Hey Jaxon and Tom,
I’m appreciating the discussion here – lots of numbers and shared thoughts to inspire others. So, thanks you two. I’m about to direct others to this thread for their edification. ;)

Benny

Hi Steven,
There is a lot of truth in what you are saying:-

The result is before we realize what happened, Rowville went from an unpopular area to an area where housing price shoot over the roof. And now, those who bought in Rowville only 5-6 years ago, they are all laughing.

Sure, this happens often – you might see a lot of renovations and/or old homes being bulldozed and newer ones going up. This is often referred to as “gentrification” where 50 year-old homes are pushed over to build new.

Keep in mind that Real Estate increases in value in a “stair” pattern. Values can remain almost stationary for many years (and even drop a bit in that time), then can double very quickly. This seems to follow a similar pattern each cycle, and I fully expect Brisbane to be the beneficiary of this within the next couple of years as people get priced out of Syd and Mel. If you compare Bne median values with Syd and Mel, you’ll see a huge disparity today compared to (say) ten years ago. Maybe more investors than owner/occupiers will descend on Brisbane, as moving house interstate IS a big deal – but for an investor, not so big !! I’m expecting to see Bne’s median jump by about $300k over the next few years. Let’s see eh? ;)

Those owners that do jump ship can set themselves up pretty well – sell up in Syd or Mel and buy a property for about HALF what they were living in, and pocket the rest (or, if starting out, pay about half the amount in mortgage interest). Of course, it means maybe leaving family/friends behind, but airfares are cheap eh?

In one of the seminars I attended, the instructor used a term called “the Push Factor”. Basically it means a previously unpopular suburb that is largely off the investor’s radar, happens to experience rapidly growth due to residents “push” into that suburb. The reason behind why residents “push” into a previously unpopular suburb can vary, but the point is the push factor is able to drive good growth.

This is true and, as you say, there are many factors. Gentrification is one, neighbouring suburbs values going thru the roof, local govt adding facilities, historical “stigmas” being forgotten with time, certain ethnic or other groups flocking there (often because of price and the desire to remain “in a group”), State govt opening better arterial roads or adding bus services, new schools, new employment prospects opening nearby (shopping centres, industrial companies), etc.

A quick look at Rowville tells me it has been around since the 1980’s and grew rapidly thru to the 1990’s (schools added, etc). Now, taking your words, maybe other factors have led to a recent price growth. Rowville is near Dandenong – so, is Rowville up on a hill? Does it have great views? Has it received a lot of “money” as people build awesome mansions “high on the hill” to get the views (views can often add $100’s of thousands in value). When was it last cheap? Was it just 5 years ago that it soared? Did neighbouring suburbs also soar prior? Has Rowville become “gentrified”? If not, why is Dandenong’s median almost $200k cheaper? Is Dandenong likely to be “next”?

A local could add a heap more, Steven – maybe you even have answers to some of the hypotheticals I mentioned there. Certainly, there are always reasons WHY an area soars in value. Find out what they are, and keep an eye out for similar areas !!

Benny

Hi Steven,

I do somehow get the impression that you make it sound like you have a grudge against new properties or H&L packages.

I’m not sure I’d call it a grudge, but simply that some properties are better for investors than others. And, as you just saw in my response to Cherry, if you have the skills/knowledge/wherewithal to be able to build your own properties, then go for it !!

One option that you made reference to, was purchasing a townhouse closer to a CBD. Now THERE you might find me pricking up my ears and paying more attention. See, to me there is a HUGE difference between buying a solution property from a developer in one of the new “greenfield estates” or alternatively buying a new townhouse in a small block close to all amenities.

I have long been in favour of “buying in well-established suburbs” and that can be new too, if the $$ work out well. But mostly (for new investors) buying an older property in established areas gives them a better chance of finding an investment property that can return them some useful $$, either as Income, or Growth (or even both). You won’t find too many opportunities like that in North Lakes, Pimpama, Morayfield – or any other greenfield developments !! So yeah – I guess I am more against “some new properties” rather than being against “new properties”.

Thanks for the comment though – it is good to be challenged and to have to think long and hard about my own biases before replying. ;)

Benny

PS For others who may not have seen this link,
https://www.propertyinvesting.com/buying-investment-property-off-plan-dumb/
…it does warn about OTP or H&L purchasing, and what we need to be aware of if considering doing so.

PPS

but to call them “bad investments” is probably not fair either.

Hmm, I didn’t see where I did that in this thread ???

Hi Investor,
If you read all of the words carefully, you will see I was using words like “IF”, “might”, and “could be”.

That means, this was not reality I was describing, but an example of what “could be”. The underlying lesson was that some areas of Goulburn might have a majorly different vacancy rate than other areas, and that you do need to take this into account.

e.g. you have found data that says Goulburn has a 1.5% vacancy rate overall. Good for you for finding that, and yes, it is a good figure.

