New here, about to take the plunge!

[itsjustme]

Hi everyone,

It's my first post. I know these kinds of questions get asked all the time, but the parameters and statistics seem to change so rapidly in the property market!

I'd like to buy an IP, with roughly neutral cashflow.

Rather than get all excited, rush out and buy someting without thinking, I have decided to take a deep breath, post on here and ask you all for your valued opinions!!


Some basics:
Can afford up to about $110,000, so am looking at the very bottom of the market;
I'm a single mother, on a low income;
These factors necessitate me looking in regional areas of Victoria.

Here's the places I'm thinking of. What do you think of:
a) their potential for capital growth? Slow but steady is fine.
b) the rental demand?


Hamilton (Spent a lot of time here over the last couple of years. Would consider buying in town if I knew more about the low end of the rental market and demand. Definitely not keen on Coleraine (very tired, unhappy looking place)

Horsham (read quite a bit on here about Horsham, opinion seems divided. I'm also a bit wary of the ex-housing commission areas. Not sure if these have good resale value)

Ararat (quite interested in this one but don't know much. Enlighten me!)

Portland (maybe starting to get a bit expensive)

Heywood (is it close enough to Portland for CG? What about rental market? Seems also to be a lot of properties on the market. Whole town for sale can't be good).

Warrnambool (again, not much in my price range)

Mortlake (Been there a few times, not sure if I like the place. My heart would say 'no', but my head says that you people have had some positive things to say about it).


My main fear about buying in a regional area like these is either not being able to find a tenant, or losing my tenants and not being able to replace them.

I've also considered little towns like Murtoa and Dunolly but imagine it would be hard to replace tenants here when the towns are struggling to keep their population numbers up. I'm less interested in squeezing my tenants for maximum $$$ than I am in holding on to someone who's happy to stay in the property. (Believe me, being a single mum I've had a *lot* of discrimination in the rental market - took me 12 months to find my current rental despite my impeccable record - so I intend to be a very generous landlady!...just had to throw that in...couldn't resist...sorry...)

Thanks all!

 

[BV]

itsjustme

What is your reason for investing?
How long are you willing to hold it for?
Is the rent going to be covering the mortgage and the other expenses?
What if you don't find a tenant for 2months?

Also, I don't know if you're aware but prices in the areas you've mentioned (and everywhere else) have gone up and in areas of low demand there could be some price corrections.

What if prices fall after you buy and they don't come back for another 5 years? Can you afford to hold it for this long or for even longer?

 

[itsjustme]

Hi Bill,

These are all good questions.

The reason for investing is tricky. I am good with saving money, but am hopeful that mortgage repayments on a property will help with providing enough equity for me to be able to buy a house of my own one day.

I'm willing to hold the property for at least ten years. As I said, looking for slow but steady capital growth.

I'd like the rent to come close to covering the mortgage, but if it didn't completely cover it, and if it didn't cover rates and repairs, that would be ok. Happy to be slightly negatively geared but would prefer to be neutrally geared. If I didn't find a tenant for 2 months I would be ok; if it was four months I would be worried.

Yep, I know that prices in the areas I mentioned have gone up. I have nearly crossed Warrnambool and Portland off my list but there's still a few places in Horsham, Hamilton, Ararat, quite a few in Heywood.

I'll probably keep looking at other towns and other possibilities. I would most like to buy into the goldfields, but I'm pretty sure I've missed my boat on that one!

Cheers.

 

[Lily House]

Hi itsjustme,

I think it's great that, as a single mum, you are trying to get ahead financially.
Just make sure you don't overextend yourself.

Perhaps, with your price range, you could look at Mildura.
I bought a 2-bed unit there last year for $105k.
Spent a couple of grand putting in air conditioning and fixing a couple of little things. Now renting for $150 a week.
I'm not expecting great growth, but with a good rental return it pays for itself.

There are good parts of Mildura and not-so-good parts, so you do have to be careful where you buy.

Good luck with your investment journey.


Caroline

 

[csc2]

Excellent move, congrats!

My concern: Limiting yourself what what maybe available in the market somewhat with your budget.

Thought: Have you considered looking at going halves or even thirds in an investment with someone with possible previous experience.....this may help with obtaining an actual legin to a more "quality type" of investment.

