Thats fine Richard, I thought that might be the case but I guess I was just hopeful.

Seems like it is not really worth developing anything significant as it might not be effective anyway, and probably better off just approaching lenders and seeing what they will allow, I guess at the end of the day it is them you have to satisfy anyway.

JacM makes a good point up there. I do not look at investing into a town where the population is around 2,000, and has not changed over the past couple of decades, where there is no significant industry around. In these places your property will only go up by inflation if you are lucky.

There are still regional centres that are growing significantly enough to achieve decent capital gains. Towns particularly with universities should always be a decent place to start.

And as for accessing equity, I also believe that renovating a property or adding cosmetic improvements is a good way to gain access to equity, instead of just waiting for for equity to grow naturally, you can force it to happen by improving the property. Of course if this is your strategy, you need to purchase a place where you can make a significant difference, no point buying a newly built apartment where you can’t make any changes.

At the end of the day, some properties will still be negative geared, if the capital gains is significant it can still be worth it, just make sure the amount of money that comes out of your pocket is minimal and does not leave your pockets empty!

It is not sustainable buying negatively geared property, as they cost money to maintain the loans, there is a finite amount of properties that you can purchase before you reach your limit. Then you are forced to wait for capital gains, and wait for rent to increase enough to make it positively geared and pay itself off.

I guess that is why most people who negative gear property as an investment, normally only have a couple properties in their portfolios.

Buying positively geared property is something you can do every day, literally every day of the week you can purchase a positively geared property and it will pay itself off. I do not see a reason why your strategy cannot bring you significant wealth down the line. Of course it will take a lot of work but if you are prepared to work hard then it should work effectively. But as Jamie said it is all about balance, there are definitely good oppurtunities in property that may be negatively geared.

The issue with purchasing regional property is typically there is no capital gains, but I do not see how it matters if the property is paying for itself. If you find a true positively geared property, then with some management on your part, it will simply pay for itself, and need no financial input from yourself after the initial purchase and renovations.

I remember recently I made up a spreadsheet on purchasing a mining property as an investment, and comparing to a more traditional investment property.

Obviously the big difference is that mining property has an extremely high rental yield, but loses significant value once the mine closees. Whereas a traditional investment has lower yields but as long as you buy in the right area, well there is the capital gains that you can look forward to.

I guess if you are after instant cash flow, then a mining property would be ideal for your investment portfolio, but looking in the long term, it seems that you are almost always better off with a property that will achieve capital gains in the future. I guess you may be lucky to purchase a mining property, collect some great cash flow for a couple years, and then on sell the property while the mine is still open, hopefully at the same price you initially paid for it, or maybe slightly higher. Then it would definitely be an attractive option, however long term it almost never seems to work out.

Sorry I guess this post is a bit off track with the initial topic, just thought it might be interesting to note.

Seems like Australia is heading downhill, I believe we did not escape the recession, merely just delayed it by a couple years.

Instead of falling down a couple years ago like the rest of the world, we survived by our high amount of resources, but that can only last so long.

The next couple years in the Australian economy will be very interesting, confidence appears to be very low at the moment.

I remember a few months ago I was looking into the same thing. A friend of mine went to go work in the mines, and I saw that the place the company put him up in rented out for $1,800 a week, similar houses in the town were selling for about $600,000. So obviously it would be positively geared.

Unfortunately as soon as the mine runs out, the value of the house becomes nothing pretty much, since it is out in the middle of nowhere, and a lot of the time these places are really nothing more than fibro shacks out in the sticks.

Still with the high rental returns, it seemed it was almost too good to be true. I ended up making a spreadsheet to see what it would be as a long term investment. It was not too complicated, basically just had an input of how long the mine would last, typically around 10 years, and after this, the value of the house would dramatically drop off.

The spreadsheet was fairly simple, but it let you look at your total value after 5, 10, 15, 20 years, whenever you want. It was interesting to look at this compared to a typical investment where you might get around 8% gross yield, but with some capital gains available, you almost ended up worse off by investing in the mines.

Of course there are plenty of variables, but it is nice to be able to just assume some figures and looking at what your expected returns might be.

We received insurance quotes for our property in Florida, aparently only one insurance company would look at it due to its age (built in 1966), the insurance company is Citizens?

When we received the quote I was shocked to see that the premium would be $1,800. I was shocked to be honest, the property cost us $44,000 and the insurance premiums would be 4% of this value? Not to mention this does not cover flood insurance, that was separate (only about $250 though).

I asked for a breakdown of the cost, turns out wind and hurricane was costing $1,200 on its own, so without it, it would only be a $600 premium. I am still tossing up whether to include the wind cover or not. The property has been standing there for almost 60 years and has had no problems, it is about 20 miles inland so I do not think it is really in a ‘hurricane’ zone. It is a bit tricky though because our property manager is suggesting we don’t need the wind insurance, whereas the insurance broker believes we really should get it. So I am still deciding at this stage.

$1,200 is a fair bit of money considering the rental return is only $700 a month, so almost 2 months rent (14% of the return) gone just like that.

Does anyone else out there have a thought? The property is in Lehigh Acres not far from Fort Myers.

Obviously nobody can predict the future when it comes to how the AUD USD exchange rate will be in the future. The best way I can suggest is to factor a bad exchange rate in your investment calculations, a worst case scenario sort of thing so you can see how your investments turn out if everything goes wrong.

Also in my personal opinion, I believe AUD reaching parity with USD is only a temporary thing. When I was looking at purchasing US dollars for our US house, we were aiming to just be happy with anything above the long term average. Looking at historical data, the average appeared to be around 1 AUD = 0.75 USD (I am sure the exact number is up there). So the way I figure it is, anything above 0.75 USD should be a good exchange rate.

This was one of the biggest concerns we had with our agent in Florida when we got our first house. We had never met her, even though we had been dealing with her for over a year before we finally got to finalise on our first property.

Towards the end there were plenty of questions between my business partner and I about can we really trust this person, how do we know this all has not been some elaborate scam?

We did our best to look her up on the internet and see if there was any sort of bad news about her, we talked to people who had dealt with her before, unfortunately none of them had secured a property with her despite using other services that she offers.

The biggest thing for me that let me know she was legit, was how when we had asked her about potential investment properties, she had rejected probably 90% or so of what we suggested saying they were not good investments. Not only this, but she also put her own money forward as a deposit for us on a couple properties. I guess by doing things like this, we were able to build up enough trust in her, and now it has turned into a very great business relationship.

I would definitely rent in northern beaches and rent out the Umina place, I assume the rent received from Umina would almost cover the rent you pay in the northern beaches? If not, then I am sure with the tax benefits you would hopefully get close to it?

As for reinvesting the 150k you have, there are a whole bunch of scenarios that the future can have, trying to look at each and every outcome to try and see which option can give you the best result is definitely tricky, but developing a spreadsheet and crunching the numbers should be able to show you which option would be the best financially at least?

Also note, if you are unsure and uncertain about what the future will hold, then I don’t really see a problem with ‘investing’ it back into the Umina loan? You did not mention if you own this property outright or not? I assume there is still some loan on it? But if you put the 100k back into the Umina loan, assuming you had an offset facility set up then you can guarantee an after tax return of 6.5% or whatever interest rate you are paying? Just a thought anyway.