Hey All,
I am very new to the property market and have saved approximately 800000 cash…and am trying to work out what is next.I have an opportunity to purchase 2 properties one for 395000 the other for 375000. Both properties are located in the suburbs of sydney and have a guarantee of weekly rent of 340 and 285 per week respectively for a 10 year period. THe only maintenance cost to myself would be a 16.5% of the weekly rent as a management / maintenace fee.Does this above deal make sense…?Do I purchase both properties outright with cash or is it better using financing…?RegardsTroyDHA?
Some great advantages and some disadvantages make these deals attractive for the "hands off" investor.
Yes, DHA
What is your opinionRegardsTroyI think DHA is a good start for some one who just wants a buy and hold type investment with no fuss, I probally wouldn't buy 2 of them though, there are alot of great ways to invest in the property industry if you take the time to learn the ins and outs of the property market.
I have lived in a DHA house and many friends are living in DHA accomadation so I know how the system works, but remember the biggest profits in property come from being really proactive and taking control of your investing which is the opposite to what dha is, they are really set and forget investments,
are the properties you are looking at in wattle grove by chance,
and about finance in my opinion you should borrow to invest, if you buy the properties out right with your $800,000 cash and they grow by 10% you have made $80,000. If you use your $800,000 as a deposit to buy $4,000,000 worth of property and it grows buy 10% you have made $400,000. this is what people mean when they talk about gearing.
I've lived in DHA houses and have always been pleased with the service they provided for me as a tenant. i think they would be pretty good as property managers. Never had issues when maintenance was needed, make a call to them and they generally fix whatever the problem is.
the problem i found when looking at them as potential investments is that they have quite low returns, both of these below 4%.
On the other hand they are generally properties in good condition that will be well maintained for the 10 years that the lease is for. The properties seem to have good potential for capital gains as they are generally in pretty good areas.
I think that you would easily be able to find a property with much better returns elswhere although if you are after a property to 'buy and forget' then DHA would be a good option to pursue.Tatts
Tatts,
I think you'll struggle to find properties with returns greater than 4% return after all maintance and property mangment costs are taken out, and remember there are rental increases in the dha leases,
The DHA properties are generally quite new and are in very good condition as they have extremely strict guidlines that the property must meet, therefore shouldn't need too much work done to them.
I would think that if you were to look around you would be able to find properties have a higher return, even after all maintenance and property management fees are taken out. On that note, i am a long way behind you in the way of experience with property investing so i very well could be wrong.
I personally don't want to invest in any DHA properties although for some people it may be just what they are looking for.Hi
You have to work out are you looking to grow capital, or do you want yield. If I had a spare 800k, Id be off to Gold Coast corridor, Bowen, Gladstone, Rocky, or buying a house very inner Sydney cbd area- the best I could for 800k and have it as an executive rental. I guess you have to decide what you want from the 800k, there are many options.
I have put every cent we have and huge loans into Gold Coast Corridor- Upper Coomera, Helensvale, Tugun, and also up in Bowen near the mines.
Think it out and make sure you have a very good tax accountatn, planner, and correct structures in place
With $800k you could potentially buy about 15 or 16 x $200k properties with a 20% deposit and costs and borrow the rest. Or, buy about 6 or 8 of them, put in a bigger deposit and have them all pos geared anyway. Of course; servicability may be an issue, but you can see my point.
The rent returns on properties of that price range are very often far better than the two you mentioned in your first post, you will spread your risk of vacancies, lulls in cap growth etc, and your exposure to property that could increase in value is exponential.
With two properties paying cash for them, you will get good rental return, but will pay lots of tax on the profit and only have $770k gaining cap growth.
With the scenario I mentioned, you could have potentially up to $2mill or so of property gaining cap growth, and the properties (if well selected) would be cashflow neutral or even cashflow positive after tax.
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