Cheap Bathurst/Strahan IPs-comments welcome

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From: A Jones


I'm at the "paper trading" stage of investing in an IP.

Thought I'd throw these two properties into the ring and ask for comments as to how they stack up as IP's. I don't have any interest in these properties (so I figure this isn't a caveat emptor post). I'm just interested in comments from experienced investors or ppl with local knowledge.

I like the Bathurst one coz there might be a chance of a small capital gain. Not so sure about the Strahan one-I think the $110 might be summer-time rent before the Macquarie Harbour freezes over;)

Cheers Ajax

"A Little Piece of Bathurst
$63,000
BATHURST
Here's a terrace which has been completely renovated & is just so affordable as your first home or investment property ($120pw). There's 2 large bedrooms (one opening to the verandah), cosy lounge room with s/c fire, smart eat-in kitchen and tiled bathroom/laundry. Step outside to a covered deck & small pebbled courtyard. Be quick!."

http://www.realestate.com.au/cgi-bin/rsearch?a=o&ag=&s=nsw&c=60206613&tm=1018958392&id=1116331&f=0&p=10&t=res&cu=

$42,500
12 FEATHERSTONE STREET House, Strahan, Tasmania
Small fibro house on well drained sunny block only 200 m from Macquarie harbour. Currently let at $110 per week. Good carpet & vinyl.

http://www.realestate.com.au/cgi-bin/rsearch?a=o&ag=&s=tas&c=40624514&tm=1018958591&id=1096232&f=0&p=10&t=res&cu=
 
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Reply: 1
From: Jeremy Laws


I would be a _little_ careful of 'country' Tassie, but with returns like that - why are you paper trading????
 
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Reply: 1.1
From: Gail H


I don't think I'd buy them. The capital growth would be very small (probably none at all in country Tassie). While your rent would probably cover most of your expenses, you will also have upkeep costs on older properties which will add costs. You may find that you just break even, which means that in 10 years time you will turn around and find that you have effectively stood still financially. I don't think there's enough meat on the bone to bother with the hassles and risk of buying properties like these.


Just my view though.

Gail
 
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Reply: 1.1.1
From: A Jones


Thanks for your comments Gail and Jeremy.

There is certainly a hassle factor to take into account. Maybe I should target a more expensive property with positive cashflow.

My initial idea was to acquire a number (say 5) positive cash flow properties. I already have a Sydney inner city property which produces good capital gains (though rental yield is under 4%). I do not live there at the moment (have done in the past so will claim PPOR exemption for 6 yrs if I sell).

Ajax
 
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Reply: 1.1.1.1
From: Duncan M




Ajax,

As Dale has said in the past, you cant just claim the PPOR 6yr exemption,
you need to demonstrate that it really was still your principal place of
residence and that you intended to return, things like electoral roll
membership etc etc could be looked at in an effort to 'look through' the
transaction to determine your real intent.



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Subject: Cheap Bathurst/Strahan IPs-comments welcome


From: "A Jones" <ajax1@catcha.com>

Thanks for your comments Gail and Jeremy.

There is certainly a hassle factor to take into account. Maybe I should
target a more expensive property with positive cashflow.

My initial idea was to acquire a number (say 5) positive cash flow
properties. I already have a Sydney inner city property which produces good
capital gains (though rental yield is under 4%). I do not live there at the
moment (have done in the past so will claim PPOR exemption for 6 yrs if I
sell).

Ajax



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Reply: 1.1.1.1.1
From: A Jones


Thanks Duncan,

This is concerning me as I have changed electoral rolls to the area I now reside in
(where I rent).

I may live in my PPOR again before the 6 years is up. If I do I will change electoral roll back to the location of my property.


Ajax
 
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Reply: 1.1.1.1.1.1
From: Gail H


I bought a flat which I lived in for a while and then moved out of for 5 years. During that time I rented it out and changed electoral roles. I moved back for a little while and then sold it. I claimed the PPOR exemption, and have been ok. On the other hand, I haven't been audited, so who really knows if it would stand up if the tax office looked at it.

RE capital growth vs yield: I go for somewhere in between. I buy in areas with moderate growth, but where I pretty much break even in terms of holding costs (eg, sunshine coast).

The problem with properties that are narrowly cash flow positive is that they use up deposit money, and they can make a dint in your debt servicing ratio as the bank will only take into account about 70% of rents, so it can limit your ability to hold other more growth oriented properties.

Gail
 
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