For sure you will need a compatible person to get along with but they are out there.

Upgrading to a better type of property if purchased well, will give you a better nett profit should you resell hopefully.

The bottom end of the market type property may well cost you big time with continual maintenance.

There are gems out there but they dont come along daily.

The key though with any investment is to buy smart...may take months to source the right property or it may take just a day.

Best of luck, please keep us posted.

 

[JT7]

Hi everyone,

I'd like to buy an IP, with roughly neutral cashflow.


Some basics:
Can afford up to about $110,000, so am looking at the very bottom of the market;
I'm a single mother, on a low income;
These factors necessitate me looking in regional areas of Victoria.

Here's the places I'm thinking of. What do you think of:
a) their potential for capital growth? Slow but steady is fine.
b) the rental demand?


Horsham (read quite a bit on here about Horsham, opinion seems divided. I'm also a bit wary of the ex-housing commission areas. Not sure if these have good resale value)

Hi itsjustme,

I'm keeping a close eye on Horsham. Don't discount ex-housing commission areas because there is sometimes opportunity to redevelop later down the track. I think having a long term high yield strategy is sensible if like myself you havn't got large deposible income.

There is a small pocket of ex-housing commission in West Horsham which is now starting to be developed. Alot of these properties are in the hands of investors now with exactly the same strategy. I've seen properties in this area from around the 90k - 130k mark. At 130k the property would want to be pretty good though. Rents are accordingly scaled from about $120 - $180wk depending on the condition of the property. There is some room to do basic reno's to increase yield but I don't think you'd want to throw too much into the project.

According to the Residex Best Rents report March 2010, Horsham is set to see some value come into the market 6% ave over the next 5 years. Granted you won't see the best growth in the ex-commission areas but you will get some and ensure yourself some potential down the track.

No matter where you decide you are on the right track. Good on you!

JT

 

[itsjustme]

Thanks everyone, for your support and encouragement.

Lily, I will add Mildura to my list of possibilities.

I know that I could spend more and get a better return in the end, but I haven't been able to find anyone to go halves with me on a property - most people think I'm a bit odd for wanting to buy in the country and nobody else in my family is in a position to help out in any way. I am on my own with this. Therefore Lily is quite right: I don't want to over extend myself and I will definitely try to take csc2's advice about 'buying smart'!
Thanks also to JT7 for advice about West Horsham; I think I may have to head out there for a reconnaisance mission, with a side trip to Ararat.
I am very committed to this; have been wanting to make a move for a long while now, I finally have the deposit scraped together, now it's just finding the right place.

 

[MichaelW]

Good on you, your enthusiasm is evident.

I'm sure you'll do well if you apply a degree of caution and don't rush your purchase. Do as others have suggested and look for value purchasing where a cosmetic reno might allow a higher rental yield. You could probably spend a couplle of hundred dollars and buy a report of high yielding growth potential regional suburbs too. Not a bad investment given you're planning on spending $100,000.00 on the purchase.

Good luck,
Michael

 

[Mr. Fabulous]

Where's Rumpled Elf?

 

[Gentle_Chief]

itsjustme, firstly welcome to the forum.

From reading you post and replies it is quite clear that you are narrowing down your search very diligently. And you are on the right track. Good on you!

I can shed a bit on Horsham as we had bought in Horsham recently.

Purchase price: 130,000 (one street from the CBD)
Renovations: 3,000
Current Rent: 200 pwk
Land: 930 sqm (future development potential)

Hence CF positive from the start. Just slightly, but good enough.

Flew into Avalon airport, stayed overnight, hired a car and drove down there (4 hours approx from Melb) a couple of times already this year. You will pass Ararat, Beufort & Stawell on the Western Highway. Lovely drive. The Grampians region have a few strong economic indicators going for it. Horsham is one of the key hubs to this largely thriving area.

To be honest, do not worry about:
A) ex-housing commission areas. West Horsham and nort east Horsham are housing commission areas.
B) Not able to find a tenant for an extended duration of time (like 2-3 months). The probability of that happening is miniscule.

