I'm considering buying another IP in the country. QUOTE]
G'Day pickle
Buying is one thing, borrowing to assist with the purchase is another.
In the current lending climate, if you have your tax returns, work in a permanent job, and generally scrub up as a full doc applicant then there isn't too much of a problem ......
Except!
Small country towns are serviced by a diminishing supply of lenders, and borrowing to a city level of LVR in the regionals is getting tighter by the day.
Get out into the rurals and you may find that your lending supply is about as plentiful as the water supply - in drought!
There are many good areas eg Horsham which have stable populations, strong rental markets and capital infrastructure works in progress which are creating jobs for the forseable future.
10% gross return is a big ask.
One aspect of investing which you may care to consider is the return of the property over time.
For example:
Say you bought a property for $100,000 which produces 10% gross yield and grows an average of 5% per annum over a ten year period.
That property would have produced 150% benefit for you over that time.
Compare this to a property in a stronger capital market and grows 10% per annum, but which produces a 5% yield
Over a ten year period that property would also have produced a 150% benefit.
Which deal would be more appealing to you and which would be of greater benefit to you?
You may say that the yield is more important than the capital growth, and yes of course the yield enables you to hold the property, but at the end of the ten years your property is worth $150,000 and have you managed the yield so that you have the surplus funds still available?
Or would the property which has doubled in the ten years be of greater unduring benefit, even though you may have had to involve a bit more capital in the first two or three years while the rent increased to cover the mortgage payments?
Each deal is unique. Each investor has their own circumstances and their own preferences.
Buying in areas of small or even decling population is not usually something which is going to produce the greatest result for you, particularly if you cannot finance the purchase with a choice of lenders and if you cannot access the equity should you wish to do so.
A long selling time may also see you frustrated if not in difficulties should you find yourself in the postion of needing to sell or wanting to sell to access further opportunities.
Cheap to buy can sometimes be a bargain, but cheap usually means cheap for a reason. If the mortgage insurers won't go there should you?
A customer of mine rang me on Saturday all enthused about a property in Barham. The median in Barham fell by 15% over the last twelve months. No amount of rent return would be worth a market diminishing by that amount.
All that glistens is not gold. There is more to an investment than the rent return you think you may get. Don't be be a 'one reason' investor - protect yourself and your interests by making sure that you are actually buying an investment and not a lemon.
Cheers
Kristine