Positive Cashflow

[Montrose]

This may seem like wishful thinking but does anybody have any suggestions on where I might find positve or at least neutral cashflow IPs with one proviso and that is that the town must have a population of no less than 15,000 and all the industry/amenity/infrastructure that would normally come with a town of that size. Price range is up to $500,000.

Montrose

 

[beachgurl]

I have done a fair bit of research on this lately and most of the CF+ places I have found are in small country towns, areas affected by drought (so the source for tenants has disappered) or is in a very bad part of a large country town.

If you are a good negotiator, it may be possible for you to pick something up that is cash flow neutral or even positive if you secure the right place. Also, target a few areas where the %yields look good and get to know a few real estate agents, if there are good deals going around, they generally don't make it to the real estate websites.

 

[Dazz]

I think your proviso just killed it stone dead.

 

[The Y-man]

I think your proviso just killed it stone dead.

Didn't say it had to be residential......

Cheers,

The Y-man

 

[Dazz]

S'pose not....but then I just naturally assumed....

 

[Montrose]

Thank you all for your response. Yes I was talking residential. You all pretty much confirmed what I already thought. From the research I have done about 5% to 6% gross is as good as you can get.

Montrose

 

[lizzie]

build it yourself .... block $150k, duplex $200k = $350k (plus holding costs). rent $260ea = 7.7% (plus depreciation and tax deductions)

 

[want2bewealthy]

I find that studio apartments usually have around 6-7% yields, although I wouldnt buy one.

 

[Mofra]

Depending on your finance situation, some strata storage units will come close.

 

[Prakman]

Having bought properties in SA in Elizabeth, it was purchased for 145K and rents at 200 per week, 7.12%. Have a look threre, but you will have to be quick.

 

[NOT 2 L8]

build it yourself .... block $150k, duplex $200k = $350k (plus holding costs). rent $260ea = 7.7% (plus depreciation and tax deductions)

Hi Lizzie,

This sounds pretty good to me. Where would you get the type of quality that would attract that sort of rent for $175K outlay. Being from WA it costs that much just for an appointment with a builder.

Cheers Chrisv.

 

[Omega Investmen]

Residex Top 100 best rents ($275)

Hi Montrose,

For $275 you can by Residex's Top 100 Best Rents, which details the highest 100 rental yield suburbs in Australia. Granted some of these will be in smaller towns, however there is likely to be some that fit your criteria.

Haven't bought this yet (available at www.residex.com.au/index.php?content=positive&from=lhsmenu), so let me know what you think if you get it!

Kind regards,


Flynn

[email protected]

 

[pango]

I have just purchased a CF+/neutral property in Karatha WA. It doesnt quite fit into your criteria but I think the reasoning behind my purchase has merit.
My near new 3 BY 2 unit cost $625k and I have just let it to a Govt tenant at $1200p/week for 5 years with annual rent reviews to market with the base set at $1200 p/week.
To my mind, the CG may be less than I could expect in an area of your liking, however, I will not put a cent of my own money towards this IP over the next 5 years, in fact it may just fund my next purchase with the leftover cashflow. I expect some CG over this period too.
There are some properties in the South Hedland area of WA that you would get at less than 500k, and they will be CF+ or at least neutral, with tenants lining up to get them for good lease terms.
I would be interested to hear what "Dazzling" has to say about this theory. I am quite new to the IP arena and have 3 properties in my protfolio that is at this time CF+. I have around $1m equity with good servicability and consider these areas pretty solid with the oil/gas and minerals industries well positioned for the long term and with much growth planned. Seems an acceptable risk level to me, you may disagree.??

 

[bennido]

This may seem like wishful thinking but does anybody have any suggestions on where I might find positve or at least neutral cashflow IPs with one proviso and that is that the town must have a population of no less than 15,000 and all the industry/amenity/infrastructure that would normally come with a town of that size. Price range is up to $500,000.

With that kind of budget, you don't really need to go into the regional areas as you can find +ve cashflow (as opposed to +ve geared) properties in the out suburbs of Melbourne.

If you meant +ve geared and with your proviso, the best places in VIC would be towns like Morwell, Mildura, Horsham, etc. All relatively large towns with good infrastructure.

 

[knightm]

I have just purchased a CF+/neutral property in Karatha WA. It doesnt quite fit into your criteria but I think the reasoning behind my purchase has merit.
My near new 3 BY 2 unit cost $625k and I have just let it to a Govt tenant at $1200p/week for 5 years with annual rent reviews to market with the base set at $1200 p/week.
To my mind, the CG may be less than I could expect in an area of your liking, however, I will not put a cent of my own money towards this IP over the next 5 years, in fact it may just fund my next purchase with the leftover cashflow. I expect some CG over this period too.
There are some properties in the South Hedland area of WA that you would get at less than 500k, and they will be CF+ or at least neutral, with tenants lining up to get them for good lease terms.
I would be interested to hear what "Dazzling" has to say about this theory. I am quite new to the IP arena and have 3 properties in my protfolio that is at this time CF+. I have around $1m equity with good servicability and consider these areas pretty solid with the oil/gas and minerals industries well positioned for the long term and with much growth planned. Seems an acceptable risk level to me, you may disagree.??

I looked at NW WA too some time ago, it was too hot for me to get in at my buget but the rents are very high there, if you have the guts to fly up there and sniff around you could pick up a rennovator, fix it up and get LARGE rent.

I ended up purchasing in Kalgoorlie at that time (just under 2 years ago) coz it was still a cooler market and bigger town/more accessible. It has boomed too but not as much. If you have the energy in Kal I reckon you can still pick up a renovators delight in town on a big block. It will be a little negative cf at first but with some good bargaining, then the renno it wont cost too much. Then if you really wanted the cash flow do the subdivision, sell the land off the backyard and pay down the mortgage on the house, it would be +cf for sure. I am doing a sub on mine now, not sure if I will sell the land yet or build.

 

[Peter Parker]

I ended up purchasing in Kalgoorlie at that time (just under 2 years ago) coz it was still a cooler market and bigger town/more accessible. It has boomed too but not as much. If you have the energy in Kal I reckon you can still pick up a renovators delight in town on a big block. It will be a little negative cf at first but with some good bargaining, then the renno it wont cost too much. Then if you really wanted the cash flow do the subdivision, sell the land off the backyard and pay down the mortgage on the house, it would be +cf for sure.

Those 'renovators delights' are generally small asbestos houses on large high-maintenance blocks. The condition of many is poor, especially around Boulder. There may be work needed to get it up to standard, let alone add value.

Workers moving in generally want a modern brick/iron unit or house with minimal maintenance.

This is reflected in rentals where units that are less than 20-25 years old command higher rents than old houses.

When I was last in Kalgoorlie (2004) I didn't see much evidence of newer units being built behind older houses. While the blocks are a subdividable size, I'd wonder how easy it would be to sell off a block behind an old house.

Building (say) 3 units on the whole site should produce quite a good yield, but there's a higher risk and a completely different level of investor involvement.