BTW contrary to the popular belief, housing commission areas will have the largest capital growth as they are starting off a smaller base. These areas are undergo a constant "Re-gentrification" when investors and house proud first home buyers move in.

Infact in Sydney, Housing commission areas in the West have far surpassed their richer cousins in the East, both in Capital Growth and in cash-flow returns.

Look at statistics over a long term (10-15 year period) for St.Marys (West) versus Bondi (East) and you will see the results first hand.

 

[skater]

Thought: Have you considered looking at going halves or even thirds in an investment with someone with possible previous experience.....this may help with obtaining an actual legin to a more "quality type" of investment.

Don't do this unless it is a last resort. All sorts of problems can come from this where two people have different agenda's or needs as time goes by.
For sure you will need a compatible person to get along with but they are out there.

The bottom end of the market type property may well cost you big time with continual maintenance.

We have quite a few ex-housies in our portfolio. There is strong demand for good basic housing. So long as you have a good PM, Landlords insurance (EBM or Terri Shear, not a generic name), and a buffer (just in case it's needed), you will often find that there is little in the way of maintenance, so long as you provide a well maintained property at the outset. Just don't give in to tenants demands as much of what is wanted is just that, a WANT, not maintenance. These houses provide very good yield, and if you are on a low income, you need yield.

itsjustme, firstly welcome to the forum.

To be honest, do not worry about:
A) ex-housing commission areas. West Horsham and nort east Horsham are housing commission areas.
B) Not able to find a tenant for an extended duration of time (like 2-3 months). The probability of that happening is miniscule.

BTW contrary to the popular belief, housing commission areas will have the largest capital growth as they are starting off a smaller base. These areas are undergo a constant "Re-gentrification" when investors and house proud first home buyers move in.

Infact in Sydney, Housing commission areas in the West have far surpassed their richer cousins in the East, both in Capital Growth and in cash-flow returns.

Look at statistics over a long term (10-15 year period) for St.Marys (West) versus Bondi (East) and you will see the results first hand.

Near St Marys is my main stomping ground.

 

[JT7]

itsjustme, firstly welcome to the forum.


I can shed a bit on Horsham as we had bought in Horsham recently.

Purchase price: 130,000 (one street from the CBD)
Renovations: 3,000
Current Rent: 200 pwk
Land: 930 sqm (future development potential)

Hence CF positive from the start. Just slightly, but good enough.

Flew into Avalon airport, stayed overnight, hired a car and drove down there (4 hours approx from Melb) a couple of times already this year. You will pass Ararat, Beufort & Stawell on the Western Highway. Lovely drive. The Grampians region have a few strong economic indicators going for it. Horsham is one of the key hubs to this largely thriving area.

To be honest, do not worry about:
A) ex-housing commission areas. West Horsham and nort east Horsham are housing commission areas.
B) Not able to find a tenant for an extended duration of time (like 2-3 months). The probability of that happening is miniscule.

BTW contrary to the popular belief, housing commission areas will have the largest capital growth as they are starting off a smaller base. These areas are undergo a constant "Re-gentrification" when investors and house proud first home buyers move in.

Infact in Sydney, Housing commission areas in the West have far surpassed their richer cousins in the East, both in Capital Growth and in cash-flow returns.

Look at statistics over a long term (10-15 year period) for St.Marys (West) versus Bondi (East) and you will see the results first hand.

Great post Gentle_Chief! And well done on the purchase those are great numbers and good advise.

Itsjustme, I've not been long in this community here on the forum but there are some really tremendous people who are only too pleased to share information and insights into the market.

I have some information regarding Horsham that was past onto me from another member who is well experienced on the Horsham market and is a regular contributor to discussions on Horsham. She is a really good person.

If you PM me I'll be more than happy to pass it on and anything else I've managed to get myself.

Keep going and don't give up ever! JT

 

[mary&mat]

Hi itsjustme,

I don't have anything to contribute re country investing, just wanted to say a 'good on you!' for being a single mum & deciding to invest. I wish you the best of luck in whatever property you purchase and I'm sure your child/ren will admire your commitment . You're setting a great example for them!

Regards,
M&M

 

[Pandabites]

I too have little to contribute re. regional investing but just wanted to echo Mary&Mat's sentiments