I’ve just come across a property in a rural agricultural area – 3b/r house valued at $50K . Agent tells me rental is $120 per week. I was concerned the market may be seasonal however she tells me she could get the contract with a 12 month rental clause in there.
I can’t see any pitfalls except for the fact that it might be near impossible for me to get to it to inspect (7 hrs drive).
I assume for a small town (pop 500) that the capital growth might not be crash hot but we are not talking a hugh investment here.. Any thoughts or suggestions would be appreciated as I’m a complete novice.[blink]
Hi Islandgirl. I would get a pre purchase building and timber pest report on the building. Ask the agent for names of consultants if you are stuck and ring the consultant prior to going out to make them aware that you have not seen the property. Can they send you a report with numerous photos. Afterwards ring the consultant to clarify the more important immediate works which may need doing and those that can be priced into a maintenance program.
Also arrange a valuation for reinforcement that the property price is in the ballpark. As for the 12 month lease, it is better than nothing but nothing is guaranteed.
Good luck. [thumbsupanim]
Hi Island Girl,
First add all of these costs to your purchase price (If you aren’t borrowing any money then leave out the mortgage related costs)-
stamp duty on a property purchase
stamp duty on a mortgage
registration fee on a property purchase
registration fee on a mortgage
title search fee
solicitors/conveyancers fee
building/pest inspections & surveys
loan application fee
lenders mortgage insurance (LMI)Then take these ongoing costs into account-
Mortgage repayments (if applicable)
Maintenance costs
Land Rates
Water rates
Building insurance
Landlords Insurance
Management fee (unless you are going to self manage)Crunch the numbers carefully and take into account all costs because the cheaper properties can be on the border line as to whether they make you any money or not.
500 population is VERY small. Most lenders will baulk at lending in these low population areas (unless there is a larger centre nearby).
If you have a spare 50K saved up, consider that @ 6% interest rate would return 3K per annum (compounding). If you went for a fixed term interest rate you could get around 10% or 5K per annum (compounding).
Todd Burns
http://www.freepropertyhelp.com.auHey Islandgirl
How far is this town from the nearest city? How have the values of the houses changed over the last couple of years (agents can tell you or research on the net)
What attracted you to consider buying in this town?
Good luck and good on you for looking!!Hi there Islandgirl,
First thing I’d do is ring another agent that manages property in the town and find out what vacancies are like and if $120 is the normal rental rate.
I’ve known owners who will pay the rent for twelve months themselves so that they can sell the property so just make sure that after the intial 12 months you will actually be able to rent the property for the same amount and it wasn’t inflated to “get the sale”.
Secondly, if you really can’t inspect it yourself then put in a “Building Inspection” clause and have a building inspector check it over so you know it’s not about to fall down the day after you settle. This will give you piece of mind.
Also make sure that there is a property manager in the area because otherwise you may end up having to manage it yourself and if your 7 hours away, then it’s difficult to do inspections or worse still if you had to go to court then it has to be at the court nearest the IP and not nearest you. If there’s a PM they will do this for you, but if your managing it yourself then it’s a long way for court hearings. Hopefully you never need attend one, but you never know.
The others have already asked about the population and proximity to a bigger town so I won’t cover the same ground there.
Bascially if you’ve done your research and think it’ll work for you, then go ahead and good luck.
Regards
PKThanks guys I really appreciate the help.
Hi Island girl. Just for reference, in this months API magazine there is a beuat article on clauses you can use when buying, seeing a clause was mentioned. (And no, I don’t have shares in the magazine) I found it really helpful, and plan to use a couple myself (especially the due dilligence one) when making an offer on farwaway type properties. Hope you make a killing! [thumbsupanim]
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