I've been watching too much CSI:Miami … I think if you check the age of the maggots you can probably work out which tenant is missing and for how long.

I've been lucky .. i have seen most of the impossibles with rental property. The cupboard which opens to streaming cockroaches, the tenant with 9 cats who decides to leave them all behind .. in a kitchen cupboard. The guy who claims his carpet smells … and after steamcleaning we realise its HIM who needs a shower. The 20 yr tenant nicotine smoker who has the nicotine LEACHING out from the walls … you paint .. and the nicotine comes thru the paintwork 2 days later … THAT BAD.

There was also the sub-letter. Oh sure .. its a two bedroom flat from the outside .. but there were definitely 4 sleeping bags per room. Is it possible for eight tenants to happily live in the one 2BR apartment? You make the sitcom for that one.

Dont ever assume how bad crazy can get for a tenant. It can be worse than that.

The majority of the advantages of purchasing an investment property lies in the ability to offset any interest payments and depreciation benefits against your existing income. So if you have a reasonable income, the correct approach is to get enough of a comfortable interest bill that you can afford, and use that to minimise your taxable income. Negative gearing is great, if you are on a plastic surgeon's income and you need to reduce your tax bill. For the rest of us, you just need to keep your figures real and manageable.

 If you are investing for the long term, go for something like fixed interest, as regardless of the interest rate you pay now .. the figures will change so much that the initial figures wont matter. But the fixed interest part just means you KNOW what you are paying for the period and what you are liable for without any surprises.

And whatever you do .. dont worry about an exit strategy until you are ready for it. Make your best plans based on current circumstances and factor in LIKELY possibilities. The property and tax laws will probably look different by the time you exit your property investment.

All I can say on Lehigh Acres is what I discovered by following a property from realtor.com to the google maps overview of it. In realtor it looked ok, it was a little beaten up and for 75k you had a good shell .. nice tiles, someone had stripped out the coppers but heck .. thats not too big a job. Following through to a street view in Google Earth (mapping the precise location) … and it was a nice little house … surrounded by miles and miles of swampland !!!!! With not another soul in sight for miles. There are unknowns .. and then there are BIG unknowns. This Lehigh Acres area (which is quoted with good returns by a certain aussie US buyers investment agency) area leaves me hesitant. Its either VERY new or .. very unloved.

Oh .. while we are on the topic of using Google Earth .. beware their dating system and accuracy for photographs. Most photos marked 2010 or 2011 are  actually taken several years ago. I worked this out when scanning the SE corridor in Melbourne and the Eastlink (which was finished a yr ago at least) was still being dug up. That would place the photos online circa 2005-6. There are a lot of areas which have been developed since then, and post 2005 buildings that are new that dont show up.

Wynyard, I appreciate that you are viewing this all from a certain perspective. I think you should be aware that the system we have now is creating better quality living conditions for a lot of people. Sure its coming in at a price, but i'm sure that poor living conditions are the feeding grounds for bad thoughts, anger, resentment and envy. We are creating an atmosphere of housing that even by world standards is pretty darn ok. Take a look through the lists of property sales agents. Most of our houses are reasonably up to date, have nice clean enamel and tile bathrooms with good looking cabinets and shower fittings in them.

Our country is splitting down social lines that have never been in this country before. We are losing out on our middle class, largely due to the fact that it exists and survives on local manufacturing and local services. It spells disaster in the longer term, both in laws that will be written for 'the rich' and taxes and levies that will be placed on the large revenue streams of land holders. Its not unusual, the property wagon is still a gravy train for most countries, and it will change our mindthink towards property and our social behaviours and norms towards it.

I believe firmly in the idea of property being a commodity like any other, and not a bag of instant riches. It has an undervalued status, an overvalued status, and a median where it rides along with inflation. I think the current price movement is because any usual investment stream for spare capital doesnt exist so people are turning to property and collectibles. Its a shame because in days gone past that money would have gone to something solid like stocks or small business investment. I'm really not sure how long our reliance on a cheap China can exist, but i'm 100% sure that the lack of manufacturing base here will kick us in the future.

Catalyst .. the only student units that i've seen move in a substantial fashion was the ones in North Carlton where they removed the students only clause from the living requirements. When that happened the properties shot up from 125k – 135k to around the 200k mark.