But now, do consider that NOT ALL of Goulburn “might” have 1.5% – some areas “might have 0.5%” while other areas “might have 3.5%”. Don’t be blinded by an overall figure, even though it appears to be quite a good figure. You “might” be looking to buy in the one area of Goulburn that “might have” a 4% vacancy rate (even though the overall is 1.5%). Get me?

The good overall rate of 1.5% is NOT the be-all and end-all, but it is a good start.

Benny

Hi Investor,

for example Goulburn has about 61 properties for rent, shows cash flow positive which is good but with that many properties on rent whats the chance of someone wanting to rent my property? Should we avoid areas like this?

Good question – I hope the following thoughts might help you:-

It is not so much the number, but more the ratio of “rentals to owner occupieds”, and “rentals available to rentals in use”.

It sounds like you are talking of the second of those – otherwise known as “Vacancy rate” and the most common number mentioned is 3%. If more than 3% of rentals are available, then that is a warning sign of too many rentals and not enough renters. If a vacancy rate of less than 3%, then good news for landlords.

So, back to Goulburn – if the total number of rentals is 61/0.03 (i.e. 2000 rentals or more) then 61 is OK at around 3% or less. So, the question that springs from that is – with Goulburn’s population being 22,000 is 2000 rentals a lot?

I think the average family size is about 3, so that would mean 22000/3 = 7300 houses/units needed to house them. So, 2000 against 7300 doesn’t seem like too much of a problem as it’s just 28% of the total accommodation needed. Of course, someone else may be able to comment with more local knowledge – I am answering as one who doesn’t know the place, but am just crunching numbers !!

Steve had posted an article about being careful where investors outnumber Owner Occupiers – this is what he said :-
https://www.propertyinvesting.com/watch-out-for-this-simple-stat/

You can see that 28% is not too bad. But now let’s backtrack and look at that second number again in a bit more detail. Like, what if the 61 is out of a total of just 1200 rentals in Goulburn?

In that case, the vacancy rate is over 5%. To most commentators, that figure is in the “danger zone” for landlords, and it means more competition to get tenants, and may even lead to taking a tenant you regret taking “just to get someone paying rent”.

Ask a few RE agents “How many they have for rent” and “How many on their rent roll?” then divide “available rentals by total rentals” to get the vacancy rate for their operation. The magic number is 3% – below is goodness, above is a warning.

Also, don’t lose sight of the fact that there can be “pockets” where rentals have an extremely low vacancy rate, and getting a rental there is hard work. This could be because of the proximity of facilities (near to the CBD, good schools, transport) or it could be “the top end of town” where many want to live, but few can get in there. If you can buy in these pockets, it really won’t matter too much about an overall high vacancy rate as this little area might be at 1% or less, even if Goulburn overall is at 5% !!

Benny

Hi Jaya,
That almost sounds like “How long is a piece of rope?”

If you can share what you are wanting from this house, and any/all constraints, like – is it for investment or “own home”, any particular location, return required, can renovate or not, etc it should allow us to give a more meaningful answer.

Don’t forget, we don’t know you – so unless you tell us more about WHAT you are wanting in a house, we really can’t help.

Benny

Hi Steven,

The example you gave relied on a few things:
1. Organic capital growth which is difficult to come by now days compare to 30 years ago

Really? What has Sydney been doing the last 3 years, and Melbourne too? Brisbane is likely to be next…. all part of the cycle, but then each cycle is different to the one before.

2. Rental incomes are growing to the point of catching up or exceeding the amount of loan / repayment that is needed to “feed” the bank, which again is not the case now days. Housing price has gone to the point where the rate of loan repayment are increasing faster than the rate of rental income can catch up.

Certainly with wages not growing as quickly as in the past, it becomes more difficult to afford a place. That (I believe) has ties to the excesses of immigration and/or overseas investors who are buying up the farm. While ever supply is kept low, demand remains strong. Then Govts. tinker around the edges to endeavour to be “all things to all people” – whack investors (reduce IO loans), because FHB’s are crying at not being able to afford a place (like, do investors perpetually overpay to get a place???? Thus driving up those prices? :P)

3. Government is tightening regulations and banks are tightening IO lending, compare to
the old days.

Even “the old days” had times of tight bank regulations. Everything is cyclic. Small example:-
a. We struggled to buy our first property – money lending was tight in 1973 (gold through the roof, petrol too) – a lot of FHB’s were wanting to get into a house. We bought through a wrapper, secondhand, and re-financed out of the wrap within a couple of years (I worked a second job).
b. Six months after we bought it, we were offered 50% more than we paid for it. Just 6 months….
c. We did sell, about 7 years later, and got THREE times as much as we had paid. Prices then stagnated for about 7 more years.
d. We moved and bought into a Brisbane house in 1984 for the same price we sold in 1980. Prices screamed upward after Expo – doubled between 1987 and 1990.
e. Then they went backward – four years later (after the “recession we had to have”) our place had dropped by 20% in value.
f. Prices then STAYED lowish for another 6 years, until 2000 when the gun went off and we were racing.
……

Times change – buying possibilities change. Govts change legislation. RBA’s play around with Interest Rates. Re that, the Interest Rates have (I believe) played a major part in defining many of the current events. e.g. When paying between 11% and 17%, you’d better NOT have a big mortgage, unless you also have a commensurately big wage. Today, with IR’s around 4%, values have been allowed to scream upward as demand continued to grow. Folks on even an average wage can yet afford a hugely expensive house.

