Regional areas

You do need to pull the trigger and it is scary the first time, but you can take steps to protect yourself.

+cashflow properties are harder to find since the recent boom. The rents haven’t caught up to the cap growth in many areas. But there are still some around; the problem is that in the present climate a lot of these will be ‘add value’ deals to increase the rent enough.
As to where you should look and what type of property you should buy, the criteria that you use can be endless, but basically; the smaller the town and the cheaper the properties are, the better the rent returns usually are. However, the problem is you may struggle to get a tenant, and a good tenant at that.
You can find out a lot of info on the state of the rental market in a particular area buy ringing the agents and asking the right questions.
For eg; you see a 3 x 2 house for sale with a tenant already in place. Find out what is the rent the tenant is paying for a start. If the return is good enough to satisfy you, then proceed to next step.
1. Ring an opposition r/e company and ask if they have any 3 x 2 houses for rent and how much the rent is. If they have a lot available, it could mean there is not a lot of demand for that type of property – maybe 2 x 1 units are more in demand.
2. Ask whow many rental properties they manage and how many are vacant. A vacancy rate of less than about 3% is a good sign.
3. Ring the agency that has the 3 x 2 for sale and ask them about a 2 x 1 unit for rent. if they say there are very few available, it could mean there is good demand for these, or maybe there is an under-supply in the area.
4. Ask how many properties they manage and the vacancy rate.

This is just one small example of the research you must do to maximise the safety of your investment.

There is one school of thought that says you shouldn’t buy in a town smaller than 10,000 people. This is probably true in general. My mother lives in a town of 7,000 people and it is a good town, but the returns aren’t that good (5-6%) and the cap growth isn’t too flash historically and isn’t likely to change. So you wouldn’t do very well either for cashflow or cap growth in that town.
However, 45 mins drive away is another town – 9,000 people, and it is booming at the moment; cap growth is great if you bought 2 years ago, and still some more to come.
Anyone who researched the town would have found out that it was about to boom – improved access to Melb, council programmes to improve amenities etc. The indicators were there.

There are many good books available to help you get the knowledge to start with safety, here are a few authors;
Margaret Lomas, Jan Somers, Noel Whittaker, Monique Wakelin, Michael Yardney, Steve McNight, Peter Spann, Ben Venuti, Neil Jenman, Terry Ryder.

Cheers,
Marc.
[email protected]

“we get sent lemons; it’s up to us to make lemonade”

Hi there,

I also have bought a couple of properties in rural areas. Buy price was $54K and rent is $100 per week (cheap rent for the area). It has potential to do up and achieve a higher rent which I will do upon expiry of the lease. The town has approx 4,000 population and extremely low vacancy rates which is why I purchased in a town with such a low population. Again, as mentioned many many times, positive cashflow deals are made, not bought! But there are some exceptions. Good luck and do your due diligence thoroughly.