newbie question again

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From: Kevin Fielding


Hi All.
I read a post regarding buying in areas where the proportion of rentals should be around 25% of the total properties.
If the proportion of rentals was around
25-40% there would be more competition for rental accom that would drive the rent(yield) down.
Is this true?
Conversely if the proportion of rentals was around 18-20% this would increase demand for rental accom and drive the rent up. Is this true?
When looking for an IP is it best to rely on the first scenario or the second? As the worst thing that could happen is having your IP vacant for long periods.
Can someone please help.

Kevin
 
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Reply: 1
From: Nigel W


Hi Kevin.

Welcome on board.

Just want to play devil's advocate for a moment...

Is it REALLY the worst thing that can happen to have extended vacancy? Jan Somers' latest book I think does the sums to show that over the long term, even an extended period of vacancy doesn't dent the bottom line that much...

Of course if you're heavily -ve gearing that may be a different and much more dangerous position...

the worst thing is probably never investing at all...
 
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Reply: 1.1
From: Kevin Fielding


yes I guess so Nigel, rent insurance would cover you for the short term anyway.
thanks,

Kevin
 
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Reply: 2
From: Glenn Mott


Kevin,

If you found yourself in a position where a property had been vacant for a bit longer than expected, you need some cashflow and there is plenty of competition for tenants, accepting a lower cashflow for 6 months is not as bad as no cashflow for 3 months.

Learn from this cashflow mistake I have just made..

After coming home from Sydney 6 months ago, one of my tenants moved out. He was paying $115 per week. I decided that I wanted to do some renovations on the property as it was fairly run down, so did not re let the property. The renovations started about 2 months ago. Even 4 months rent at $60 per week would have been enough to get the painting done!

We live and learn

Glenn
 
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Reply: 3
From: Will G


Hi Kevin,

Figures are important when considering an investment property but the quality of the property and price are also important. If you can get your hands on a 'median priced' property at or below market value in an area where prospective tenants want to live then you should be OK.

If there are a lot of similar/identical properties in the one area then try to get one that is unique (spa bath, view, north aspect etc ...). Tenants are going to compare properties, look for differences and take the one with the most 'bang for buck'.

This probably sounds like all of the books you have already read but it is logical.

Hope this has been of some help.

Good luck !
Will
 
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