[biggrin]I am looking to purchase my first investment property and unfortunately after a lot of research there are no properties even close to passing the 11 second rule within a large radius of where I live.
The only options I have found are transportable homes in caravan parks priced from 25 – 55k with rental of $170 to $220 per week. These homes also have a weekly site fee of $70 to $100 but still look like returning good positive cashflow. Do you think this would be a good start or are there known problems with these types of properties? First purchase has me a little nervous and I want it to be a positive experience to build confidence to continue.Hi michael
Buying you first property is the hardest but you are on the right track. It definetly has positive cashflow then go for it. Remember you have nothing to lose, everything to gain. And if something does go wrong sell it and get your money back. Good luck michael!
Cheers Leo
Originally posted by Deep_Pockets:you have nothing to lose, everything to gain. And if something does go wrong sell it and get your money back.
[blink]…
You are kidding of course?
F.[cowboy2]am looking to purchase my first investment property and unfortunately after a lot of research there are no properties even close to passing the 11 second ruleCashflow from any IP, is one of many factors that should be taken into account when making your decision to proceed or pass.
Blind faith to positive cashflow is a recipe for disaster.
Are you kidding???[blink]
I can’t for the life of me think why anyone would want to pay that sort of rent per week and live in a caravan park….but each to their own and I do hope for your sake the figures are right.
Why would a tenant want to pay that sort of rent to live in the relocatable home, when they could rent a equally as good standard 2 – 3 bedroom house (although depending on where it is you’re looking) or possibly buy the property themselves?? At $55K on a low doc loan of say 7.5% on IO means they would be paying around $79 per week in repayments, plus let’s say they pay the $100 a week in site charges, then they would still only pay around $179 a week and not have to worry about ever being turfed out of their property. Something sounds a little odd, and I think that Leo’s advice could be a little dangerous – I don’t think these sorts of properties are likely to sell quickly if something were to go wrong, or how quickly they can be tenanted if yours moves out…but then I don’t own a relocatable home in a caravan park and have never looked into one to buy so I can’t really comment. You may also find that it’s extremely difficult to get finance for these types of properties. I did notice in this month’s issue of Australian Property Investor magazine that there was an article on caravan parks, if you haven’t read it already it might be useful.
Unfortunately the holy grail of 11 second solution properties isn’t as readily available as they may have been a couple of years ago, and canny investors have to look at other ways of making their properties cashflow positive either through renovation, depreciation, buying well below market value etc etc.
Read Steve’s 2nd book, as the market has now changed greatly and his new book reflects that. I do hope that the media keeps on with it’s negative hoo haa about property prices falling, better buying opportunities are coming and you’re probably better to wait for a while and invest in proper bricks and mortar than in relocatable homes.
But as I said before, each to their own, just make sure you do proper due diligence on your purchase, whatever you do.
Cheers!
JunkersThanks for the feedback Junkers.
No I’m not kidding, just looking for some helpful advice from people with much more experience than myself and we all have to start somewhere.
This is one scenario as to why people pay top dollar for renting transportable homes in caravan parks. Caravan park transportables are popular throughout Australia’s mining communities. The tennant pays the rent while the landlord pays the weekly site fee(no coucil rates, water rates, etc just the site fee) meaning the tennant doesn’t need to worry about electricity bills, water rate excess, looking after the backyard, etc. Most of the tennants are high income earners, work long hours and for example, one month on, 2 weeks off returning to their own place of residence during their break so it makes good sense for them to keep it simple and not have to worry about maintaining a larger home with gardens, etc? Note – they still pay the rent when they’re not living there during their break. You still don’t own the land but the maths says that there’s passive income to be made. Rental demand is high in these communities and vacancy rates are low because of the demand. I’m not experienced enough to say whether these are opportunities worth pursuing but it looks ok on paper and I was just looking for some advice from experienced investors. Does this make any sense and if so what are your thoughts?Cheers
MikeI’ve looked into this sort of thing:
1. You can’t get a mortgage because there is no land title transferred. Thus you can only get personal loans = high cost of finance.2. No capital growth because of point 1 and depreciation on relocatable home. ie everything just loses value.
3. Rent must include GST as they are not considered “residential”.
Those were the 3 points that I took into account and chose to put my pennies elsewhere. Things may have changed, but you can check that out.
On the positive side they can and do provide cashflow, though as a long term investment… well do the math and see how it works for your situation.
stay away from caravan parks. look harder and dont put all your faith in the 11 second rule. its only guide.
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