July Newsletter – tassie property

Dear Josh,
let me make a couple of comments about the Hobart market.
1.the only areas in Hobart experiencing growth are Battery Point, Sand Bay, and the areas immediately around the University.
2. None of the other suburbs of Hobart have experienced much growth besides the above mentioned.
I own/or part own with my ex wife ( still working out the property settlement) several properties which I renovated in 1992. the properties rose in value after the renovations and were valued in 1994 after which the economy stagnated in Hobart, and in fact the properties fell back in value. I have just had the properties revalued and they are at exactly the same value as what they were in 1992. Yes they have risen in value by about 15% over the last 18months but that has only brought them back into line from where they started.
Properties outside of Hobart do not rise unless you value add to them, in which case they increase by about the amount you invest into them via sweat and money.
Capital gain is rarely seen like on the mainland.
3. You have made no mention of Body Corporate fees and charges which are normally made on a quarterly basis.
4. Insurance and maintenance should be about $500 minimum for maintenance and approx $160 for insurance.
5. You mentioned it was 8 minutes from the Hobart CBD, what suburb??
location is critical for rentability in Hobart.
Just to let you know, I have rented conjoined 2 bedroom 1890 vintage single storey terrace houses in North Hobart for $160 a week in 1992 up until 1997 when the rents fell and we could only get $140 week.
The location was on the border with the CBD.
in Hobart location is of prime importance.
If you can find a property within walking distance of the University grab it with open arms and rent it to the university

Hi Josh,
Its great to read of another young like minded “soon to be” Tassie based investor. I realise that this reply may be a little late to assist you in your decision on this property, however i have not long ago made a similar purchase, so here is my feedback.
1stly i’d like to say that i agree with Tom’s reply wholeheartedly. There is NO real factoring for capital gains in Hobart suburbs – as yet!!. Yes you are right in your appreciation of the current market trend however there are many factors that suggest that this will not be sustainable in the long term. With the bulk of 1st home owners having purchased properties, and the rising interest rates i would imagine it wont be long until we see a rapid halt to the over inflated capital growth. You will eventually see some capital growth (maybe in say 40-50yrs) however we need to look at cashflow options if we are to invest in our home state!! This brings me to the exercise of reviewing the figures on your particular deal in question.
You seem to have done your due diligence however looking at the figures you have provided may i be as bold as to say that you are ommitting some BIG factors in determining the cashflow of your property as Tom pointed out. With these factors worked in to your analysis ( $500 for maint., $160 insurance & an ultra conservative $100 body corp.) your wkly cashflow is already down to $14.61/wk or $760pa. Now that said you are STILL in the black assuming no more is required for any amount allocated for any expense. Therefore as long as you are investing for cashflow and the obvious equity build then my personal belief would be that the figures stack up so go for it… ah but one last thing to consider 8 mins can take you a long way in Tas so remember the golden rule of location. some of the areas 8 mins out of Hobart are going to land you in high maintenance and repairs territory, and if this is the case then you are going to blow your figures right out the window and land yourself in negative gearing territory… brrrr who wants to go there!!!
So in short your figures look ok to me but always consider ALL aspects of your deal, and remember, this is just my opinion and should be treated as such!! Good luck with your investing… feel free to drop me an email sometime [email protected]
I’m also young in the world of investing(25) and love to chat with like minded people!!! For your interest i have purchased two units at Midway pt and am now looking to start my wrap portfolio. wait till you have tennants and you will have EXTRA motivation for wrappin’ to the max!!!
kind regards
Michael Long