Investing in Morwell?

[Jake1983]

Hi all I am a long time browser and first time poster as I am after some advice on my next move. I bought my first IP 4 years ago, a 2 bedroom apartment in ascot vale and that has has slow growth and now I'm looking for my second IP.
I am 30, not married and on a decent wage. As I am negatively gearing my first IP I thought it may be wise to add a positively geared property, as to not restrict any possible borrowing in the future. One regional area I was looking at was morwell. It has good connections to the city and prices there are really cheap with good rental yield between 7-8%.
Is this a wise enough move on my part? What are people's thoughts on investing in a regional town like this for positive gearing and possible capital gains in the future?
Any advice would be greatly appreciated

 

[Paul@PFI]

Regional towns can be excellent value however liquidity can be very difficulty. Towns in regional areas often rely on large employers and specific industries for their fortunes. So a small cough can be like influenza. A crop failure, drought or closure of a main employer and even the local takeaway does it hard.

ie Shepparton relies on SPC which is now owned by Coca Cola Amatil. There have been concerns this operation isnt cost effective. Fears of job losses. Also when fruit etc falls out of saeson or there is a glut the value of the crop affects local producers. I have a client with a former home (now IP) in Shep. They cant sell. Few buyers and a glut of sellers due to job losses.

Do your research carefully. Morwell could be serious harmed by the "green movement" who are intent of ceasing coal mining and power generation using brown coal. Morwell relies on BOTH industries as a major source of employment.

 

[strongy1986]

Would rely on much capital gain
Also wouldn't include the city in your thought

Cash flow could be good

Problem is you don't have a strategy

And with no strategy you will be reliant on capital gains to get to where you want to be
If your strategy was to purchase 20 cash flow positive properties then it would be ok

In all seriousness though morwell is a rough old place - might have some tennant issues
Maybe Churchill might be better

Or yarragon or trafalgar

Personally I think there is better prospects in regional towns in queensland - better economic outlook

 

[oc1]

Out of those areas stick to Traralgon. Biggest and best of the lot in Gippsland.

 

[strongy1986]

Out of those areas stick to Traralgon. Biggest and best of the lot in Gippsland.

I was thinking of places with higher yields. You would be lucky to get 180 a week for entry level properties in traralgon - too many investors I think, oversupplied

A house in lakes entrance would be ok for yield , 6.5 % maybe more

I'd still be looking at bigger cities interstate, more value, more potential

 

[oc1]

I was thinking of places with higher yields. You would be lucky to get 180 a week for entry level properties in traralgon - too many investors I think, oversupplied

A house in lakes entrance would be ok for yield , 6.5 % maybe more

I'd still be looking at bigger cities interstate, more value, more potential

An extra $20 a week doesn't turn me on. Atleast in Traralgon's better areas I know I'll get my rent.