Ok. I have been reading lots of the posts on here, which reinforces how great property investing is, and can be.
My next purchase (is or was) going to be a 4×2 b&t house on a beachside suburb in Perth. After reading the different opinions on here, obviously everyone has their own views on what is the best option on -ve or +ve properties.
Just thought I’d ask the question then…
I have had my eyes on a beachside suburb in Perth which will be a great spot to have an IP long term, but will be -ve geared initially. Coastal land as we know is never going to be as cheap as it is today, however after being on this website for about a week now and reading Steves book I have questioned my initial thoughts on this purchase.
Properties are available (3×1 or 3×2 mostly) in other areas of Perth Metro area for 100k-130k which is half the price of what I would pay on the beach (which I suppose is still less than 1/4 what I would pay here in Sydney if I wanted to be near the beach!!!). This way I can buy TWO properties instead of just one and not have a cashflow shortfall.
These other suburbs will often have close to cashflow neutral give or take 10-15% either way. I have a 4×1 IP also which is -ve geared.
My other thought was to buy the 4×2 on the beach so I will have TWO -ve geared IPs and THEN start buying the lower priced properties?
What do y’all think? Im just a beginner so go easy on me [:o)]
[?]
Luke[^]
Hey dev,
While I totally respect Steve’s views on +ve cashflow investing, I firmly believe that any portfolio should have a mix of +ve cf and what I call “rare earth” (which is almost invariably -ve cf) properties, if you can afford to maintain the payments on the latter.
Which should you get first? Hard to say, unfortunately. I’ve already got some “inland” property, but am still saving up to buy some beachfront real estate.
I think the benefit of getting a few +ve cf properties first is that you’ve then got the extra cashflow to make your life easier when you buy that massively negatively geared beachfronter.
The other thing, though, is that rare earth may go up in price faster than others. So the longer you wait, the more you have to pay.
Hate to pass the buck, but I think you’re going to have to make the decision yourself, based on the pros and cons and whether you’re comfortable, in your own circumstances, with the risks and cons for the particular choice that you make.
As an alternative, you might want to look at riverfront, as opposed to beachfront, properties.
By the way, those prices you’ve quoted sound scandalously cheap, even for inland stuff, if you’re talking about houses. Are you sure they’re decent suburbs?
Cheers
Elysium-M“scandalously cheap”- nice phrase Elysium
Steve’s book was written about property before the prop boom, so that has to be taken into account re cashflow pros.
Similarly with neg geared props, however. You need to look not just at how property *has* increased, but also, how it might increase in value in the future. As we are not all born with psychic abilities, you will probably need to think about immigration, population, employment etc.
But i believe that post-boom is all going to be about the old rule of RE- “location location location”, and that Aussies still have a love affair with the beach. We have an ageing population, and the notion of “sea change” was not made up. Noone talks about “outback change” so presumably, people are not all paking up their bags and moving to the outback.
Look at what’s happening *now*- not what happened 4 years ago. Old rules are gonna be under scrutiy, as we look at new realities. If prices fall, are they gonna fall for reasonably priced IP’s in great locations? I doubt it. But then again, two for one prices are always tempting
Your own psychology and risk assessment will determine what you do.
kay henry
yeah thanks guys… [
]That is true, the beachfront land is rare in WA (we only have about 9000km of coastline) but you only have to look at the urban sprawl to see that the population is spreading north and south along the coast,not east.
As for riverfront, I agree but i think the figures long term will stack up better on the beach. There is a new land development starting further north of where this house is and there is no signs of slowing down creating more land. The more they clear and sell, the closer mine becomes to the city, therefore its value and rental income will increase over time.
