The latest REIT reports for Tasmania show that Queenstown is the most affordable suburb with median house prices in the mid $70,000. With two IP already in quite expensive areas is it worth finding something cheap in an area with moderate capital growth to gain a positive cash flow property? Rental returns are around $120-150 per week and with a little bit of work i'm sure you could make some good returns on a cheapie… any advice would be great. Cheers
tuggerwaughHi Tuggerwaugh
The idea of going for a cheap positive cashflow property has merit, but would it work in your situation as an additional property?
You currently have a mortgage of $730K and property valued at $800K. It appears this means you are already quite highly geared at the 90% mark. There doesn't appear to be much capacity to draw on any further equity. How would you finance such an investment without overextending?
Now think about the positive cashflow prospects. The returns if they were at $140per week rent would provide about 10%. But if interest rates are currently at around 9% now, and if there are still a couple more increases in the pipeline, I'm not sure what net value this would provide except to increase the pressure further particularly from your two negatively geared properties as well as carrying an additional $75K of debt..
On the other hand, as I may have mentioned before, what are the possibilities if your current mortgage(s) were 'portable'. Your current mortages at $730K implies you can currently carry the servicing for repayments. If you could sell one of these IPs at $400K, retain the mortgage for other secured properties that you will be buying, and then buy four x $75K properties, your cashflow position should improve significantly.
However, you would have to weigh up whether you would be prepared to sacrifice part of the current CG position to improve your net cashflow position. You may find this provides a more balanced position with part of your property portfolio being high growth, and part being high cashflow.
One good thing about the different questions you're asking, is that you're exploring possibilities of how it could be done rather than accepting it can't be done.
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I remember reading some time ago that one problem with Queenstown was that there were no PMs in town, so when it came to renting owners were very much on their own.
Things may have changed.
Marg
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