This is the stumbling block i constantly have. I have in the past invested in ‘growth’ property with mixed results. I now have a clean slate and am struggling with the right strategy in moving forward.The positive CF properties are in small towns and i find myself asking the same questions:
1. The risk appears far greater with regards to damage and late payments due to the likely type of tenant that will be attracted by the rental.
2. Will i be able to sell it if it is not working out
3. If there is a period of vacany then my CF+ property may become neutral or negative and I will also lose with low growth
Can anyone shed any light on this…I am just starting Steve’s 2nd bookThe issue probably is whether the standard of accommodation being offered will attract good tenants. If you invest in keeping your property looked after you will attract better tenants.
Your PM should check references etc so that the risk of bad tenants is minimised.
If your cashflow forces you to have to make a choice of any tenant rather than a good tenant, you’ve got problems.
One of the reasons the property is cheap if it will attract a reasonable tenant is there is not much demand to purchase. Therefore if you need to sell it may take time.
You need to research the town.
If you have bad expectations, irrespective of the cost of the property, congratulations you will get what you hope for, bad tenants or vacancies.
We have several really cheap townhouse which have tripled in 3 years. 1 Bad tenant in the townhouses in that time and landlords insurance covered the shortfall. No biggie. Any good property manager will get you onto landlords insurance as they get you a discount and a fee from the insurer for setting it up.
Win win, and you can sleep at night too.
DD
PS146 Certified Financial Planner
Don’t sweat the small stuff,and it’s all small stuff!!Cheap properties do not mean bad tenants. Bad tenants come from all socio-economic backgrounds and so do good tenants!
Good luck, always do your homework on both the property, town and the tenant and you should be fine.
PK
PS. And don’t forget Landlords insurance, just in case!!!
even though i have havent yet invested in a property i am suffering a psychological battle of roughly the same ideas….. surprisingly im only 15 so my parents would hold the property for me……. but yes if u recieve a positive response please forward it 2 me. thanks
Wesley N. Wise
Ok, here’s some food for thought.
mikefrost and wezza, would you donsider yourselves to be good tenants (wezza, think the future, would you be a good tenant?)
When you left or leave home at 17, 18 or 19, where are you going to rent? I imagine it’s going to be in one of the cheaper places to rent as most young fold don’t earn heaps in their first job. So, your renting cheap, does that suddenly make you a bad tenant?
Secondly, your saving for your first home, so what will you rent in the meantime? Well, I rented cheap so my deposit would grow faster. Doing that didn’t suddenly amke me a bad tenant.
Now this about this, I came across a nurse who was posted to a country town. Now, you’d imagine a nurse who is trained in cleanliness etc so that patient care is good, sould be a good tenant? Wrong, this particular nurse took her dog with her to this town and each day when she went to work she locked the dog inside and she readily admits the dog often pee’ed of the carpet etc when it couldn’t hold on through the logn shifts she worked. SO, why did she lock the dog inside? Becuase the property didn’t have a fence all the way around. Why was she rentign ahouse without a fence, because the Dept of Health found the house and didn’t ask about fences, the owner thought yippee, it’s a government body, rent will be secure etc. Well, the rent was secure but imagine the smell of that house. My guess is that being a government body they probably got it professionally cleaned, but my point is, what and who you think will make good tenants, isn’t always the case. Don’t judge a book by it’s cover.
PK
I am very wary of investing in small towns, but would like to point out that some tenants in the more expensive properties can be worse than the cheaper ones.
Terryw
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I reckon good PMs are the key. I went down to Tasmania last week to inspect a property (block of 6 flats) I have owned for a while (but never previously seen). I met my PM. She’s pretty tough. She knew the property inside out and gave me a rundown on each tenant – payment history etc. In addition to that she does inspections every 3 months and sends me hard copies of the inspection notes. I’ve had the odd problem tenant, but she is on to any potential issue in an instant.
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Mike, in response to one of your questions, I think if you can get decent CF+ properties, there will always be a market for resale- look at the folks on here- one of the greatest questions is, “where can I buy CF+ property.” Capital growth is king, but CF+ is CG’s doppleganger- opposite, but valuable. Where CG is all about “potential”, whereas CF+ is measurable *now*.
One thing about cheaper prices and smaller rents is that it can kind of be less risky- in some ways. Let me explain… I have a property which provides 3 times in rent to me than another one provides. I would rather a defaulting tenant in the cheaper property than the more “quality” property, as I would lose a major amount of money in that.
Having said that, a plumber or other tradey, will cost you the same no matter how much rental return you get. I always think the $80-$100 rental places can cost significantly more in repairs than one which is newer and gets more $$ rent.
Poor people aren’t poorer tenants… just like we are not always enriched by having richer tenants. However, a poor quality rental property *may* allow a property to not be looked after- if we don’t maintain our properties as landlords, I guess we can’t expect tenants to. A cheap cottage can be a “renovate or demolish” job, or a “cute charming cottage”- just depends on how we look after it. I presume the latter would get a better “quality” tenant- despite income of the tenant.
kay henry
[shocked]Whoa…ARE MY EYES DECEIVING ME???? [shocked]
WELCOME BACK KAY!!! [biggrin]
Thanks Monopoly [wink2]
kay henry
Oh come on….you’ve been away 3 months, and that’s the biggest smile you can manage???[blush2]
I was expecting at least one of these —> [biggrin]
Originally posted by Monopoly:[shocked]Whoa…ARE MY EYES DECEIVING ME???? [shocked]
WELCOME BACK KAY!!! [biggrin]
Hear, hear – welcome back Kay.
Derek
[email protected]Property Investment Support Available.
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