Hi Lawrence and everyone…
Do you know my town? You have descibed it almost exactly – except that we think it’s funny that city people think we are disadvantaged.
We live in beautiful peaceful surroundings with no crime or traffic hassles. Anyone can afford to live here, (thus the low income renters providing a ready source of tenants for my local property)
Yes, I believe there is merit in your theory, as I am carrying it out now. My local houses are more than paying themselves off. (By the way, they are modest, but not dumps).
However, they were just a training ground for my property investing, as I have also since bought in a bigger neighbouring town and in Sydney.
I now want to sell my remaining local house, not because the financial plan was unsound, but because there is no property manager here, and I do not enjoy (or have time) being a hands on landlord.
If you have the time and energy to be hands on, go for it. Many country towns are not as gloomy as portrayed in the media, and you (and I) may very well be on to something here…Hi Lawrence, yep I agree with you. Have you had any intelligent replies. Let me know. Thanks Kaye
kaye brown
thanks for the thoughts bindi, bens and jaffa. Yes, I think that the idea is reasonably sound, and if you guys are doing it, then fantastic. I guess the landlord issue is something, but most smaller towns have realestate agents that operate from nearby larger places (larger is 5-6 thousand) I guess the only thing holding people back from doing it is that you often have to travel a few hours from home. Maybe a nice weekend away if looked at in a positive way.
I would be interested to know from any builders, home reno people about their thoughts on maintaining one of the propertys we have spoken of in this thread. I think the only concern is how much the maintainence would eat into your profit. Keeping in mind most really small towns have ‘handymen’ that do just about everything for reasonable prices, especially if you have some kind of relationship formed with them. i.e you could provide them with cheap, city bought products and they do the work.
ANY SUGGESTIONS ON THE COSTS OF MAINTAINING, NOT REFURBISHING, THE TYPES OF HOUSES WE SPEAK OF. I.e. any home renno people or builders regularly in this forum?
Hey Ben, Trundle is near (ish) Orange isn’t it? My cousin went to Kinross at Orange, and was friends with a guy whose folks had a farm at Trundle?
Cheers
MelHas anyone with a head ( and the time ) for figures looked at some of these places and worked out whether in the last two years they would’ve been better off buying – geared properties in a larger area or + geared properties in a smaller area..
With the benefit of Capital Growth ( and hindsight [
] ) the – geared property , as long as not to heavily geared,would’ve made you a reasonable equity gain, in some cases where gearing was not to high, would now have provided you a + geared property..Timing in the marketplace is essential, as is having a strategy.. do the numbers before you invest..
S.I.S promotes a ‘balanced portfolio’ and Chan and Peterp have advocated +CF as well as the possibilty of CG being part of thier strategy… you can’t have the best of all worlds ( No Risk, High CG and High CF ) you have to accept a mix of the three in varying degree’s.. the degree of the mix is up to you, me, i’m all for trying to achieve a balance of the three as best i can [^]
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Hi All,
Good to see some differing opinions comming out. I have to say that i am not a +CF investor and therefore will not agree to the theory that lawrence is pushing for two reasons .
1, Capital gains of 7% on $200,000= $14,000
Capital gains on $30,000 rural = $0
Income losses from neutral geared property per annum
$0
Income gains from +CF rural area per annum say $2,500 Ie it takes 6 years to make same gain as 1 year.Take into consideration that i am getting compound growth on the $14,000PA and i must say that you will find it very hard to catch up.
2/ I have a trade in carpentry and therefore am able to buy then renovate to increase equity and i believe that i could make greater gains buy buying renovators in a metro town than in a small town as you have stated that these peoplke cannot afford to pay the high rent i would like to get after spending money on the renovation.
Happy to hear your replies!
“Sooner or later the man who wins is the man who thinks he can”Wonderfull replies red wing and big ben anyone have differing opinions? Ben, what do you feel are the main concerns with maintaining a 30 year old home for another 15 years?[
]
Note, for the share market puppies, maybe small towns are the perpetual bull and larger towns represent the bear, with people trying to time the trends.Lawrence,
Just to let you know all my prperties are over 30years old some are over 80 year old. I have found that once a house reaches 30years old the maitenance seems to fall behind and renters do not seem to care anymore if things are not like they were as new.Ie cracked tiles ,window that wont shut all the way etc. Seems that they say ahhh well she is a nice old home… Buti must say that i can make a lot more from renovating a 80yo home that renovating a newer home as old homes definately hold more appeal.
As for costs it really depends on what sort of condition you want it to be in…Go for the slightly dented look and you will have much fewer calouts that if you go for a pristine property. Generally wiring can last up to 40 years and pipes for water can last the same in theory. Different parts of country have different water……Queensland water must have some drugs in it thats for sure….HEHEHEHE nah i love the sunny state!!Originally posted by bigben:1, Capital gains of 7% on $200,000= $14,000
Capital gains on $30,000 rural = $0
Income losses from neutral geared property per annum
$0
Income gains from +CF rural area per annum say $2,500 Ie it takes 6 years to make same gain as 1 year.Take into consideration that i am getting compound growth on the $14,000PA and i must say that you will find it very hard to catch up.