There is homes available on reiwa website in suburbs like Armadale, Kelmscott, Gosnells etc where properties can be picked up for those prices, but as for scandalously cheap, does it matter on the suburb if the rent is paid by a good tenant? As Steve says in the book there are good tenants everywhere, while the capital growth may not be as strong in these areas the rent returns arent too bad. 100k – 130/140k no probs…
Maybe ill grab the beach property (which will be only 3-4 years old too) -good for depreciation too i suppose and get some cashflow +ve ones next. That way this, with my current property will be a good solid base for capital growth as they are in “rare earth” locations. Im only 23 I dont mind working to keep the payments up till they are CF+ve…
Luke [:o)]
Luke, Just to rub it in 4-5 years ago those 120k houses in Armadale were 60K. My best buddy bought nice 3×1 2yrs ago for 90K has it now rented at 170/wk and is now worth near 150K. Not too bad for inland.
If you’re earning ok$$ now is not a bad time to buy the Brighton house(was it?) because they’re pretty cheap compared to some inland stuff. And have you heard about the Alkimos satelite city?
Just my opinion[
]
PS are you married – DINKS works wondersIf you can afford it comfortably Luke, the beach will be better long term. When you turn 33 you don’t want to say “if only I bought that beachside property 10 years ago”. The cheaper areas do have some positives and are not too negatively geared but you just need to look at beachside prices in the eastern states to see what you may get here in time to come. I’ll stick to the cheapies as I’m quite a bit older but also wise enough to know what debt level I can sleep with. I also have a couple of tricks up my sleeve that will see good returns by time I’m ready (able [
] )to retire.If I knew then what I know now……….you know how it goes
Hmmm – I must confess I haven’t looked at those areas.
Hmmm – I must confess I haven’t looked at those areas.
As for beachfront and regrets, here’s a story about one that didn’t get away: my life insurance agent told me how he bought his house in Ocean Reef, literally metres from the beachfront, years ago for a couple hundred grand. Back then, it was woop-woop. Some houses in the neighbourhood are now going for a million bucks!
Cheers
Elysium-MHi
Its all relative is it not ??
The Location Location + one more will always come back and haunt you.
My relatives had several properties on Dangar Island NSW & assoc leases for Oysters etc thereafter.
If they had kept what they had and not “sold” then $5m +++ would be the guess now.I often wonder what those 1/2 acre water front properties would be worth now ??
So like many, U take that knowledge & experience you gleam at the time, make a decision that “you” think is right………..
In twenty years time when were on here youll otherwise be telling us… do U remember when ???Regards
“Do not follow where the path may lead. Go instead where there is no path and leave a trail” Ralph Waldo Emerson
I think another rule of thumb is “NO FLOODPRONE AREAS”
God- have a look at tamworth, and some outback QLD areas right now- completely under water. I reckon an IP is worth *nothing* if it is underwater.
Really cheap IP’s are cheap for a reason. A 40k flood place means you’ve chucked 40k into the river.
kay henry
lol good stuff
Well, lets hope this area doesnt flood! Tho, the suburb im talking about (Quinns Rocks) is a great place to buy. The Mitchell Freeway will be going past there by 2006, the train line is being constructed now to go up there and yes Phil I have heard about the plans for the satellite city in Alkimos I think they were talking stage 1 to commence around 2015 though? (*thinks back…)
I do actually remember those prices in Armadale! Scary though, just reading Steves book changed my opinion on the area. I supposee its best to stay very open minded with property investing! I thought it to be dodgy (no offence to anyone on here from Armadale!) and never wanted the hassle of a bad tenant.
Basically, the northern corridor has a lot happening over the next 5-10 years and I would expect a lot of strong capital growth long term.
As for Ocean Reef, great spot again- rented there with Mum n Dad after we sold the family home of 20 years in Marmion (another GREAT spot). They built in Mindarie and now have 180 degree ocean views and have doubled their money in a little over 2.5 years! Beautiful spot. This, again was a change in my thinking- when they said they wanted to build in Mindarie I thought they were mad. Now I love the place (even tho I live in Sydney now) If they are building a Holden dealership in Clarkson they are obviously expecting a lot of growth up there in the coming years!
I dont want to have to say “if only” TOO many times, tho I am already saying that considering im 23 and am now driving my 10th car! With the money I have spent and wasted buying and doing up and racing cars I “could” have a property portfolio that would see me retiring in a couple of years… BUT… u get that! [:p] I have had FUN and learnt from my mistakes, and nothing teaches like experience!
