"High Rent Return, Cheaper Properties"

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From: Andrew G


Hi all,

I have two IP's in Adelaide both returning a 10% rent return, and one more on the way which will be probably about 9.5% or so.

I understand that capital growth won't be too flash for these "cheaper" properties, but am I really hurting myself in the long run by going down this path?? I'd like to try to get one which has good capital growth potential, but I'm a little concerned the "forecasted growth" may not realise itself and I'd be paying weekly outgoings to something that wasn't really moving that much. Does anyone else know anyone in my situation where they have targeted the cheaper range with good return segment for any length of time?????

Thanks,
Andrew.

 

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Reply: 1
From: Will G


Hi Andrew,

Your questions really depend on your financial plan and what you want to achieve.
It might take you a bit longer to achieve your financial objectives with assets that don't grow as much as expected.

You may hurt yourself if you have all of your equity tied up in the 'low growth' properties and a 'high growth'/'good quality' property comes up for sale and you can't get a loan to secure it.

Can you outline your financial plan and the estimated growth for you Adelaide properties ? (perhaps I be more targeted in my response)

I hope my comments haven't been to general.

Regards,
Will

 

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Reply: 1.1
From: Fiona W


Hi Andrew,

We were in the same situation, but here in Melbourne. We had two 'cheap' and old units which we were getting a fantastic rental return on, but we didn't think we'd get any capital growth. We were happy about this, but not convinced we were doing the right thing at the time! However, we had them for about 18 months and sold them in January for a HUGE profit! We painted one, and the other one we had to do the whole bit, garden, carpet, kitchen, bathroom...everything! Spent $12,000, but made a massive profit anyway. We are actually regretting not keeping one...but I'm not allowed to dwell!!

- Fiona