Seems rules are now changing and we need new solutions.

Pretty much right there, Steven. I think lessons from the past can be tailored to fit a new world too though. While ever supply and demand continue to play their part, making decisions based on their relativity will continue to make a lot of sense. e.g. If demand is high, and prices have become too high in an area, think of how those prices could be lowered. Old wisdom might say “go buy in next suburb or next city” – and that might still work. Or look to new ways (e.g. sharing homes to get multiple incomes from multiple renters). Student accom. airbnb.

To be able to make the best choices, one must be “a full bottle” on the possibilities around them. An understanding of this new world becomes mandatory. Keep on reading – if wanting “How to” stories, buy YPI magazine or similar, and read !! Early days are hard, but with each investor person you meet, and each story you read, the path becomes a little more well-lit and easier to navigate.

Benny

Hi KK,
Wow, what an interesting question. Now, upfront, I am not a lawyer or any kind of professional adviser (just so you know) but others on here are, and I hope they step in to assist you.

Meanwhile, I just wanted to give you the “reasonable man” argument and perhaps a few ideas that at least give you a nudge in a direction that may help.

First, I would think that there are some areas in which you can comply that will add weight to your assertion that this IS your home – e.g. the correspondence to you would still be providing evidence (unless you do it all by email, and even then there will be an address for your rates, water, etc). Your Drivers Licence would certainly have that address on it, yeah? And these I think would be key points in your assertion.

As you say, your lifestyle might well be different re utility usage, and there is no crime in that. Your penchant for DIY would have an effect too. The bit about having “no kitchen” might be something that others can comment on – I would think that if you are “in between” an old kitchen and a new one (yet to be installed) then there is no issue. But is there anything in the law that says “A PPOR is not valid if it is uninhabitable – and, does having no kitchen make it that way?”

By the way, I am hearing that some units these days DON’T have a kitchen – perhaps just a microwave – and they are built that way. Re not using lots of electricity – your lifestyle choices might mean you don’t cook that much at home anyway (even if you had a kitchen) and I don’t believe laws can compel you to do so – yet!!

Maybe something as simple as a Stat Dec (Statutory Declaration) made by yourself with the help of your solicitor, and backed up by some evidence (D/L, rates notice, electoral roll mail) might be all that is needed. It seems to me like you SHOULD be OK, even though some of these questions sound a bit alarming, and even “over the top”.

Good luck with it, KK

Benny

Hi Ian,

First of all I would steer very clear from house and land packages in Logan

I’d go further than Simon, and say “steer clear of all house/land packages”. Typically they are a “solution” property. The developers have created a house for a family – and the family pays well for that privilege. Over time, the house may value up – but that could be 5 years or more, so not good for an investor who wants to make things happen.

Steve says “Buy problems, not solutions” – and you get paid for solving that problem (whatever it was). It could be that you buy a “worst house in the best street” and do a reno on it, or you purchase a property that allows a divorced couple to “move on” – they often sell at a lower value just to get moving. There are a host of different options to consider. What are you wanting right now? Growth, or Income? With 2 of 3 of your current IP’s being Commercial properties, you might be heavy on Income and are wanting Growth – is that it? If so, I wouldn’t be looking at a H&L in Logan at all – nor even a straight rental.

Someone else said it – beware any Buyer Agent who is trying to sell you “new properties” to the exclusion of all others – they are not a Buyer Agent at all – they are a salesman !! A good Buyer Agent will listen to what you want, then go out to help you find it.

Benny

Hi Investor,
I agree totally with Richard – when I was investing, my Broker was one of the most important members of my team. It is all of those “little details” that my Broker knew, and I didn’t, that kept me out of trouble. Like what Richard said – don’t go getting too many hits on your Credit file. Decide on the BEST lender at that time (with your Broker’s valuable input) then go with that one. A Bank will likely push you toward cross-coll – a Broker will drag you AWAY from it. Most times, cross-coll only helps the bank, not you. If you didn’t know that, you could be getting yourself tied right up going direct to a Bank.

Further, a Broker knows WHICH lender to use for your first loans – use them up, then swing to the “next lender”. If you choose the wrong lender first then you won’t get to maximise your possible borrowings.

You don’t know just how much you don’t know – especially when starting out. Getting the “finance” member of your team sorted first is a great first move. Choose one who listens and guides you. Usually they are free to a borrower (the Banks pay them for bringing in the business – but then, some Banks don’t use them – talk it all out when you have your first meeting – there is a lot to cover).

Benny