Hi All,
I have a family member moving to Bathurst and they looking to rent there for 2-3 years atleast.
i can buy a 140k – 2 bedroom villa in Bathurst and that gets rent of 180 per week. If they pay me 180 rent directly for 2-3 years.
does it seem like a goood small property to buy.
the downside im thinking is in Sydney it might appreciate a bit more, but perhaps I will have to pay real estate agent management fees and also tenants I dont know too well.
any thoughts..
thanks
investhut
You're not going to get much in Sydney for $140k and with a guaranteed tenant for 3 years you'll be able to knock that mortgage into shape pretty quickly depending upon your borrowings. As the rent should be covering your interest costs, it shouldn't put too much of a strain on finances or slow your borrowing capacity down very much at all.
investhut, the fact that your family member is moving down to bathurst is an excellent reason to purchase this property. However the reason you are putting money into a property is you are expecting more money out the other side. If you are going to be doing that with an inert (not going anywhere) city like Bathurst, then treat it like you wont get ANY capital return. If you have your family member sticking 180 into the property .. at 9% that would be covering 100k of the interest with you supplying the difference.
Dont be afraid to pay this one down. Long term it is all in your favour, remember .. capital gains is based on the PROFIT between what you initially purchase at and what you sell at. So .. anything u sink into this property is really money back in your pocket. A reminder though, the only tax deductible portion of this IP will be the interest, the principal will be a taxable portion. However .. its low enough that by injecting $200 a week into the loan (if you can afford that) you would have a property mostly paid off within 8 years. So with a guaranteed tenant of 3 years this works great ! And it will reduce your interest payments over the term substantially. Allowing you to borrow against that equity for something else. Just remember in the meantime .. rents go up.
Unlike city based properties in decent suburbs, i treat my country properties with a greater level of respect. I NEED the tenant in there as finding another tenant in a country property can be a headache. If the tenant complains about a rent rise .. i respond. In the country its the other way around, a tenant in property is worth gold and the rental return is optional. In the city there is enough tenants that you can dispose of a poorly paying one and get a new one at a better rental level. Its the other way around in the country. This doesnt mean you dont raise rents on the country tenant. It just means you try to keep them happy and satisfied as long as possible.
Dont be afraid of purchasing in a country town. Just remember its not a central urban area, and respect it as such. As many people will point out to you, the good deals are often in the country, but you must recognise the property for what it is and what it isnt. Its a country property, you'll have different requirements than a city property. But whatever you do in the country, dont buy into dying townships. There isnt an upside in having the last property standing in town.
thanku to both of u… makes a lot of sense.. will keep u posted.
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