Forum Replies Created
Why is everything different this time? As George Bernard Shaw once said:
We learn from history that we learn nothing from history.
Josh
Geo, I wish I had enough money to retire on. I was mainly asking since people expect the apartment market to drop a bit in the next few years and I might have that money then, unfortunatly not now. Just want to be prepared.
Thanks Acey, I wanted to know what some of the main differences between apples and pears were as all I knew where they were fruits.[cowboy2]
Thanks Josh
Thanks Derek,
I don’t have too big a problem with the higher LVR as I was looking to go towards neutral gearing or positive cashflow since I believe that Cash is king.
The main thinkg I’m wondering about is that since rates and BC are higher is this in some way offset by lower maintenance costs (ie for gardens and aprtments tend to be niwer)
How does the CG compare to houses. With the high vacancy rates are the penthouses etc more susceptable or immune due to their unique factor?
Thanks Josh
I’ll be there in Brisvegas to see the Kiyosaki concert.
Have a look through E trade. My brother got my ticket there but I think it might have been cheaper and I got a free rich dad poor dad velvet edition book.
Josh
From what I can gather, a lot of com prop investors use the services of an agent that will help you purchase etc, etc.
I think I’ll also look at comm prop as the way to go, all the people in the big money go commercial or develop.
Besides they generally have higher cashflow and less operating expenses…. Cash is King!
Josh
I’ve heard of some holding props in a trust and distributing to a company thus getting the best of both worlds….. I don’t see why you can’t have both the co. and you as benificieries.
I’d check it out though.
Josh
Hi david,
Off the top of my head, the cheap +cf houses used to sell around 50k, now probably around 80 to 90 k rent I gguess is around 100pw. I honestly haven’t had too much of a look at the prices, rent and vacancies too much as I don’t tend to agree with investing in small towns with little potential.
I could probably try and find out the kind of people who rent etc. if you are really interestted. My guess would be that most miners with a bit of dough would live in bowen (much nicer and I would consider investing here.)
I mentioned that the houses on the hill were nicer as they had a view and were generally newer but I don’t know about the prices.
Ask away.
JOsh
I live near ayr, it does depend on the sugar industry a fair bit so it does depend on what you think will happen to the sugar industry. The town it self doesn’t have too many prospects, it isn’t a beach town and does rely on the primary industries. close to townsville (1 hour). I think the town will be around for a while but growth??? I seriously doubt that rural towns like ayr will grow much.
JOsh
Oh and also I wouldn’t put money into investing in collinsville.
Josh
I live in bowen, about 80 clicks from collsvegas.
It is highley reliant on the mines, power station and to a smaller extent teachers. A new mine recently opened so it might be alright. Teachers never stay long. Some live in bowen and just drive an hour to work every day.
The town has one hosp GP and one prive GP although tehy have difficulty keeping them (both have less than 6 mths here) One IGA store and thats about it. A lot of the houses are a dump (there are some nice ones up on the hill though).
If you want to know more let me know. I could ask most of the locals for you as i work there one day a week and I see a few of them.
Make sure you do your due dilligence. I think a lot of the CG has already occured due to this macro boom and if histroy is anything to go buy won’t move for another 20 years. (might be 10 tyears when the boomers start retiring as a few oldies move here because housing is cheap and there is a hospital.
Josh
PS I’ll try and check back here too if you have and Q’s. I don;t spend much time here as I’m usually looking at the stock market.
I remember reading in BRW about a recent court ruling regarding interest while building a house. The result was that interest can be claimed IF the house was being built with the intention of renting upon completion.
Josh
As a side note, buying your own PPOR may not be the quickest way to get rich.
On a dollar for dollar basis renting beats owning a ppor.
Josh
I think also Actually buying the cvan park can be rather expensive. There were a couple for sale in Bowen and ranged in price from about 1 to 4 mil.. They do rent well though I believe
Josh
Chris Corrigan of Patrick Corp thinks that the rail link was a waste of money as far as business is concerned and I think he would probably be in a good position to tell.
JOsh
Hi all,
From what I have read, If you can find a tenent that will pay all outgoings (rates repairs etc), long lease, not currently owened by tenent, you might do OK.
As MJK One of the big risks is the vacancy period, Due to the higher costs large repayments may be required, AS long as you can cover this you would probably be OK.
As Mel mentioned the lack of info does stop some people and this is why an agent might be a good investment.
As an aside to Peter, I have heard that a sizable number of people have been moving from residential to com props and pushing the yeilds down. This was in an article in AFR a few months ago.
Josh
I think from what I have read, it is harder to get info/research on com prop so most people buy through an agent.
As with anything else higher risk is higher returns. Com prop is more volitile and can go down in value more so than res prop. If you lose a tenet you could be vancant for longer periods.
Josh
Matt,
If you are worried about losing the money or servicing the loan I would tend to go for less IP’s with lower gearing ratios. As with anything the higher the reward the higher the risk.
Josh
Hi all,
With reagrds to the immigrants, I don’t think this is the main factor driving the prop market. (I read somewhere that most of them rent which may affect the vacancy rates and thus props but I thhink it is minor) At the moment it is the baby boomers who are driving this property market, and anything driven by this group of people will make the market go higher and further than predicted by most.
I was thinking that the prop market was hot in 02 but it kept going. Most of these boomers pushed the massive bull market in shares up until the turn of the century. Now they have all started to move into the prop market so a long run of CG may be expected.
This extended push may lead to a bigger drop in prices than the past. (The past has generally seen around a 10% drop follwed by no to little CG over a good number of years) Most people who enter the prop market enter as better buy and holders than the stock market hence past prices tend not to drop as much but tend to flatten for a good number of years. ( A slow decline thanks to inflation.)
The speed of this decline will propbably have a lot to do with employment and interest rates but that’s another story.
Personally I’ll be waiting for everyone to be talking about the stockmarket so that I can get out and enter the prop market, whenever that is.
Josh
Ok, I’m not really invested in com prop but hopefully here are some answers from what I have read in a few books:
1) Yes, usually, You tend to find vacancies are for longer, (not really more but if you get one they can remain vacant for a lot longer.) Prices to fluctuate more and tend to run with the economic cycle.
2) The GST is the main one I can think of, GST on rents and you claiming GST on expenses or something like that.
3) Not sure. I have heard people mention that if you go com prop you are better off having a buyers agent.
4) Generally it depends on the purpose of the building and the flexibility of being let. (less flexible higher yield) Somewhere from 8 to 15% yield. An agent should be able to advise
5) dunno. haven’t really looked into it in that much detail.
Josh
Hi all, Interesting topic.
First off I believe both camps have both their pros and cons and I think a portfolio should probably have a combination of both.
However as far as the cashflow goes I generally am all for it. I think that they will generally have lower CG than the city centers over the long term. Like angie! says the cg may be there now but is this to do with the fact that the whole prop market has moved?
I live in bowen which is probably considered quite rural and talking to the locals they say that over the last few years the cg have close to doubled but that was after prices were stagnant for the previous 20 years.
It will be interesting to see what happens to all the high cashflow positive props in rural areas after a good number of years.
(BTW I would probably exclude townsville and toowomba from the above description of rural)
Josh
