chose it because it didnt have a lot of steps
the street certainly has a few nice restaurants and it is all pretty well walking distance to some sights

There is a Holiday Inn right on the border of Potts Point and Kings Cross. I have stayed there a few times when I have gone to Sydney with a group of people. I would not walk down the street by myself at night but during the day it is ok. There is a train staight close by so easy to get in to town.