Its a sector that I not only have been watching but I was actually selling at one stage. And from my ongoing observations, none of the student accommodation places with restrictions has moved upwards in CG over the period of 5 years i've been watching it. And as you might be aware .. there has been lots of growth going around.

Dont get me wrong, for the right investor there is no doubt that a good cash return property that you havent any need to sell may prove a boon. But if the banks wont let you borrow on it .. they probably also wont lend against it. It falls short in all sorts of ways from being an ideal investment base. That remains my problem with them.

I go one further on that .. i require that my country properties be localed in towns without singular dependancies. And must have at least THREE main industries stoking the town's employment. It doesnt matter whether thats tourism, agriculture or the annual beerathon it must have at least 3 of these.

Lets play a better scenario for you, long term.

Try this one out for size.

http://www.realestate.com.au/property-unit-nsw-lavington-104851762

Its a set of two units in a four unit block. Price is 245k (that would mean you would need at least a 40k income to support it or a joint 50k). Out of that you will have two incomes (currently $140 per unit but 2BR unit price in the area is now pushing 160) so, assuming you can borrow around the 8% mark that would be an outlay of roughly 320pw to support it. But .. hold on .. incomes are $140 x 2 that sounds like GASP .. a gross income of $280 vs outlay of $320 (p/w). How does owning 2 units for a mere $40 before expenses sound?

Now i did say BEFORE expenses in that last sentence. There would be 3 sets of bills you'd need to outlay for the long term as landlord, which would be .. water connection (NOT usage), council rates, and any community (body corp) bills. I'll use rough figures lets say $600 for the rates $800 for the community and about $500 again for the water connection bill. Summed up thats a total of $1900 or .. as a weekly figure, lets call it  36 bucks a week. Double it for two and its 72 Bucks. Now add the initial $40 a week to that figure and you get to own TWO properties for 112 bucks a week? Scandalous !

But heres the great bit .. as two properties .. every $5 rise in rents .. is $10 overall. So it would only take a $20 rise for your gross ownership for the property to be annulled. And only a 36 dollar rise over that for the property to be paying itself.

Sounds like a lot? Sounds like its going to take time? Remember that the prices are already under market. This doesnt mean you rush out and dump the tenants as fast as possible. Just .. next time one leaves .. you raise the price to market. Never forget the value of someone else paying your bills.

Its also double growth. Its two properties growing at the same time. So a 25k move in price = $50k equity.

Oh .. did i mention that if you got the loan as interest only .. its fully tax deductable? (the interest component).

This situation exists out there already. And I know of it. Its only ONE example of if you think a little you can make a workable deal.

Prob for you would be the banks would be asking for a full 20% .. Thats about 49k on this (plus about 8-12k for stamp duty)

If i was a smart 25 yr old again, I would be asking around for the difference .. because of what deal i could make from it.

But what it would mean for you long term is the equivalent of 15k you'd never have to work for again. You can borrow again using it as extra income (it would mean you could afford to get a better place) and you can sell it if you want to retrieve built up equity.

Thats a deal. Thats money making magic. I've supplied ONE example. I even know of others where you can use just your 20k deposit and get it working for you.

Ask me how sometime. As i said in a separate post, when you are ready to put your foot on the property ladder, there are deals waiting for you.

Wynyard, sometimes a group doesnt realise how good things are.

First the historic reality. Over the past 400 years the historic average for rent has actually been TEN percent of the properties value. So you've been living in a society that now has its rent/value closer to a 4% for the property. Heck, historically you are doing very well. And you are getting a lot of property for that buck. The average house size has moved from just under 15 SQ to a whopping 22 sq, so sit back .. you are getting more house for your buck.

Now with the tax advantages for factoring in renovations .. you are living in better houses than was possible 30 years ago. Most houses are linked up with cheap affordable natural gas, which reduces your overall bills. Wow .. so spoilt. Most of the places out past the 50km zone in Melbourne built over 30 yrs ago have nothing but electric. Simply .. gas connections were not available.

And the rents are so high? Firstly, if you are unemployed, on disability or aged pension, you are getting a subsidy from the public purse to your rents. Guess what this does to rents? It makes them rise ! So you can thank that sedicious welfare system for ramping up your rents. I think we should just cancel that and see how many people make it .. DONT YOU ? (sarcasm)

Thanks to the great government decision to cut back on building public house in large congregate blocks and spread it across the suburbs with the purchase of housing, there are no real ghettoised areas of Melbourne. Sure its increased housing prices as this has taken up otherwise used utility house stock, but you dont have heavily ghettoed areas of Melbourne.