Ben
Don’t forget however, if you were on a lower income andonly had $10k to invest the + geared Country property is a better option, as your $200k Property has growth but high costs associated with it..
the country property hopefully is cash flow positive ( or why buy ? )
with both deals you have to look at costs involved ( purchase,rates, management, interest component of loan ), taxation and depreciation benefits, and what your strategy is with IP’s and what you expect from them..
Don’t forget – gearing ‘limits’ the number of properties you can effectively own, hocking yourself to the eyeballs and waiting for growth to occur is not a feasible option, and neither is buying 10-20 houses in towns of 200-600 people in the middle of nowhere..
i’m all for a ‘balance’ of assets, as stated before
you can do ‘well’ on any strategy ( people are doing it now) just have to decide whats right for *you* annd your individual situation and your goals..[^]
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
I totally agree with Big Ben. In the long term you are heaps better off. Sure it depends on your income. For people with a reasonable income, the purchase of growth properties is the best strategy.
If you have no income or a very low one then you need to build a ve+ cash flow properties and treat it as a business and this means doing your own repairs and property management.
hi guys
thanks to all for the thoughts on Lawrence’s topic.
my thoughts are.
i invested only in towns over 5000 and never declining towns, however there are always exceptions to the rules. Last week i purchased a house for 18,000 (needs 7k spent on it in a town of 600. but it will rent for $120 easily. This town is in a strong area for employment. i won’t get a loan so will make about $85pw on the deal so 17% return on my money, i’m happy with that. Later i’ll refinance it and get my cash out so my % return will look even better.
2. just because a home is rural doesn’t mean it will not show capital growth, and just because a property is negative geared doesn’t mean it will show capital growth.
3. but i would be very careful as the others have said.
you don’t want a property has large bills in the future. But i’ve also bought dumps, one last sept for 58k (city of 120K) is rented for $180pw , but soon i’ll start to renovate and the value will go up and the rent will also.
its hard to make set rules every deal is different and the difference bettween a good deal and a bad deal is the price you pay for the house.
gotta go it’s tea time in NZ
bye westanI find +ve cashflow deals in New Zealand which I sell to other investors. To be on my database send an e-mail to [email protected]
gotta go it’s tea time in NZ
bye westanFush en chups agen, Wustun eh!
‘Eat rich food, barbeque a yuppie’
Hi Guys
Fush en chups agen, Wustun eh!Bl…. Aussies could never speak the Queen’s English properly.
Appearently with the world upsurge in the cost of copper, the cost of rewiring the old houses is set to surge.
Regards
Lawrence, two out of the three houses I bought were crappy. That is, structurally sound from the builder’s report, but needed repainting inside,
a bunch of repairs. like the property westan describes, 18K needing 7 k of work, that’s about right. But the thing is that then you don’t get the “”They don’t mind staying in crappy accomodation, ” kind of tenant. You are still providing cheap accommodation, in the part of the rental market with demand, but it’s no longer crappy. it’s nice, neat, fresh, clean. but still within the price-range. Like before reno oneof my houses rented (crappy condition) for 100 and after reno it was 115. The highest price rental in the area is only about 140 and even if I’d put smeg appliances in i probably still wouldn’t have got it for that house. But that would have been overcapitalising. I didn’t price it out of the market or anything, in fact I let my property manager advise me what to put it up for rent for.So then I was able to get a good tenant with references who will stay, because the house looks nice.
For seven grand you can do a lot. replace the light fittings, paint, fix the dripping taps, broken windows, downpipes, etc – in fact overdue maintenance is the reason many landlords sell.
The light shades I put in were 8 bucks each. All I did is buy the exact same kind that were in there before, except brand new, clean white and not fly-spotted. if i’d put 30 dollar ones in or 100 dollar ones in, it would have been over-capitalising the house. the idea is not to make a silk purse out of a sow’s ear, but just to attract the best tenant you can.Polishing the floors is from aninvestor’s point of view an inexpensive hard wearing floor that suits rental properties, but also looks fabulous. Painting with good prep first looks a million bucks, and put a funky feature wall in for an extra 30 dollars worth of paint and the whole thing gives the impression of ‘modern’ and you didn’t really do anything much more than ‘routine maintenance’.!
Houses will last if they are maintained.
We live in a 100 year old villa here in paddington, the kind where the floorboards are kind of bendy and there are 1 inch gaps underneath the doors. really cute though. but this house has lasted a long time already, and my (formerly crappy) houses in NZ were built in the 50s or 60s and are a heap more solid. they’ll last for donkey’s.
houses are actually rugged and do last. Don’t buy if a builder’s report says you have a dodgy roof, AND rising damp, and a whole lot of other things all at once. But sometimes it is worth spending 5K on a 20K house to fix the roof and paint. My dad’s just done that actually. That house will rent for 100 per week no problem at all.
cheers-
miniMini,
Can I ask how much you pay for getting floors polished? Would a house of say a few bedrooms cost you around $800? Or less? Because THAT I reckon, is what makes a house look beautiful and light- newly polished floorboards. I am presuming you dson’t do the floorboards yourself. I’ve seen some home polishing jobs that look crap (your photos looked like a pro job). And I think people hiring out all the equipment is probably less cost-effective than getting it done by pro’s.
