I am a newbie to this field, and am after your thoughts.
I have found a country town that has a reasonable population and a high rental % with a number of properties on the market which would give reasonable positive cashflow. The down side is that there has been neutral to negative capital gains there for the past few years.
I’m after +cashflow but am a bit scared that I’ll not be able to eventually sell the property at a profit in the future.
Also i have heard that some lenders reduce their LVR in these types of areas.
any comments or advice welcome
regards
coopscoops- it depends on what you’re looking for. Really expensive propertires in cities generally have a large neg CF. Really cheap properties in the country might have a pozz CF. Neg growth or no growth means you are paying pre-boom prices- well, that’s not such a bad thing. Ihave looked for places that have not achieved huge growth too- I call them “under-valued”… You said the place has a reasonable population. Look up “population decline blahtown” in google.com.au, and see if the place is having significant decline.
These days, it is difficult to get cash pozz properties (10% or more). If you are seeking mere CF, then you could buy into the town. Personally, I don’t expect any growth on IP’s that I buy for the next few years. However, I am happy to receive 6% yield on a property/location that has “growth potential” rather than 10% yield on a property/location that possibly has none.
It’s up to you
kay henry
Oh yeah- I forgot the LVR thing! coops- I just bought a property in sydney’s eastern suburbs, and it has a 70% LVR on it too. As for me, I don’t mind 30% deposit- keeps my LVR down. Population isn’t the only thing that determines LVR- if you buy a bourgeoise house in Lorne, vic, or berry or Kangaroo Valley/Jamberoo, nsw, they are not going to want 30% deposit- because those places are hugely desirable- even though they have small populations.
Just depends on how much “risk” the banks perceive the place to be.
I wouldn’t put the postcode up here- but you may wish to do so in private to a Mortgage Broker. Most people on here, if they have found a CF+ town, like to be able to keep their counsel about it
kay henry
Many Banks have 70% LVR, Rob.
Here’s a detailed list of some Banks’ Policies from this article:
http://www.theage.com.au/articles/2004/05/21/1085028511164.html?oneclick=true
Flat rates
Leading home-loan providers limit the amount they will lend for inner-city apartments in certain areas to 70-80% oaf the value of the property, some as little as 60%. Only a handful of lenders had changed their policy toward inner-city apartments in the past 12 months.
National Australia Bank
A maximum loan to valuation ratio (LVR) of 70% for inner-city apartments in certain Sydney, Melbourne and Brisbane postcodes.
Dropped its LVR from 80% 12 months ago.
No cap on the amount lent.
Will lend for apartments under 50 square metres.Westpac
Maximum LVR 70% for inner-city apartments in certain Sydney, Melbourne and Brisbane postcodes.
Dropped its LVR from 80% more than 12 months ago.
No cap on the amount lent.
Wary of inner-city apartments under 50 square metres.ANZ
Up to 80% LVR for inner-city apartments.
Up to 60% for inner-city apartments under 50 square metres in specific Sydney, Melbourne and Gold Coast locations.
No cap on the amount it will lend.Commonwealth Bank
Lends up to 80% LVR for inner-city apartments.
Has a no-size policy.
Cap on the amount lent is based on the LVR ratio.AMP
Maximum LVR 60% for inner-city apartments in certain Sydney, Melbourne and Brisbane postcodes.
LVR changed from 70% 12 months ago.
Will not lend for apartments under 45 square metres.Citibank
Maximum 60% LVR for inner-city apartments in certain Sydney, Melbourne and Brisbane postcodes.
Will not lend if the apartment is less 50 square metres.
Will lend any amount, but LVRs reduce with loan size: 80% up to $800,000, 70% to $1 million, 65% to $2 million.St George
Maximum LVR 80% for inner-city apartments.
Studio apartments must be minimum 25 square metres and one-bedroom units minimum 45 square metres.
No cap on the amount they will lend.
Loan broker Mortgage Choice says interest-rate rises had subdued investors’ hunger for inner-city investment properties, but not in a dramatic way.Mortgage Choice says lenders had not noticeably reduced their lending policies in recent months, but were seeking to restrict their degree of exposure to any one apartment block to 5-10%. Despite fears of loan defaults after the rate increases, lenders said their arrears rates were at historical lows.
_________________________kay henry
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