By the way, the answer to most of the housing price rise is commodity stock. For almost 30 years now there hasnt been anywhere NEAR enough replacement stock built proportionate to the growth rate in population. What will happen eventually is .. the housing requirements will be met, there will be enough stock to go around and prices will regulate themselves.

Finally, the real answer to rental issues is demand. As long as there are those evil landlords getting rich .. they are out there developing more stock for you to sit in and complain about how high those rents are. When there arent any, you'll know about it. You wont be able to get housing without knowing someone .. prices will not only be for the rent .. there will be a price to pay just to GET a property. That happens in other countries, I'm sure you are aware of that.

And to end the idea of the evil landlord once and for all, there is nothing wrong with doing legal means that are WRITTEN IN LAW to minimise your tax burden. It means you have citizens providing a housing service that the government isnt .. hasnt and wont EVER be willing to support. I am an evil landlord, I provide housing for people who cant buy it themselves, so be it.

When there are no profits in housing .. you will get a housing market where no-one has any incentive to upgrade maintain or renovate their house. This leads to crummy housing stock, decaying housing, and eventually loss of tenancies. No-one .. even tenants want to live in crap. Crime rates soar, and the cost to maintain the houses is more than the houses are worth. Houses just rot.

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investhut, the fact that your family member is moving down to bathurst is an excellent reason to purchase this property. However the reason you are putting money into a property is you are expecting more money out the other side. If you are going to be doing that with an inert (not going anywhere) city like Bathurst, then treat it like you wont get ANY capital return. If you have your family member sticking 180 into the property .. at 9% that would be covering 100k of the interest with you supplying the difference.

Dont be afraid to pay this one down. Long term it is all in your favour, remember .. capital gains is based on the PROFIT between what you initially purchase at and what you sell at. So .. anything u sink into this property is really money back in your pocket. A reminder though, the only tax deductible portion of this IP will be the interest, the principal will be a taxable portion. However .. its low enough that by injecting $200 a week into the loan (if you can afford that) you would have a property mostly paid off within 8 years. So with a guaranteed tenant of 3 years this works great ! And it will reduce your interest payments over the term substantially. Allowing you to borrow against that equity for something else. Just remember in the meantime .. rents go up.

Unlike city based properties in decent suburbs, i treat my country properties with a greater level of respect. I NEED the tenant in there as finding another tenant in a country property can be a headache. If the tenant complains about a rent rise .. i respond. In the country its the other way around, a tenant in property is worth gold and the rental return is optional. In the city there is enough tenants that you can dispose of a poorly paying one and get a new one at a better rental level. Its the other way around in the country. This doesnt mean you dont raise rents on the country tenant. It just means you try to keep them happy and satisfied as long as possible.

Dont be afraid of purchasing in a country town. Just remember its not a central urban area, and respect it as such. As many people will point out to you, the good deals are often in the country, but you must recognise the property for what it is and what it isnt. Its a country property, you'll have different requirements than a city property. But whatever you do in the country, dont buy into dying townships. There isnt an upside in having the last property standing in town.

I'm familiar with both cities. On paper they look like bargains, but the housing stock thats left is worn out, the tenants are the worst possible types, itinerant, dangerous, drug dealing, thieves (they will steal floating floors and coppers). Ever seen a whole 92 unit apartment block trashed AND burnt? There is an old hotel for sale now in detroit at $89k its run down and there is mould and water everywhere. There is no upside on either of these towns until the main problems get fixed. And detroit isnt changing anything even with the new (supposedly uncorrupt) mayor. I'm sure there will be books on what Detroit was. But at the moment its not going to do anything to recover. Let it die and take your money to places where it will do something within your lifetime.

I remember looking at the Victorian town of Moe .. waay back in 1986-1987 and thinking .. wow .. these places are 20-25k per unit WOW cheap! Fact is .. its now 2011 and the town of moe still has the best el-cheapo units (now only 65-100k) still the cheapest on the market. Think of where your money could have been working better in the meantime. And Moe has some of the nicer aspects of bad tenancies. But nothing like Detroit.