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Between us some friends and we own 9 properties in Morwell. Yields are very good even now. When we bought we were buying in the $80k bracket and so we have had some surprisingly good capital growth. Management is the big thing in both Moe and Morwell. A good manager is worth gold and a poor one can cost you a lot of time and money. You can still get houses on subdivisable blocks for $120k in Morwell. Morwell is running out of land because there are green belts specified for the power stations all around the town and so there are limited opportunities save for one site on the road to Traralgon to expand the town. We figure that the power stations will be there for a long time and that alternatives may well spring up there because of the transmission infrastructure. We will do some developments there in about 4 years but have stopped buying as we have our profits locked in. We’ve moved on to other places.
Moe is full of units and they probably represent good value only when you buy the block, thus allowing you to do some value adding.
Have looked at houses there but never been tempted. Traralgon is a different market much more like a regular rural town. Employment is underpinned by the two big power stations down the road.I do it. Followed the outline in SM’s book and bought in areas that gave me yield. The funny thing was I’ve had good capital growth as well. I only buy ex-Housing Commission properties in Victoria. I imagine they are in what you might call dodgy areas. They do need good management but I could not have got into property any other way. The secret is to treat people well and mostly they treat you well back. Good inspection gets movie tickets and a thank you etc. Dodgy area does not mean dodgy tenant. I live in while I renovate and subdivide. Right now I’m sitting in house in a dodgy area with really nice neighbours on either side, both long term HC tenants. It can be done, just a matter of attitude.
I don’t want to get into a drawn out argument. My point is quite specific. I think I did not get my money’s worth. No more no less. I have paid 1% of the price to attend a property function, where it was made clear to me that I would be pitched to, and got more. So good was it in fact I went back the next year. I am far from a sceptic.
There needed to be more meat in the sandwich to justify the price. I cannot comment about emotional or spiritual fulfillment as I went to learn. I certainly was motivated because the time away came at great cost.
Perhaps a better system would be to break away more often to a wider range of smaller meatier presentations offering an alternative to the pitches to captive audiences. I don’t know what the solution is with something of this size but to make my point once more, my money and thus, I suppose, my time were wasted. I am finished on this topic.I won’t be returning for Sunday. I am unhappy that I’ve had to sit through a series of pitches for products some of which have a tenuous connection to investing in property. The straw that broke the camel’s back was Aussie Rob. 90 minutes of fluff and pitch. What annoys me most is not the waste of my money or time but that I put off helping some people this weekend to attend a series of patronising infomercials.
Just out of interest I went to the Lloyd’s site and took up the option for a free DVD on options. We’ve previously had one from Carly Crutchfield. Anyway had a call from someone at Lloyds and what ensued was a sales pitch for the system, there was a one sided discussion about when I would call back to dicuss my $9900 membership of their option group. The one way to turn me off is to try a hard pitch and not get off the phone when I say I have work to do. The second way is to explain that they rang to check me out. Was I legit? I suppose. I told the guy who called he had a suspicious mind to which he replied that this is business and that he was concerned to see that I wasn’t someone from their opposition. Options are not that big a secret, especially if my father who has been dead 20 years used them back in the 1960’s. Interestingly he quoted me the cost of an option contract as being $15,000. The Crutchfield organisation quotes about $5-10,000 if memory serves. Option contracts are not that hard to draft and precedents are available in most law libraries. I’d suggest discussion with a lawyer before embarking on the option road.what Lloyds appear to do is lift the burden of doing the legwork. It’s up to an individual to work out whether or not that is worth the fee. I’m waiting to see the DVD with genuine interest.
I managed to buy my first property at 17. It could be done 30 years ago. I had to visit a judge in chambers and he deemed that the various contracts could be enforced against me if I defaulted. Find a lawyer and ask if it is still possible (this was in New Zealand) if you have somewhere in mind. I had vendor financing so no bank was involved. It was only when I became a lawyer myself that I saw what a risk everyone took to give me a start.
You have one thing running greatly in your favour, time. Start reading and watching. Remember that this is a numbers game and that slow and steady will win the property race. Think about what your strengths are and use them. You may well develop an investing system and once you do you won’t be able to believe how easy it is to make money. Do your own research and become your own expert. Where you have gaps in your knowledge ask and never worry about the cost of getting the best advice, it’s still cheaper than getting caught out.
This is sounding like a lecture. I’ll shut up.Can comment on the paint. We use a water based paint called Aquanamel. In our bathrooms. It comes in gloss and semi gloss dries quickly.
Bunnings would have it I imagine.The best thing you can do if time is on your side is to do a bit of research. see what your council requirements are for various options AND find yourself a good surveyor. Make sure that the surveyor has a town planner on their staff. The difference between a good and a bad surveyor is months or even a year or more in time as subdivision plans are rejected and resubmitted. Get out the calculator and nut out the possible scenarios.
hawthorn wrote:I 100% agree with fatboy i'm an investor from canberra i own 3 properties in canberra and 1 in nsw i went to morwell 2 weeks a go as its an area i've been studying for about 3 months i was amazed at how strongly positive cash flow property was there so impressed that i bought 3 properties with my brother it has cost us $348,000 total for all 3 properties and combined rent of $500 with long term tennants 2 of which wanted to extend for a further 2 years which means that even if we borrowed 100% plus property management fees and rates etc we will still make $260 each per year. But the main reason i purchased there is because it is listed as a real boom area with a lot of infastructure coming to the area and the new road links to Melbourne its an easy hour and 15mins drive along the highway on the new stretch of road. Housing is very affordable and not only is it a boom area but the property pays for itself without contributing a cent. I love property and research it everyday and from the research i've done there is no better place in australia to invest. My favourite saying is BE GREEDY WHEN PEOPLE ARE FEARFULL AND FEARFULL WHEN PEOPLE ARE GREEDY as we seem to be a country of followers not leaders don't miss the boat cause when everyone starts jumping on board your returns won't be as strong as you will have more competition which pushes prices up which pushes interest rates up etc there is no better time than now to invest in property.Hope you picked up the free building sites that go with most houses in the town. Together with friends of ours we own 5 properties and are quitely subdividing each for future development and more cashflow.