Ill have to catch up with all u west aussies when I get back for Easter… [
]Luke [^]
Oh and one more thing about Ocean Reef, one of my best mates bought his PPOR there in early 2002 for 240k (4×2) and is now valued over 400k!
Beach! Beach! Beach!
Bring it on [:p]
(ps after living in Sydeny for 3 months now I feel sorry for anyone trying to get into the property market for the first time over here. 500k properties advertised for “first homebyers”) shhh dont tell em about Perth [
]wink wink[]Over the last year or two property in Ocean Reef, Mindarie, Clarkson Merriwa etc has all achieved great growth what with FHOG and the Property Boom.. heck, a friend even made $40k on a basic block of land in Brighton,which he sold, another made 80k ( on paper, with land in Mindarie .
Aussies Love the beach and the River, where would you rather go for an evening stroll..
Remember with – gearing depending on your tax bracket you only get that portion back ( for me 30c in every dollar outlaid, so you want the growth to be great ) you’re also resricting the amount of your purchases you can do…
me i’m a believer in S.I.S’s way of thought and have a mixture.. like life it’s all about ‘balance’ [^] “Some negative and Some Positive”
Yes, i’ve got a property up that way too..[
]Just remember with the 2 properties in 2 different suburbs, you spread your risk !
REDWINGthats so true redwing…
Brighton prices are crazy now and by the time you secure a block and put a decent house on it, you could have spent your money on a decent place in Quinns instead which is west of Marmion Avenue (which long term has always proved to be higher in value)
Brighton is nice tho, dont get me wrong [:p]
There we go debate b/w beach and inland house.
Just go out there and buy one beach house and one inland house wait for 10 years and see which one is better.
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]Those now looking at Armadale, Kelmscott and Gosnells may be too late, they’ve already gone up 15-20% in the last 12 months, (thankfully I bought one in Armadale 12 months ago) and it is the tenant that makes the difference, I have an excellent tenant and all is well (I also have insurance,just in case). For those wondering why they were so cheap, it’s becasue there was a fair bit of state housing in the areas. Like other “cheaper” areas though, Homeswest has sold some off and limiting the number it holds in each suburb. However as the prices have incresed over 12 months, it’s getting harder to find +ve cashflow in these areas now. Good luck to those trying, you might still find one that needs a bit of TLC.
Purple Kiss
Fortune Favours the Bold.
I’ve heard of Merriwa being described as “Balga by the Sea” but then again look at Balga now..
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
Hey Luke,
You’ve gotta have your fun. We’re in the same situation, though a few years older than you. We’d probably have 100 properties if it weren’t for that damn rally car we’ve got! But I can’t imagine not competing in motor sport. Sure – high cost but high fun.
By the way, my 2c would be to buy the beachside property. We bought negatively geared properties when we could afford the extra, and it certainly paid off in the long run.
Best of luck
Karen[]good on you that was a good time to buy… im sure you will make i tidy profit in the coming years
Having a good tenant in makes a huge difference in an area like Armadale. Eventually all of the state housing may go…
Look at a property in Sydney (say 3×1) which is the same distance as Armadale from Perth. You will pay around 600k for a house of this size, and still be getting a smaller block of land!
Hold on to it, Perth prices can only go up! Perth is a great place to invest!
Luke [
]redwing: Balga by the sea? Yeah ive heard that too… but take a drive up there im sure you will be impressed. The area is new, clean and you can get a decent house (4×2) for 150 -180k. The “homeswest” tenants in the area may not be the best to have a s neighbours but wont be forever. Remember, you wont be living there… I ran my own Security Company in Perth before I left and the crime rate is not as bad as other parts of Perth so I wouldnt worry about that too much, just make sure you put an alarm system in to make your tenant feel secure… [8D]
And, Karen – I agree with having fun… I think ive had my share too! I think the difference will be racing “without a limited budget” -spending property on property and not my cars now means I can have more fun later and spend MORE on my cars and go FASTER [
][][] and of course having financial freedom is very high on my priority list!Luke [^]
]
] )to retire.
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