The mining company usually pays the rent in these areas tenants pay normal or lower then market rent it's the mine companies who pay the majority of the rent
Picks For Positively Geared Property
- Thread starter james_w
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The mining company usually pays the rent in these areas tenants pay normal or lower then market rent it's the mine companies who pay the majority of the rent
I've decided to buy in a mining town and to manage the risk I've decided to go halves with a real estate agent.
Get this, he thinks I know what I'm doing and I think somebody like this guy will be handy because he really does know what he's doing.
Anyway the way I see things is that half of something is better than nothing at all....
To further manage the risk I've decided,(the real estate agent is leaving it up to me), to spend in the 400's somewhere and invest in a mining area where the boom is well and truly underway as apposed to saving money and punting on what might be the next big thing.
Get this, he thinks I know what I'm doing and I think somebody like this guy will be handy because he really does know what he's doing.
Anyway the way I see things is that half of something is better than nothing at all....
To further manage the risk I've decided,(the real estate agent is leaving it up to me), to spend in the 400's somewhere and invest in a mining area where the boom is well and truly underway as apposed to saving money and punting on what might be the next big thing.
Interesting and creative strategy NI, but getting into a JV investment with your REA means that his investment debt will count against your credit score in future. You do realise that, don't you?
For example, if you owe, say, $200K each on a shared property, his $200K will be regarded as your debt by the bank when you next got for a loan. It's not fair, but that's the way it works (because from the bank's point of view you are a guarantor to his side of the loan).
Happy to be corrected of course if there is a way to get around this with two self-contained loans, but I've not heard of this happening myself. The same thing bit me firmly on the backside when I went into partnership with my sister to buy a place. Talk about forced equity savings: We were both hamstrung for 3 years (until I managed to buy her out)!
BUT I must say, getting the REA on side to share in the deal means it must be a good deal (surely), and that you're looking at all the angles to find a way to buy it. Nice going. If it's so good a deal though, why not just go it alone? (The other thing is that the REA would have to disclose to the vendor his interest as purchaser, which might not be in the deal's best interests.)
I have decided to look for a partner and buy know as apposed to waiting 6 or 12 months and going alone. As sure as I am about this mining property I don't think it does any harm to manage the risk and go halves.
BTW The deal involves subdividing and building a second dwelling etc so the upside is we aren't splitting one watermelon.
Thanks Belbo,
Thx Thx Thx Thx
Positively Geared Property
My advice would be to buy in Muswellbrook in NSW you can buy a 4 bed House & Land property there for under $400k which when furnished can yield over $700 per week
My advice would be to buy in Muswellbrook in NSW you can buy a 4 bed House & Land property there for under $400k which when furnished can yield over $700 per week
Have we missed the boat on regionals?
I've been looking at several regional options for a while now and to me current prices in some areas don't make a lot of sense.
I'd be careful with neutral or slightly +ve geared regional properties because when interest rates hit 9 and 10% they will no longer be +ve geared and investors would have vanished so unless we're buying considerably under market value as Nathan does (to make up for the risk of future price correction & stagnation) I'd rather buy where there is strong population growth and continued demand.
What do you guys think?
I've been looking at several regional options for a while now and to me current prices in some areas don't make a lot of sense.
I'd be careful with neutral or slightly +ve geared regional properties because when interest rates hit 9 and 10% they will no longer be +ve geared and investors would have vanished so unless we're buying considerably under market value as Nathan does (to make up for the risk of future price correction & stagnation) I'd rather buy where there is strong population growth and continued demand.
What do you guys think?
I don't agree with most the above comments.
Firstly, it's very unlikely interest rates are going to hit 9 or 10% any time soon. Although a couple of rate raises by the end of the year are certainly not out of the question.
Secondly, if they did, irrespective of whether the property is regional or inner city, if the property is currently neutral or slightly + geared, cashflow will be impacted. Metro properties are not bullet proof and cashflow will be impacted in a very similar way (I own inner city and regional properties so completely unbiased, the above is fact).
Thirdly, if interest rates go up, this will only result in more rental demand as it keeps FHBs out of the market longer due to affordability. Your CG during this period might be subdued, however thats part of the property life cycle. Swings and round abouts.
Depending on which stage you are in your investing cycle, interest rate increases are not necessarily a bad thing, as it can present great opportunities from a purchasing perspective - less competition more supply. Also, rent increases are very easily justified (there is a lot of media hype around this space which creates awareness to renters), in fact I have had some of the biggest rent increases during times of increasing interest rates.