But back to the original question :o) Is it exxy to get the floorboards polished in NZ?
kay henry
Hi Kaye,
I paid $26 per square metre. A whole house cost me – ah I can’t remember, was it 1200? 1600? I think with the more expensive one,(the green house) the guys also steamed off the lino in the kitchen and bathroom, which was a heck of a job as it was some pre-60’s weird glue that was sticky and hideous. Also they removed the carpet, nails, disposed of it, and the absolute whole house was done. It was the cheapest and most hard-wearing option which suited the house.The 1200 house, had had some parts already as floorboards so it was just the hall which had to be done from scratch, the rest just got a ‘going over’.
My Dad’s house already had polished floors, but they were paint splattered and dull and worn with gaps. He had them re-done and sealed and repaired and it was only $680 for the whole house. (3 bdr.)
I so don’t do them myself. the floor sander we use has emphysema from his lifetime of dust and chemicals, poor guy.
Thanks Mini! That kind of dough is pretty reasonable for the outcomes, I reckon [smiling]
That’s one good thing about buying older houses/units- floorboards!!
Does anyone know what year, or thereabouts, floorboards stopped being used? One of my places I bought sight unseen, and was told there was no floorboards, and then went to see it, pulled up a bit of carpet, and there they were- cyprus pine staring at me- yay- down the track, i’ll rip ’em up- instant improvement!
kay henry
Thankyou kay henry and minimogul thats wonderful, ground level information that is often difficult to find first hand. Any body else with similar thoughts. We have moved throught the ideas of investing in these types of towns, now we seem to be looking at the ground level elbow grease thats involved (and difficult to find information on)Thank you everybody.
[thumbsupanim][biggrin][smiling]Originally posted by Pisces:>>In 15 years it is likely they will have either refinanced and paid you out or will have sold the property.<<
If I were to do a wrap (and I doubt I ever will) I would want to see the property transferred out of my name within five years or so.
I think Lawrence summed it up pretty well when he said : “wrapping properties in the areas I speak of is difficult. They are awesome for having a property pay itself off , but difficult to sell.. i.e. a house on an acre of land in the middle of a town of 400 people. Sold for 14,000 and rent is 50 dollars a week. thus in only 5 years you have 14,000 with minimal effort, and a bank manager eager to lend you more money. BUT it took 3 YEARS to sell the property. See the dilemma. There are often no capital gains in the places I speak of.”
That is such a significant statement that I don’t feel I am wasting your time by repeating it.
In fact I will hang this statement on the wall in front of my desk just to remind me if ever I get infected with wrapping enthusiasm.
After all who wants a paltry $ 50 a week (if we are fortunate enough to have a tenant in the property that is) if after some years all that surplus is eaten up by repairs.
What does it cost to rewire a house ?
What about the cost of roof repair ?
What about the cost of repainting when we need to fill the house with a new tenant ?
The whole wrapping situation for $ 50 K houses is a mirage, a self imposed hoax.
There are no shortcuts to wealth. In this country, in major cities, there WILL be a steady increase in values over a period of some years. What more do you want as a formula to make money ?
Besides, as PurpleKiss says : “How long will it take to find a tenant (in a population of 400 people – or 4,000 for that matter) ?
Pisces
The only way to go if you are buying these little humpies in the back of beyond is to do some building courses and turn your +CF IP’s into a full time career. You still have to work to retire comfotably unless your a lotto winner.
“Dont be looking in your back yard for a four leaf clover when the opportunity of a lifetime could be knocking on your front door….”
dont forget about the tax deductins in 15 years. depreciation saved if your other tax debts are large so therefore added reduction to this is your run down shack! Meybe the govt can pay for some of it in the turnaround of it all?
Or..ever thought of selling out to the tenant, refinancing it yourself if need be. Karma to help someone else out who cant afford a deposit, but could maybe fix it up in 5 years (have to sell in 10 not 15!), and win win all around! They may continue paying rent towards a deposit, then take over your prob when you are ready.Sandy
Originally posted by lawrence:TO find, because I grew up in parts of NSW/QLD/WA where these sorts of properties are thriving. The only problem is that they are usually all run down shacks, yeah sure you get the positive cash flow, (my goals arent’ even that ambitious, rather money that creates itself, s.i.s termed it as neutral gearing) BUT the question is, since these properties are usually very run down, what happens in 15 years time when the property needs extensive maintainence i.e much more than a coat of paint or new carpet. At this point, buyers aren’t interested and there is but a large bill for repairs. Any suggestions? NOTE; I am not looking for problems, just preventing them from happening. Is any one else in the same frame of mind? i.e Buy shit heap for + cash flow, happy for 15 years, then stuck with expensive repairs. What are your ideas people….[
]SandyVG
] ) the – geared property , as long as not to heavily geared,would’ve made you a reasonable equity gain, in some cases where gearing was not to high, would now have provided you a + geared property..
]
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