Some smaller towns (20,000 people or less) offer good value for investment. The risk however is that the rental market is small and there’s a risk that you can go several months without finding a tenant. Has anyone had either positive or negative experiences investing in small towns?
Thanks,
SamHi Sam,
As a new investor I can’t offer much from the experince of rental markets in small towns but I thought I would tell you about a recent visit I had to a small town in southern queensland where the rental market and property prices floored me. The population was less than 10000 (much less), property prices were what I would expect to pay closer to Brisbane and development was being pushed along by a massive development (that’s the only hint I’ll give about its location). After speaking with locals about what was going on I was quickly told that you can’t get a rental property in this town. They simply don’t exist. I did find a few rentals ranging from $130 (already let) up to $400 (vacant). Yet there is a large presence of construction workers in the town who no doubt needed to live somewhere. Property rates had recently increased much to the disgust of the locals, but the council said they had no choice, otherweise they couldn’t fund the necessary developments required to meet the growing demand. And the “significant” development driving this boom was about to be replicated with a similar project within the same vicinity. So what’s so amazing about all this? This town, stuck in the middle of nowhere (I do apologise to anyone who may know this town and disagree with my description of its location), with a very small population was experiencing nothing short of a property and development boom diven by a large capital works programme. It would seem this “small” town would have been a wonderful place to invest a few months ago … maybe it still is? Population is not always a deciding factor on where to invest for the next boom.
cheers
BiscuitHi Sam,
Our IP is in a small town where we live (about 9,000 people) and has been tenanted continuosly except for when we wanted it vacant to do some repainting and recarpeting between tenants. We were fortunate that a new major development was about to go ahead when we bought our IP therefore additional rental properties were being sought. It is important to know the needs of the particular town. Another point to keep in mind – what are the educational facilities in the town? I believe the rental market is better if the town has good primary and high schools as people will move to smaller towns for the educational needs of their children. If there is a TAFE or small Uni it is a real bonus. (Yes we have all of these in our little town).
Good LuckKittee
Hi Sam,
The main difference between investing in smaller towns and larger ones is in the risk management. It is possible to go without tenants in both scenarios and the likelihood will vary on the specific individual circumstances of each area. Due diligence will assist in that decision.
Population is not always a deciding factor on where to invest for the next boom.Sorry to disagree but population is a deciding factor. Not necessarily the absolute population size but the growth in population and the time frame. Demand is what determines price, and people determine demand.
pr
samgliksman
As long as you are comfortable with what you are spending, and the rental market for that area is stable or shows signs of improving (due to improved infrastructure, new developments etc) then go for it. I have a property in a small town in tassie that I paid $79k for. It rents for $120pw and the tenants are happy to stay (they have been there 2 years already).
I can also claim around $2200 a year in depreciation on this property…
A lot of people warn against this area, but I went down there and felt comfortable in spending that much in the area.
As long as you can sleep at night! If this place is vacant for a few weeks it wont send me broke! Then again, I wouldnt spend 300k in this area…
Dev * [kid]
The only disadvantage I seein some small towns is the lack of capital growth. It’s great to have a good rental return although it’s equally (and arguably more important) to have steady growth.
It creating some sort of a balance between the two that will be most likely to acheive great results.
Roy H.
L.R.E.A., Dip FS (FP)
Guardian Property Specialists (GPS)
http://www.gpsnetwork.com.auI guess my comment about population was made knowing that the town is expected to double in size from 4000 to around the 10000 mark and a $500M power station is being constructed by 1000 workers not far out of town. Approval has also been given for a new gas fired power station in the same area. Not bad for an outback rural town with a population of around 4000.
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