In saying that, I am not suggesting that I like interest rate increases, however, external factors such as this are beyond our control and subsequently its in our own interest to embrace it and look for opportunities any market, at any stage of the property cycle. There's always money to be made, it's all about problem solving. This could also mean not entering the market at such a time also.
I agree with your fourth point in regards to sustainable demand and population growth.
Firstly, it's very unlikely interest rates are going to hit 9 or 10% any time soon. Although a couple of rate raises by the end of the year are certainly not out of the question.
Secondly, if they did, irrespective of whether the property is regional or inner city, if the property is currently neutral or slightly + geared, cashflow will be impacted. Metro properties are not bullet proof and cashflow will be impacted in a very similar way (I own inner city and regional properties so completely unbiased, the above is fact).
Thirdly, if interest rates go up, this will only result in more rental demand as it keeps FHBs out of the market longer due to affordability. Your CG during this period might be subdued, however thats part of the property life cycle. Swings and round abouts.
Depending on which stage you are in your investing cycle, interest rate increases are not necessarily a bad thing, as it can present great opportunities from a purchasing perspective - less competition more supply. Also, rent increases are very easily justified (there is a lot of media hype around this space which creates awareness to renters), in fact I have had some of the biggest rent increases during times of increasing interest rates.
In saying that, I am not suggesting that I like interest rate increases, however, external factors such as this are beyond our control and subsequently its in our own interest to embrace it and look for opportunities any market, at any stage of the property cycle. There's always money to be made, it's all about problem solving. This could also mean not entering the market at such a time also.
I agree with your fourth point in regards to sustainable demand and population growth.
Personally I don't over commit myself to the point that I couldn't cope with any increase in interest rates. The same goes for the subdivision scenario where we all want things to go like clockwork but the reality is sometimes a surprise or two pops up which needs to be taken care of.
When the US and EU both start raising their interest rates things will change.
Actually the RBA and/or the banks are likely to raise rates before then and investors have already been spooked so can you imagine what another 0.5% or 1% will do to our property markets?
So I'm thinking that there will be more opportunities later and probably better ones. Ofcourse there is the possibility that interest rates will stay where they are for a couple of years and considering the state of the US and EU economies, market sentiment is unlikely to change so property prices will stagnate in which case it would be wiser to only add to our portfolio when good opportunities come along.
Metro properties are not bullet proof but land is limited and rents are high so demand is likely to stay high.
Yes it is a cycle but I bet that any price corrections as a % of the purchase price will be higher in areas with lower demand. Ofcourse some properties are likely to hold their prices better so if we are adding regionals to our portfolio we should probably be looking for well located properties or properties with potential for improvement or subdivision.
Nathan dosn't do this, he buys anything with good yields and that's his insurance policy.
The good returns will get him through any difficult period.
But what is our insurance policy if we just buy average performers out in the sticks?
When interest rates go up, rent doens't necesarilly go up. Don't delude yourself into thinking you've got a crystal ball on the impact of interest rates.
An equally feasible scenario is that when interest rates go up, house prices come down meaning for new investors/entrants to the market, they can afford to lower the rent and still maintain a yield which is as healthy as yours.
An equally feasible scenario is that when interest rates go up, house prices come down meaning for new investors/entrants to the market, they can afford to lower the rent and still maintain a yield which is as healthy as yours.
so renters (hopefully) will be able to afford to buy their own place, there will be more properties available for lease, rents will come down and the cycle repeats itself....
That's right - and those who bought expensively will have to wait a fair while to break even, even longer if you factor in the fact you're losing money every year (ie negative gearing) and paid 5% stamp duty.
BV , you can't be serious with all this theory of yours.
Heres a scenario.. I've payed $91,000 for a house in Gippsland and it's leased for $165 per week. That's say interest rates go to 10%,(which I doubt), how am I worse off than a switched on investor like yourself who has negatively geared a $450,000 apartment for the sake of the exercise in Hawthorn?
My tenant is on the single mothers and don't quote me but half her rent is payed by the government and it won't matter what happens with interest rates she isn't moving out anytime soon.
more later.
Heres a scenario.. I've payed $91,000 for a house in Gippsland and it's leased for $165 per week. That's say interest rates go to 10%,(which I doubt), how am I worse off than a switched on investor like yourself who has negatively geared a $450,000 apartment for the sake of the exercise in Hawthorn?
My tenant is on the single mothers and don't quote me but half her rent is payed by the government and it won't matter what happens with interest rates she isn't moving out anytime soon.
more later.
When did you buy this property?
Your property is cheap so it would not fall into the category I've mentioned.
Don't take it personally, I could be wrong but when property prices in some regional areas with unlimited land around them are approaching those of the cities something is not right.