Merry Christmas to you all.
I am just about to start investing again, but in the past I have always been investing in negative geard properties. I have found a cf+ property in the country, but I am unsure if its a good deal as I wonder if the risk in a small county town is to high? The town I have found it in has a populatioon of 1,000 people, and have many rental properties in town. From talking to different people I have been told that the vacany rate in town is very low and basicaly nothing at all. This town is about 70km’s from a major country town that has a population of 9,700 people. What is everyone’s thoughts on investing in small towns with low population in the country? Does anyone have some particular rules they live by to asses if they would invest in the town? ie. does it have to have a minimumm amount of particular infrustructure? Any help would be fantastic. The yield is about 11.0%, and the proprty is overpriced by about 15-20% from the research I have done on similar properties that have sold.
Hope to get some help to get started.
Thanks
Dave
Dear Dave78,
You don’t give us a lot to go on! I have a couple of small town IPs that are doing OK. I bought these some time ago and did a lot of reno. They rent well and it is surprising how tenants seem to appear out of ‘thin air’. I wonder about your 11% on properties so overpriced. Are you sure?
More help with a bit more detail but obviously do not disclose your own research.Hope you had a Merry Xmas too Dave [biggrin]
Firstly, it is not so much the issue of “small population” that causes me concern, because as Marsden has verified, sometimes IPs in small towns can run effectively regardless of their numbers.
HOWEVER…..what DOES bother me, is the “little infrastructure” because this is where a small town can turn into a ghost town over time; if there is not enough infrastructure to supply the people with the necessary facilities; jobs, roads, hospitals, shops, schools etc etc.[blush2]
Having said all that, I tend to agree, you have not provided a great deal of information for anyone here to comment fairly, as any opinion given would be based on mere speculation.
Cheers,
Jo
The property is a 3BR house on a large block of land that have sub-division opportuniies. Has a new tenant that has signed up for $120pw for 12 months. The house is on the market for $59,000. The average home is selling in this area that is of similar age, size, and quality has been sellig around $45,000 to $50,000. I am guessing the owner is going for the hihger selling price as he has a good rental return. I have also been told it is rare to pay more then $100pw rent in this town.
Do you need more information?? Sorry only new to the forum and to this sort of stuff.
Sorry,
The town also has 2 pubs, a restauraunt, cafe, and I think a caravan park.
Hi Dave,
Don’t apologise, you’ve done nothing wrong.
Thanks for the info; it helps us to give you what you want, ie. opinions (based on fact, not on our assumptions that’s all). So really, it’s just so we can be fair and give you a more precise opinion as I stated earlier.
Personally, I would be reluctant to pay the vendor almost 10-15K extra simply because a property rents for an extra $20 p/week above the average rent for the town. Do the math, 20 x 52 weeks = $1040; you are paying min. 9K more for the place, it will take you 9 years to get that difference back!!! IMO (in my opinion) I’d tell him to stick it!!![blush2]
2 pubs, a restaurant, a cafe and a caravan park….WOW…at least the people can stuff their faces, get tanked, sober up with black coffee afterwards and crawl back into their caravans!!! Sorry mate, I’d give this place a huge [thumbsdownanim The infrastructure is appalling to say the least!!! What about a hospital, a police station, a school, major roads, power stations….important stuff; not just a couple of watering holes!!!
Cheers,
Jo
Would you recceomend a book, or a website or anything that I should read on this type of topic?
I guess schols, police stations, are a logical thing which I should of thought of myself
What topic is that exactly Dave???
Buying in small (one-horse) towns???
Negotiating a fairer price???
Re-couping your loss???
What to look for when buying in woop woop???Please explain………..[blink]
Cheers,
Jo
what to look for when buying in whoop whoop??
I don’t think there are any that spell out what to look for when buying in these areas, but here’s a clue……
Look at things you SHOULD be looking for in good investments (ie. good size population or at least near to good sized township, good infrastructure (hospitals, police stations, roads, medical centres, not just a pub or cafe), tourism opportunities, employment opportunities (factories, commerical and manufacturing industries etc) shopping facilities (supermarkets, malls etc) town planning (see infrastructure, check with local council), recreational (swimming pools, parks and gardens, beaches), and apply them to any area. That is, if they don’t meet that criteria; don’t buy there!!!
Cheers,
Jo
Jo,
Thank you very much for all your help. I will take it onboard. A lot of it is obviously commensense. What would you say is a decent population of a town that is worth investing in?
Would you say it needs to be a minimum of 2K or 3K?
