Forum Replies Created
- Quote:Luckily I am capable of undertaking the majority of work myself and have a supply of tradie mates that can assist on jobs that I cannot do alone.
The specific areas that I am looking at have vacancy rates around 1% and an average gross yield of 6%. The rental market is quite tight in Wollongong.
Quote:If vacancy rates are 1% and yields 6% something is wrong. You need to be looking for yields of least 8%+Aside from higher risk mining locations that in all likelihood would be well out of my budget, it appears to be difficult to find yields above 8%, that are close enough to value add cheaply by myself and fit within my budget.
Quote:I think your analysis of the Illawarra may be a bit simplistic but an opinion it is. The university is obviously and important economic driver but so is Port Kembla, and with expansion plans underway it should be even more so. The Hospital and medical services in general expanding are also important for the area. By all accounts, Bluescope appears to be in a stronger position after the last restructure and even so it is not the only thing sustaining the region.Quote:Wollongong for example and that's fairly representative of the region has seen no median house or unit capital growth for 10 years. That speaks volumes for any potential CG in a general sense. There is no substantive economic growth driver for the region. Don't confuse activity for growth.I don't believe in this instance I am confusing activity for growth. I am equating expansion/infrastructure spending and growth with growth. Furthermore I would debate that there has been no growth in the region. The "Median" can be a deceptive figure as there are some areas that have maintained some nice growth. Whilst 10 yr growth may not be at historically high figures for most areas, I am quite content with areas that have seen 5yr growth of +30%. Your analysis seems quite broad stroke and vague at best. It is fairly apparent to me that you truly have little idea what is occurring in Wollongong. Again it is your opinion however.
Quote:Obviously if I can buy cheaply I should not need to use the entire $70K of equity and will therefore remain below 90% LVR on my PPOR and keep funds in reserve as a contingency. This being the first step, I intend to tread carefully and not over commit myself. At this stage I am sticking to my numbers and am waiting until vendors become a little more "motivated" which will give me scope to make the IP as close to neutral or +ve cashflow as possible.Quote:Sound reasoning but only part of the puzzle. If your using an IO strategy then you have to be able to push the assets value over time to improve LvR. That means an average CG of around 3%/pa. You can give this an initial shunt with a reno but be careful not to trade the reno revaluation for poor future CG because it makes the figures work today. If you can't get an average gain of 3% over the long term then the deals dead in the water unless somehow you're going to make rental growth work for you as compensation. You also need to recoup entry and exit costs in those CG figures as well.As stated above, I believe that even on the most conservative estimation that the areas I will be focusing on will see average growth of at least 3%.
Quote:When you find areas with low to no CG over an extended period of time you have to question why you would want to invest there. This is where being a local can mean your decisions are being influenced by convenience and emotive reasoning.Not entirely correct. I am looking to invest locally for convenience, but in the sense that I can renovate myself and save thousands in the process. However, I am unattached emotionally to any potential property and am guided solely by the numbers.
Thanks again to all contributors
I am currently paying P&I at 5.51% variable on my PPOR loan with them and am quite happy for my mortgage to remain with them. At this stage I am paying an extra $400 a month above min. I can see the sense in going IO as my extra payments are in the redraw and in effect not able to be used for a tax deductible purpose.
Thanks. I will look into it with the bank. Unfortunately the manager I have been dealing with is not back for two weeks.
Shahin,
IMB is my current lender. Fairly conservative by all accounts and are apparently no longer in the broker market.
I would like to keep my options open re buying another IP and also retain a some funds to improve the first IP.
QLDS,
Thanks also for your response.
I have been fairly unemotional throughout the property finding process to date, but have been concerned that my structure is setup correctly from the get go. It may be time to go back to the accountant for some detailed planning regarding account setup going forward.
He might have a vested interest in ensuring my accounts aren't a mess come tax time.
Cheers
Freckle,
Despite the fact you didn't actually answer any of my questions, I appreciate the response nonetheless, even if it was a bit "ranty".
The reason I have chosen the Illawarra as the place to invest is that I live in the region and it is my intention to buy properties cheaply and add value through functional renovations, thereby increasing rental yield.
Luckily I am capable of undertaking the majority of work myself and have a supply of tradie mates that can assist on jobs that I cannot do alone.
The specific areas that I am looking at have vacancy rates around 1% and an average gross yield of 6%. The rental market is quite tight in Wollongong.
I think your analysis of the Illawarra may be a bit simplistic but an opinion it is. The university is obviously and important economic driver but so is Port Kembla, and with expansion plans underway it should be even more so. The Hospital and medical services in general expanding are also important for the area. By all accounts, Bluescope appears to be in a stronger position after the last restructure and even so it is not the only thing sustaining the region.
Obviously if I can buy cheaply I should not need to use the entire $70K of equity and will therefore remain below 90% LVR on my PPOR and keep funds in reserve as a contingency. This being the first step, I intend to tread carefully and not over commit myself. At this stage I am sticking to my numbers and am waiting until vendors become a little more "motivated" which will give me scope to make the IP as close to neutral or +ve cashflow as possible.
Thanks again and I hope to hear many more opinions from experienced investors.
