has anyone been investing in Nhill, Dimboola and Murtoa in Vic? How is it like, good?
I havent and never would. I have to question this whole positive gearing thing in the country. you might make 20 to $30 a week in cashflow per week but wheres the capital gain, as far as im concerned this is where the money is made. It just seems stupid to me to have a bunch of properties that will never really be worth much.
G’day Fullout,
Unfortunately, I cannot answer your question about these country areas either. But if you crunch the numbers and they work for you, then go for it.
To me, my definition of wealth is “where income exceeds all possible expenses”.
If this is achieved by multiples of $30 per week – then great.
If this is achieved by capital gains, then also great.
Work out what is best for you, then go out of your way to make it happen
BDM
I have to agree with G-MAN007, and would steer clear of these country towns with little chance for cap gains. To get a decent income you’d need about 30+ of these properties! Imagine the headaches with property management and the tax you’ll be paying.
I prefer unrealised gains that are compounding and aren’t subject to tax (CGT) unless they are sold. This is achieved through growth and is the basis for true wealth.Wealth comes from capital gains, not cashflow. True wealth is often defined as assets that exceed liabilities – and is achieved by capital gains. Cashflow is all about taxable income.
I’d rather have 5 tenants than 10 any day. The tenants you attract in low end properties will often treat your property as “low end” and the rent will also reflect that, often being paid by tenants on Centrelink benefits.
The tenants you attract in low end properties will often treat your property as “low end” and the rent will also reflect that, often being paid by tenants on Centrelink benefits.Alison W, the basis of the assumptions in your comments is?????
David U
I would agree with AlsionW & G-MAN007 in part.
I think a property portfolio need to be cash flow positive and exhibit capital growth. Obviously this can be achieved by purchasing a combination of pure cash flow properties and high capital growth properties (but my rule is that the portfolio MUST always be cash flow positive).
Therefore, Fullout might be looking for a cash flow positive property (with low capital growth) to fit within his overall portfolio… nothing wrong with that in my opinion.
I guess we all have different investment objectives.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi fullout
i found a property (for my brother which he purchased 3 months ago) in Murtoa
cost 27,000 rent 100pw
with 20% deposit plus purchase cost ($1200) he put $6,600 into the deal.
Loan of 21,600 @5.65% interest $23.75 pw
Rates/water $15 pw
Insurance 4 pw
Agent 7 pw
Total Costs 49.75 pwProfit before maintenance etc 50.25 pw
$2,613 per annum or 39.5% RIO not bad, sure not much capital growth but it certainly won’t loose value as large parts of Melbourne could very soon.
i should have kept the deal for myself.
westanHi G-MAN007 and AlisonW,
I totaly agree with you that you need substantial capital growth properties to become wealthy. But how will you achieve this when you get to your 2nd or 3rd purchase and the bank says ‘hey, are you forgetting you need to be able to service these loans’? I think investing in these country ‘cashflow’ properties may seem insignificant on their own, but why not look at it from the view of creating a balanced portfolio.
ie: Structure your portfolio such that you have 2 or 3 positive cashflow properties to support the negative cashflow of each high end capital growth property. This way you retain the ability to service your loans, have the foundation in place for both returns and capital growth, and you can continue to build your portfolio towards wealth creation without the ‘downtime’ a lot of investors experience between purchasing properties.
“All the world’s a stage, and you choose the role you want to play on that stage” William ShakespearHi,
Such a post raises the point that many people fail to consider a deal from all angles>
Let me explain…
or 39.5% RIO…What if this deal were in a non-descript town devoid of all emotion (a la ‘in the country’) and we changed the terms to 0 cashflow but an annual capital gains of 30% per annum. Would you be happy then?
I am not the champion of country property per se, however the simple truth is that my property portfolio is build on yield first and cap. growth (if any) second.
And here’s an idea from left field… why not take part of your c/flow weekly profit and invest in shares for capital gain? That way you could get both c/flow and cap. gains?
What’s required here is a realistic estimation of the risk of the deal (ie. will vacancies ruin you -> this means doing a proper due diligence over the tenant) vs. the rewards (ie. +ve cashflow).
But really… at $27k, that’s cheaper than some of the seminars going around!!!!
Oh, and by the way, when I started investing in Ballarat back in 1999, I was given the same advice about capital gains and avoiding country areas like the black death… thank goodness I had the sense not to abandon my plans and instead decided to do my own research.
Bye,
Steve McKnight
**********
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