No problem Dave,
Again, size is not always the main issue, although the more populated the better, so at a guess I would assume minimum 3000 (if anyone out there has IPs in towns less than this please feel free to correct me). It is really more about INFRASTRUCTURE because without it, regardless of how many people you have, whether it is 3000 or 30,000…if there is insufficient amenities to support them, they will leave!!![blush2]
Why not do a search on the net, specifying the town’s name and see what it has to say. For instance in your search engine (Google, Sensis, Yahoo, whichever one you choose) type “XYZ population” and see what it brings up. Try and find out as much as possible about the place, before you part with your hard earned dollars!!!
Good luck with your investing,
Jo
Originally posted by Monopoly:
No problem Dave, Again, size is not always the main issue, although the more populated the better, so at a guess I would assume minimum 3000 (if anyone out there has IPs in towns less than this please feel free to correct me). It is really more about INFRASTRUCTURE because without it, regardless of how many people you have, whether it is 3000 or 30,000…if there is insufficient amenities to support them, they will leave!!![blush2]Why not do a search on the net, specifying the town’s name and see what it has to say. For instance in your search engine (Google, Sensis, Yahoo, whichever one you choose) type “XYZ population” and see what it brings up. Try and find out as much as possible about the place, before you part with your hard earned dollars!!!
Good luck with your investing, JoHi Dave
The first keyword I use in Google is aimed at finding the local council’s site. For example, if I was looking at investing in Mt Isa, I’d go “Mt Isa Council” and click on the local council’s home page, plus all links thereon. It gets trickier if the town’s so small the council is part of a broader region with a more obscure regional name. You can get over this easily, however.
That’s the 1st 1/2 hour of your due diligence. Then go get yourself a cup of hot chocolate (winter) or bubbly stuff (summer) to settle in for the duration of many, many, many, many, many hours for the rest of your due diligence. In the process, you’ll start to filter out the useless websites, and find a few “gems”. I’d suggest you set up a folder in your Favourites to save these golden websites to (I have separate “due diligence folders” for most states in Australia, plus one on NZ).
Cheers
GregNearly forgot Dave, here’s a couple of links that might be of interest. As I said, in another thread, albeit somewhat dated (1998, 2001 respectively) they are worth keeping in mind, and in your case having a read through the definition of what constitutes a “small town.”
http://www.abs.gov.au/Ausstats/[email protected]/0/2619aaebcadda426ca2569ad000402ca?OpenDocument
http://www.rpdc.tas.gov.au/soer/indicator/55/index.php#Data
Cheers,
Jo
These country towns can be deceptive in a lot of ways. An old trick is to get a tenant in for a short term at a high rent to make the place look a better proposition and enhance the sale. However, if the accomodation has the extras then it may well deserve the extra rent. Three bedrooms better than two, dishwasher etc. but check it out first. There is no easy answer.
Small town infrastructure may also be deceptive. The ‘business’ end of town may not be in town but out in the paddocks working the land. Shearers especially need a place to live while they travel to their work around the country. Again, this needs to be checked out by a thorough investigation.
My rule of thumb is to count the number of pubs and whether they are a going concern or not. This is an easier form of investigation because you can spend the evening over a beer and learn a lot from the patrons. Three pubs with patrons is a good chance.
You could be on to a good thing and ‘your small town’ may be your golden opp just do a lot of checking. Do not try to use city rules for country properties.
Take as much time as necessary, property investing at the moment could be described as a buyer’s market. You will have all the time it takes to do a thorough job.
I wouldn’t write off a two pub town either. There must be a reason for the place to keep ticking along.
Or a reason why the properties are for sale!
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdThe town rely’s on wheat crops, and has a major cross station where the wheat is prepared to be loaded onto the train through silo’s. I have recently found out the town does also have a medical centre.
Woo hoo!!!!
We’re now up to:
2 pubs
1 restaurant
1 cafe
A caravan park
1 Medical centreAnd their industry is wheat harvesting!!!
Marsden,
“Do not try to use city rules for country properties”
Since when has common sense been the luxury of city slickers, and if so, maybe it wouldn’t be such a bad thing to take a leaf out of that book!!! [whistle]
Gimme a break here!!! [rolleyesanim]
Furthermore, how can infrastructure be deceptive??? You either got it, or you ain’t!!! And a hospital 70km from your doorstep (for example) is hardly going to benefit some poor local in need emergency surgery now is it???
So in your opinion, the more pubs the better…is that how you gauge a good investment??? Crikey, what do you do with the pub runs out of beer, move town???
Dave,
Do your homework; research the place thoroughly, but for heaven’s sake, don’t dismiss the facts (or lack of) which you have presented to us here, as anything remotely resembling worthwhile investing!!! But hey, it’s your money Jack; knock yourself out!!! [wacko]
Cheers,
Jo
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