Cash Flow positive but with not good cap growth prospective?

[staceyo]

Hi

Am considering purchasing a property in Tennant Creek, NT. It has a rental yield of 10% and that's without trying to haggle the price down.

Tennant Creek has population growth of just under 3000, there doesn't appear to be anything on the radar that would stimulate capital growth. However, rental demand is very big, if you go to realestate.com and look for rentals absolutely nothing comes up.

I'm still considering buying to get the good return. But I think I'm just not looking past the 10% yield at present. Is it a good enough reason? Having always bought for capital growth, not sure.

Thanks
Stacey

 

[peastman]

I would be concerned about the quality of the tenants. I will admit I have never been there so I dont really know the situation, but could imagine there may be problems. 10% is great if everything goes well, but if the place is constantly damaged or rent not paid on time, its just not worth the hassle. Find out what tenants are like in the area and go from there.
Good luck.

 

[Bon]

Isn't it all Aboriginals there? I will double check and confirm this.

 

[staceyo]

Isn't it all Aboriginals there? I will double check and confirm this.

TC does have it's usual issues with social problems that go on in some of these parts. But having lived in Katherine, NT, I'm familiar with some of the pro's and cons with that. But my point is there is a strong base of support services, government, semi-government, council etc to support the area, and they need somewhere to rent. At the end of the day if the property more than paid for itself, (and more) was always tennanted, and you probably wouldn't spend money on it. It would still seem like a winner?

 

[imonmyway]

I would say properties in Tennant Creek for rent would only be advertised locally, might want to check the NT news or if it is online the Tennant Creek News (if there is such a thing) or call real estae agent in the town and ask them if you want to determine actual vacnacy rates of properties

 

[marg4000]

I would suggest you see if there is a good PM in the area.

Quite a few years ago properties in the Queenstown area of Tas were very cheap (and greatly Cash flow positive), but apparently there were no PMs there so managing was a nightmare.
Marg

 

[roosterfan]

Bon, what would it matter if it "were all Aboriginal"?

 

[VYBerlinaV8]

These sort of properties look good on paper, but as your portfolio grows you may wish you'd never bought it, purely from a hassle point of view.

However, if you can get decent tenants who pay on time and don't damage the place, you can put in on a P&I loan and forget it, then in 25 years have an asset you didn't pay for.

To me, this all comes down to the hassle factor. You need to investigate that first off.

 

[VYBerlinaV8]

Bon, what would it matter if it "were all Aboriginal"?

I grew up in an area that had plenty of trouble with Aboriginals, but when I got married moved next door to an Aboriginal family who were genuinely wonderful humans. This really changed my perspective. Within the context of this thread, perhaps it's more appropriate to simply consider whether prospective tenants will meet your expectations as to care of the property and paying the rent on time.

 

[want2bewealthy]

Is you gone completely crazy. . !

 

[crc_error]

There are better ways to go cash flow positive with property.

You can enter listed property syndicates like stock code OIF which own commercial property around melbourne sydney and brisbane.. 60% of their tenants in the portfolio is woolworths and average lease of 11 years so your rent is secure.

http://www.orchardfunds.com/Products/Listed Products/Orchard Industrial Property Fund.aspx

at the current price, that's a 20% PA yield. Perfect to support negative geared properties etc.