It is what we do. We don’t sell. We work well under the median house price. Cheapest so far was $86K and most expensive $147K, each yielding a building site. The general rule of thumb for us is that the building on the back should turn the whole proposition into a cashflow positive deal if it is not already. Better if you ask questions of me. It’s raining in Melbourne so I have an excuse for not being outside painting the latest part of our little empire.
We buy cheap (currently under $200k) properties and subdivide them doing up the existing house and building on the back. We’ve followed a deliberate policy of going for cashflow. we get our capital kick from the subdivisions. We started with next to nothing in our 40’s and made a virtue of necessity. In our longer term plan we KNOW that we will have to make the change and go for capital growth. Meantime our cashflow from property allows us to reach that goal. If you can, buy for growth in capital. Eventually the cashflow comes if you buy well. Banks look at both cashflow and equity. They need to be sure of your ability to service and their being able to get their money back in a forced sale if the worst happens.
About October of last year I wrote about buying CF+ve property in the Latrobe Valley. Specifically Morwell. I’m sorry I’ve taken so long to get back to the forum but we were bedding down a subdivision in Geelong.
I was asked a question about Housing Commission areas. Was it wise to buy, subdivide and build in such areas? That is all we do so it’s easy to guess where we are working in Geelong. We work on numbers and percentages only and we are primarily after cash flow to strengthen our hand for later purchases where we will have to sit on CF-ve property to get good capital growth (but still under the median house price value).
Unusually the Morwell properties have shown about 13% capital growth pa. in the last two years. We did not expect this. It is a bonus. We research demographics and council plans before buying. What we uncovered there, but not in Moe or other areas, was a pretty safe return of about 6-7% on prices then prevailing and no valid explanation for this being overlooked. All conditions prevailing there existed in other centres.
As I said we subdivide and build. The method really is just the construction of cash flow. The land is usually free or a capital bonus. This is what we do and it will not suit everyone.
I got one amusing reply about crime and population decline. We live in each property as we work on it. Morwell was an ok place to live. I’ll go back for our build in 2010 after doing one in Norlane, another Housing Commission area. Population decline occurred because of a unique set of circumstances and as a part time resident crime is less of a problem than in St Kilda East where I am regularly the victim of theft or vehicle damage. The drugs in use are different I will grant you.
Business is going well in the valley and it is no longer an area reliant on one source of employment.
I’ve been letting property to people on benefits or low wages for 20 years and find them mostly to be very reliable and good tenants. I also try to provide the best quality shelter for their dollar to encourage long tenancies.
I’ve lost money twice on my formula. Once when I built in an upmarket area and once when I was letting a house in a nice area. I will never go above just below the median income/median house price combination again. I’m not the only one who does this, there are quite a few of us. It allows us to do a little and often. We have just got approval for a build and a buy. This is because we have strong cash flow which interest rate drops will only increase. In exchange for this we take smaller capital gains but we have many of them. It has allowed us to give up our day jobs and live in a way where we are the boss.There is a lot that can be said about making rather than buying a cashflow positive deal. All of that has been well covered in many posts. The burning question that doesn't get answered is "are there cashflow positive deals available of the sort outlined in Steve's books?". We have found a place in reasonable proximity to Melbourne where you can buy lettable property on a good enough yield to make a purchase with up to 95% financing either cashflow neutral or positive. We have two houses there. Here are the numbers on one of them. We bought this in February. We paid $85,000 and the tenant was pating $115 per week in rent. He left and we spent a few weekends and about $2000 on paint and materials. Result $140 per week. A one and only? No we did the same thing down the road about 500 metres. Bought $84,000, untouched apart from new flyscreen mesh on a door this rents for $125 per week. These properties are two bedroomed and are on subdivisible sites. Friends have done the same 3 times in the last month.
Hopefully this will show it can be done with a bit of research. We are going to build on the subdivided land which will make the deals all the sweeter.
Have a look at Morwell. Have a look at Morwell. Have a look at Morwell.
There I've said it three times so you can't miss it.I must agree that finance is not necessarily a problem without an ABN AND in our case a part time work history of only 15 months in Australia. We had about $60k in savings which we brought with us from overseas and as far as the bank knows that’s it.
I was very sceptical about getting finance and only went through the motions with the bank to keep the peace at home. Imagine my surprise that I would not have to work for two years nor give up my part-time work for something more serious in order to borrow.
If you don’t ask you don’t get. We are in business two years ahead of schedule!
One word of warning about being suddenly unemployed with a lump sum in your pocket. I’ve seen many a fortune frittered away by people used to a steady income and unused to large cash lumps. While you can make a furtune in real estate you can also lose your shirt.
We are experienced in property but because we don’t know the Victorian market as well as our home one we opted to start very small and will slowly build from that.
All the best.
Fatboy
