Reply: 2.1.1
From: Jas
Steve, you got me curious
> So I will be covering this in the 'Jazzed up article'. (Hopefully
going
> out today!)
Where? Your site?
>
> In the meanwhile:
>
> BUT:
> There is also greater competition at this level. If one looks at the
> actual facts then, a different picture emerges:
>
> Example - Property @ $250,000:
> (Rent say at $250 per week)
>
> For every available rental property there are about 96 tenants. (Hence
a
> vacancy factor of about 4%)
>
> What about at the $500,000 level?
> (Rent say at 450 per week)
What about the multiple income stream argument? ie. That one vacancy of
450 a week is a lot worse than one vacancy of $250 a week (and another
$250).
>
> Well, if 96 tenants can afford rent at $250 per week, the question is
how
> many tenants can afford to pay $450 per week?
>
> Probably only about 10!
> HOWEVER, how many rental properties are available at this level?
>
> Very few in fact,
Walk into Peter Blackshaw, and this isn't the case at all. Of course,
if you head into an agency in Mawson you'd expect lot of vacancies for
the lower market.
> There are tenants available at every level of the market - it all
comes
> down to the amount of competition in the area / suburb.
>
> If one enters a suburb with at least an 80% owner ratio, it is VERY
> difficult to find a property to rent in the area.
Interesting point.
> I take your point about corporate rents at the very top level and
comment
> as follows:
>
> Two examples:
> Double Bay units at $1.12 million (renting for $1230 per week) and
$1.18
> million. (Renting for $1250 per week) respectively.
> Both leases are for 12 months.
It's the $2000 grand per month in the hole for interest payments alone
that I would be interested in finding out how you cover. I can see why
vacancy rates are a big issue
>
> 1) There was a waiting list of more than 10 applicants for these
units.
I'm curious about how long you have had them up for rent. Once--with
ten applicants, or each time with multiples? My question is really, is
this a once off?
> 2) The current valuations (independent bank assessment) for these
units is
> now $1,450,000) So, if the economy should soften, well there is more
than
> sufficient equity to purchase a cashbond income stream to cushion
> literally any period of vacancy.
I don't know enough about cashbonds beyond you give something equity and
they give you cash (and then you get your equity back). Would this be
enough to cover the payments?
BTW: when was the increase? The past couple of months? Three years?
> Lastly: Yes, yields are higher at the lower end, but hey, I MUCH
prefer
> capital growth - especially since the income stream it can purchase is
far
> greater than the small extra (taxable) yield that can be obtained!
As the yield strategy uses the rent to cover interest payments, it's
necessary. By the looks of things, you use cashbonds/something else.
Tell all, and I'll buy a couple of million dollar plus places myself!
> Okay, okay: Different strokes for different folks, but we are getting
> wonderful results by staying away from what the herd are doing.
I love the herd. Show's you which direction to go! (Hint: not their
way)
Jas
To paraphrase Charles Mackay - By the vile arts of stock-jobbers!