Commission areas.
Hi guys, many rural towns like metro towns, have a good and “bad” side of town.
If a commission part of a town matches my investing profile, is not a fibro house, (actually double fronted brick veneer), would you rule out buying in such an area?
Prices in this town are approx. $170K, with the better end ranging from $190-$250K
Population is above 15,000 also, vacancy rate at 1.5-2%
Yield is almost 7%.
Major developments in (business district).
Population not dependent on one industry.
28% of population are renters
Almost half population married
I just wanted to understand others philosophy on such an issue.
Is this a definitive factor that would prevent you from buying? What if that area is slowly changing?
Do positive cash flow investors buy in such areas?
There is a future in the town. But are commission areas in a sense isolated from the growth and prosperity that rub off on the better parts of town?
Thoughts please…
Dave
Can I ask what the cost difference is to the 'good' side of town?
I would never buy in the "bad" side of town as it may limit the capital growth long term and also limit better quality tenants. If the stats are that good why not spend more and buy in the 'good' side of town which should give you much better capital growth and where you may get better tenants and keep the tenants happier as they are in the good side of town.
I'm giving this advised based on my experience investing in the Mt Isa (which I also currently live in) where the population is dependent on one industry (mining) and there is a huge stigma in the 'bad' areas in town also know as the bronx so it may be very different to what you're talking about.
Hi Dave
It would be interesting to see if those vacancy rates apply to the "bad areas" of town as well. That's one of the issues with lower socioeconomic areas – the vacancy rates (and I'm generalising and it's only my opinion) tend to be higher in those specific areas compared to the overall town/city. Finding decent tenants can be difficult as well – but that's not to say that there aren't decent tenants renting in these areas.
For me, I look at the ability to add value and the likelihood of growth. A CF+ property is fine – but if it's not going to provide any capital gains then it's not for me – not for the small amount of additional income you receive while having the headache of owning a property in a dodgy area.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Dave depending on the what your long term objectives are you could well find that the property would suit a purchase, rent and then sale by Vendor Finance strategy.
This is one of the income accelerators i used to build my buy and hold portfolio.
Of course in saying all of this if after talking to a local property manager you feel that the area will cause you more problems that it is worth then it wont matter what the potential for longer cash flow will be it could just be a matter of giving it a wide berth.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I think it really depends on the area Claire – I have seen many suburbs where the 'bad areas' have over time disappeared.
A lot of investors of have done well buying in these areas undervalued and then riding the waive of demand which is quite evident in certain markets.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
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