I have been investing in properties (negatively geared buy and hold) for some years now, and after reading Steve’s book, I am exploring investing in +geared regional centres. I would appreciate help for the following questions:
1. CAPITAL GROWTH FOR REGIONAL CENTRES
I agree that cash flow is what the game is all about. The approach I am using is to put zero cash down and borrow 106% (or so) of the property value using equity in other properties to cover the 20% deposit required by the bank.Therefore, an important part of the buy & hold strategy is to ensure that your properties grow in value over time so that you can refinance the property every few years to purchase more. My understanding is that regional centres do not grow at a high enough rate to enable regular refinancing. I may need to wait 7-10 years before an acceptable growth occurs, in say, Dubbo, before I can refinance. What are the forum’s views?
2. RENT GROWTH IN REGIONAL CENTRES
A lesser issue is that of flat rent growth in regional centres. Obviously, if the property is positvely geared from the outset, then this is less of a concern. However, one should expect income growth greater than that of inflation to ensure your income at retirement is as strong as today.
Is this really an issue?I should add, that I do not have long-term property value and rent growth data for individual regional centres and so my preconceptions may not be based on fact.
3. LOCATING POSTIVELY GEARED PROPERTIES
I have been searching for postively geared properties but have been getting a little discouraged by what has happened to prices recently (putting it mildly).
Do postively geared properties still exist in “reasonable” areas or do I change strategy? I live in Sydney and John Burley’s rule of thumb of buying properties within 60 mins from where you live is a challenge (Central Coast, Newcastle, the Gong all seem to have boomed). Do people know of any regional areas around Sydney that still positively geared?I would appreciate any comments from the forum on these questions
Looking forward to hearing from you
Con P
[?]Hi Con,
Others will give you a full answer to your questions.
If Dubbo is real for you, I understand that the meatworks has been/is being closed down. Loss of jobs is in the hundreds. You may need to ride out the cycles, provided of course you can minimise your vacancies.
Kind regards, Phil
hi con
firstly i live in Victoria and don’t know the market around Sydney. but unlike John Burley who apparently says buy within 60km i buy anywhere there are good buys. if it is 400km away thats no big deal or even 2500km if its a good deal i find a way to make it work. Dolf de roos has properties all over the world.
now about your questions
capital growth
historically you are right cap growth has been slower in the country (but actually not a lot less than the city). that is until recently. most country areas in the southern states have grown at a larger rate than the capitals (some properties by 100%). are they playing some sort of catch up at long last i think so. will it continue ??? in regard to the refinancing thing i’ve refinanced a few times to get the cash for more properties, growth has been good.rentals have likewise risen in country towns, but not at the incredible rate the prices have.
one other factor for your consideration is how many properties can you buy that are negatively geared ? the great thing about cash positive is you can accumulate many more, i’ve got about 28 in the past 6 yrs. i’m on less than 50k a year and my wife doesn’t work. i could have purchased one negative geared property that would have been it.
as for as the area around you someone else will have to help.
regards westan
Hi Con,
Personally, I think it is risky now to be buying cashflow +ve ppty at 106% (or so) finance, no money down.
We are now “probably”?? at the end of a boom, and capital growth will probably be NIL or go backwards (a bit) over the next couple of years.
I definately would not do 106% finance interest only.
But that’s just me,[
]Good luck, [
]Del
PS – You are not alone at being “a little discouraged” at house prices lately….[
]westan, you said:
“one other factor for your consideration is how many properties can you buy that are negatively geared ? the great thing about cash positive is you can accumulate many more, i’ve got about 28 in the past 6 yrs. i’m on less than 50k a year and my wife doesn’t work. i could have purchased one negative geared property that would have been it.”
I’m afraid I don’t understand how you could have done this. My wage is somewhat bigger than that, but there is no chance I would be able to buy 28 properties!! Would you mind giving me an example of how you did this? (but not if it was from wrapping- I don;t believe in that practice).
kay
hi kay
i’m with you i couldn’t wrap a property to someone either, just doesn’t sit right for me. but i’ve met people who bought under one of those agreements and they were realy impressed it gave them a chance to buy a house when the banks said no, today 5 yrs later his house has doubled in value.well i started in 1996 and in the first year i bought 10. i only had $25,000 to start with so i needed to be a bit creative. so what i did was buy properties that were below real value. adding to this i didn’t have much cash but a very helpful mother who could see what i was trying to do. i borrowed the money from her to buy a property then i’d go to the bank and refinance. for example i bought one in Tas for $33,500 went to the CBA a few months later and they said it was worth $55,000 and gave me 80% back: which put $44k in my pocket, i paid back mum the $34k i borrowed and had $10k left. then i bought 4 in Adelaide for a total of $92k (sold one of those last week for $95K). once again i put 20% deposit in and borrowed 80% using some of my money this time. anyway then we got stuck on 10 for a while a few years actually, (the banks wouldn’t lend me any more money). then prices rose and i found a bank that would lend to me so we started to refinance. by then the adelaide properties were worth $45k each so we got 80% finance on them and paid out the old loan, with the new cash we bought some more properties. up until the end of 2002 we had aquired 20 properties (about that). in the past year prices have taken off especially in country victoria and SA so our prices have gone through the roof. i’ve sold about 10 this year but bought about 16. so even poor people can win in this game.
could i do it today? prices are a lot higher than in 1997, to be honest i’d be careful buying (in Oz) in this market, but i think it can still be done.
hope this helps a little
regards westanwestan- yes, it does help- thanks
I have nowhere near the success you have had. I bought a place 8 years ago and didn;t ralise what a bargain it was then. I’m selling it now as I think it’s an excellent time to sell it. I will then have some more cash to negitiate with. I’m 37 now and won’t be able to speculate in the sydney property market really- I couldn’t imagine buying anything- ever- over 100k!
Perhaps westan, you wouldn’t mind giving me your ideas on the questoins asked in the “bad-debt” question in this forum elsewhere.
I’m new to this forum- I’ve checked it out before, but I just joined today. I’m really interested in how people have done well in real estate, but it distresses me to hear about people awaiting other’s misfortunate to make their own fortune- grrr.
Regards,
kay
Con,
Silly question, but do you work in the Medical industry at the moment?Con,
Silly question, but do you work in the Medical industry at the moment?
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