we r looking at buying in a regional centre. this way we can afford to get 2 to start our portfolio. houses are semi-detached, $55,000 & $60,000 asking price, returning $110 & $120. this is good return on a cash basis, but the whole town has only had a 3% rise in median in last 12months. median price is $40-50,000 above asking price for these. The town is solid enough i feel and no problem finding renters. is the 3% enough to continue our portfolio?
Hi Weniksa!
Totally depends on your own goals, i mean, look at what Steve has done, if these houses are cf+ then i think go ahead, as long as they are making you money from day 1 they are probably a wise investment.
I’m not speaking on steves behalf but i would say is fair share of homes may have similar capital appreciation, don’t quote me on that though.
I assume you have done your due diligence on these properties?
If you have and your are sure about tenancy, and the house are solid and won’t need ongoing repairs etc then i say go for it!But that’s only my opinion
Fudge111[^]
Thanks for your prompt return. as long as we by increasing we can borrow for more, i dont want to be stuck on two for years, but cant rely on equity growth to fund it.
Very true, but as long as you know the town is solid and tenants are there and abouts, because if the town growth is declining it may not be such a good idea.
I assume you have read Steve’s book?
Fudge111[8D]
As fudge says it depends on what you want to achieve. a cf+ property will provide instant income which you can use to save for your next house but on equity to leverage off.
You have to remember also that with lower capital growth may come lower rental income growth.
Eg. a house with 8% capital gains and 5% rent will in the long run eventually have higher rent than a 5% growth, 8% rental property.
You could also use a few cf+ IP to buy some higer growth cf- IP.
It depends on what you want to do
Josh
Hi Wen
I am not too keen on these sorts of properties, but…
That is a fairly high rental return. Since Steve’s book came out (and for other reasons) there have been a lot more people looking for these properties. A lot of people from Sydney and other cities are buying properties without seeing them based on rental yields. Since the area only had 3% growth last year, that could mean that town hasn’t been discovered yet and may boom, catching up to other areas. Or maybe you could buy for $55,000 and on sell for $70,000 -which would still give a yield of over 8% at current rent.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Thanks very much for your replies, i haven’t read the book yet as we have only just found this site and recently started getting serious about investing. weighing up the options at this stage
Weniksa
As the other posts have mentioned it all depends on what your own personal goals are.
We have wrapped 126 properties with the majority in regional queensland where upto now there has been little or no capital growth.
We didnt want our wrappees to refinance and are now enjoying the very positive cash flow each month.
If you are looking at making a capital gain combined with cash flow then why not consider purchasing a regional located property and then wrap in say 6 / 12 months time.
Cheers Richard
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http://www.fhog.com.auThere is no such thing as a problem.
Just a solution waiting to be foundRichard Taylor | Australia's leading private lender
weniksa,
Don’t worry about capital growth for the regional centre. If it had a 20% capital growth, that is good for sellers, not necessarily buyers. Sydney has had ubergrowth, but is that good for us as buyers? If you buy post capital-growth, then you are paying the price.
Remember the old adage: “buy in gloom, sell in boom”.
And remember that capital growth is not necessarily reflective of population growth, employment and all the other things one looks for in buying a property.
kay henry
If you are buying to keep then capital gain is not so important. There are other ways to get equity in your property without relying on Capital growth. Look for mortgage/debt reduction strategies. Some ideas in Margaret Lomas’s books.
we r looking at buying in a regional centre. this way we can afford to get 2 to start our portfolio. houses are semi-detached, $55,000 & $60,000 asking price, returning $110 & $120. this is good return on a cash basis, but the whole town has only had a 3% rise in median in last 12months. median price is $40-50,000 above asking price for these. The town is solid enough i feel and no problem finding renters. is the 3% enough to continue our portfolio?Hi Weniska,
What Regional Areas have you found with these yields?
Hi Wen
As you can see there are many strategies to investing in property.
Broz and I are taking an approach that most people will not, it’s based on paying houses off very quickly, but it takes alot of your personal income in early years which most people can not or will not want to do.
This approach means we save alot of the *time* factor as we have a much greater pool of options, not just the 10% of +cf properties and we also don’t need to buy properties all the time, it is based on first house payed off in 3 years, next 3 in 2 years and then 1 house every 1.5 years from then on and these are fully payed off, no 25 year mortages. I admit that returns will not be as high with this approach the the certainty of returns is definately there.
Anyway, my spreadsheet shows this in more detail, you can get it from the spreadsheet topic page 2. It has 50 replies.
Fudge111[
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