Hi, my wife and I live in brisbane and haven’t entered the property market becasue we just can’t afford it. So, we are looking at buying an investment property in outback QLD. We can buy a home for around $80-$90k and the rent will cover the repayments but we understand that we will have to put a little in for rates and rental management fees. This is all fine and we can afford it. We plan on keeping the property long term and just wanted to know whether what we were doing is a good idea. We know we won’t make much money on a house in outback QLD but we want to be able to invest in something with little outlay and is stable.
Thoughts anyone?
PeterWith outback properties, prices are generally rather flat. Not much capital growth occurs.
Without capital growth, there is not really any point in investing in a property. So you have to determine the potential growth prospects for the area you are looking to invest in.
Terryw
Discover Home Loans
North Sydney
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I realise this, but also know that it’s a good way to achieve property without outlaying a lot of money. I know I won’t be making a lot of money but would you say that it would be a stable investment?
To make it worth while over the long term, the loan would have to be P & I, so at least you debt would be reducing because you wouldn’t want it interest only, if there is not much chance of capital growth over the long term.
Do you have debt on your own home?
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Have you considered other assest classes that potentially offer better returns over the long term. I.e index tracker funds.
You have said that you wont make much money on a outback property so why are bothering. With an asset to appreciate over time there has to be demand, is there going to be that much population growth in the area you are looking into.
Remember that property is not a zero sum game, you can lose more than you put in in the short to medium term if it doesnt all go to the desired plan.
Originally posted by ssab:You have said that you wont make much money on a outback property so why are bothering.
That’s it in a nutshell!
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Heh guys lets hold up there.
I can think of several regional queensland towns where i have good agent contacts which are still enjoying steady capital growth.
As Kerri suggested why not ensure that you loan is one of Principal & Interest and then at least you can reduce the debt as time goes by.
As the debt reduces use the built up equity in the property to purchase again or by using an offset account utilse the acrued funds as a deposit for your own property.
Happy to assist if you need further help please feel free to email me.
Cheers Richard
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Originally posted by Qlds007:As the debt reduces use the built up equity in the property to purchase again or by using an offset account utilse the acrued funds as a deposit for your own property.
Thanx Richard, This is what it’s all about for us. The property boom in Brisbane blew our chances of getting in a home (as well as the change of career only to find the shocking wage I’m on for a guy working in IT!). Getting equity in a cheaper home is I think the only way to our dream of owning our own home. For a guy who is 40, two kids and a wife working part time for aussie post owning a cheap investment property is our only way in.
If your going to use P&I to build up equity in a property that you will need to top up every year to cover costs in an area that is flat in growth, whay bother?
Why not find a nice managed fund and put money into that. AT least there’s no outgoings and if you choose a good one it will give you a cash flow and your investment will go up.
I can’t understand why you want to risk all your money on this just so you wont miss the boom.
Here’s news, I think you have missed it.
All things are possible to the person who believes they are possible.
Whateve the mind of man can conceive and believe, the mind can achieve.
Napoleon HillI would not buy a property for the sake of buying a property. There is not point. It needs to help you grow your portfolio. You would make more money in a managed index fund or property trust.
The above aside, as for the possibility that capital gains may not occur, I would not worry about this if it is a positive cashflow property. People invest for various different reasons. The added cashflow may be enough to help you achieve your more difficult goals.
I would personally stay away from P&I and use an offset account with an interest only loan. There is no point to paying down the principal on an investment property if you intend to invest further. You can keep the funds available in your offset and it will be helpful should your cashflow position take a further turn for the worse.
I would personally not buy the property for the reasons you have outlined. It does not serve you well to buy just to buy something.
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Essential LinksOk, I’m offically confused.
1. I know i’ve missed the property boom, so thanx for reminding me.
2. I am on a low income and don’t have masses amounts of money to pour into funds of any kind.
3. That’s why an investment property sounds good because the rentor helps pay it off.
4. There is no other way I can see of owning our own home unless I have equity in an investment property long term.You can gain capital growth outside the major metropolitan areas – just do your research and ensure the area is a goer.
Consider it a long-term investment that will pay off with time, as the growth is not as consistent as major cities. You may get good CG immediately, but expect to wait ten years or so.
If you check out some government websites, you’ll see that they are investing in certain areas to increase industry and community. There’s been a lot of talk about the SE Qld plan, but there are also rural areas in Qld and Australia that have been highlighted by state or federal governments. Some local councils are also very progressive in attracting new industry.
You are also much more likely to find positive cash flow in these areas.
Don’t buy any place you can afford. Pick an area that has shown some population growth, and has solid plans for its future growth and stability(diversifying industry, attracting new industry, close to a major city for commuters, community initiatives, etc). Research properly, and buy low. It’s an investment property, so you can afford to be a tough negotiator – only buy when the numbers add up.
There is more risk outside metro, as we as a nation are becoming more and more centralised with people moving from rural to city. However, some areas are successfully combating that – or at least pick up population as a growing city spreads toward it.
Thanx Luci, that was excellent advice.
1. You don’t need a ‘boom’ to make money in property. It does help though.
2. You don’t need masses of money to pour into funds. You need more to pour into property.
3. The dividends increase your cash flow. If you do not gear (borrow), there is nothing to pay off.
4. If the property is not growing in value, it will take a long time to build equity. Increasing your cash flow in other ways (eg: funds) may improve your serviceability allowing you to potentially buy a property that will grow quicker.
You have a lot to consider.
The Mortgage Adviser
http://www.themortgageadviser.com.au
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Essential LinksWhat about starting out in shares?
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hmmm, I’ve thought of shares, but know nothing about them and isn’t there a lot greater risk?
Peter,
You’ve missed out on the boom- ie having property before the boom- but so did many people. the best time for you to purchase property is now AFTER the boom- in a flatter market. so don’t panic- there’ll be many opportunities around, but I am not sure prices will be pre-boom eiother- so you might get less bang for your buck these days.
At 40, you sound a bit resigned to being on a low income and having few funds- wow- you’ve almost retired when this could be your prime! If you have a poorer income now, it doesn’t mean in the future you won’t earn more. I’m 38 and a bit schocked at your feeling that yours is a fixed state. You also have two incomes, and presumably your kids will be growing up so you and your wife can both get better jobs.
Many of of us (who started with nothing and saved for that deposit) would have started off with cheapy crap properties. Not that your first property will be a cheap crap one [blush2] but it means that some people will see where you’re coming from- out of little things big things grow.
My conservative approach would be a P&I loan (as others have said) to be paid off as quickly as possible. As a low income earner, tax breaks won’t be a large concern to you- just get the bugger paid off so you can do other stuff with built equity.
kay henry
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