Risky properties for investment

[onetwothreefour]

Risky properties for investment:
- in mining or resource town
- short commercial lease
- had lots of tenants
- first property (no experience)
- defence (dha)
- need reno

Has anyone purchase a IP that was considered risky and still went ahead? Did it turn out to be risky(bad) or good investment?

 

[Propertunity]

Risky properties for investment:
- first property (no experience)

This is not a 'risky' property. The risk is entirely 'the buyer'. This risk can be mitigated by doing lots of research and due dilligence or outsourcing this to a BA who knows what they're doing.

- defence (dha)

That's not a risky property either. Although they are not my cup of tea, many people do well from DHA properties.

- need reno

Again, this is not a risky property IF you do your DD ......AND you are experienced, OR have trusted people who know how to manage a renovation. Many people, myself included, have done very well from renovating properties and using the equity created to leapfrog to another property .....and another.

 

[onetwothreefour]

This is not a 'risky' property. The risk is entirely 'the buyer'. This risk can be mitigated by doing lots of research and due dilligence or outsourcing this to a BA who knows what they're doing.

hhmmm......

That's not a risky property either. Although they are not my cup of tea, many people do well from DHA properties.

It's a risky investment for me. To start investing in dha, you would be -ve geared. The newer properties are either located in new areas or very expensive properties (killara NSW $900K).
There are some ex dha properties for sale in NT.
What happened if dha would not renew the lease? The ones in NT had high strata and insurance fees. Local people wouldn't be able to afford it.

Again, this is not a risky property IF you do your DD ......AND you are experienced, OR have trusted people who know how to manage a renovation. Many people, myself included, have done very well from renovating properties and using the equity created to leapfrog to another property .....and another.

You can do as much DD as you possibly can, but sometimes mistakes do happen. People learn from mistakes, it's part of gaining experiences.

Any investments carry risks (big or small), it's up to individual investors appetite for risks is the deciding factor.

 

[HotRod]

Risky properties for investment:
- in mining or resource town
- short commercial lease
- had lots of tenants
- first property (no experience)
- defence (dha)
- need reno

Has anyone purchase a IP that was considered risky and still went ahead? Did it turn out to be risky(bad) or good investment?

Yes, VERY good.

One person's risky investment is another's gold mine.

When we started investing no one wanted to touch them with a 10 foot pole, investing in a far off place that no-one had really heard of nor wanted to go visit.

This was before this new fangled thing called the interwebs. You actually had to go to the corner store, buy the newspaper, bother to read the RE section, call up on a telephone attached to the wall and then actually go and see the thing before you bought it.

I'll post in the future in more detail the concepts of a "corner store", "newspaper" and how on earth a phone could work attached to the wall for those a bit confused with those things.

 

[onetwothreefour]

Thanks HR.

Banks see risks differently than investors.

I see gold, they see risks.

 

[AlmostBob]

the bank is not in the business for YOU to make money, banks are in the bank make money business.
they want you to borrow money, pay exhorbitant interest on it while it sits in a savings account losing value, then give it all back to them, with early repayment penalties.
no risk

risky properties, can be a large source of cg cf (and FU to the bank.) risk assessment becomes the difficult, chief requirement.

edit: risky properties:-> Nathan would have a great deal to say.

edit2: dha houses, have a guaranteed rate of return, regardless of whether there is a tenant, and a guaranteed restoration of the property to fantastic condition at the end of what is usually a long agreed fixed term. EX-dha homes are usually only ex because the owner refused some upgrade that dha requested

edit3: mining or resource town:- at the start or the end of the mine, makes a huge difference. manganese mine 55km north of Tennant creek opened april 2012, tennant creek rents tripled between between january and march. been stable since, build or buy a property for rent now, see little return. bought cheap years ago, and struggled, now goldmine. new mine opening 55km east, will it happen again, probably. but banks say country town = risky

 

[Rolf Latham]

one mans risk, anothers opportunity of a lifetime......................


ta
rolf

 

[Corey Batt]

one mans risk, anothers opportunity of a lifetime......................


ta
rolf

I and no doubt a lot members on this forum would know many people who would say buying any investment property is 'risky'.

I think Propertunity hit the nail on the head.

 

[Ausprop]

Risky properties for investment:
- in mining or resource town

made my best money out of these towns, the risky ones are in the cities where you get some whinger paying a few % yield and wants you to rush out to the shops everytime they break something or would like the latest mod con

 

[BayView]

"Property is risky"

"But what about all that debt"

"But what if the tenants wreck the place?"

And other gems......

These are why most folk don't do it, and if they do; it's their own holiday house, which is quite ironic because there are no tax deductions or income from a holiday house to help with the all-important cashflow.

It could be said that the lack of cashflow - if it occurs - makes property risky

 

[Charlotte30]

Risky properties

one mans risk, anothers opportunity of a lifetime......................

I agree with the above quote.

Risk is calculated based on your own experience. It does propel you forward much faster. You just have to believe in your decisions and control your fears.
Charlotte30

 

[Nathan]

Depends how you view risk.

I am very risk adverse and property investing is all about the numbers so making sure you buy below market value, cash flow is very strong, good solid upside for capital growth then the risk is minimised.

pretty houses out of boxes are VERY risky IMO, unless you buy bulk administrator stock. I have bought about 500 new units over the last 12 - 18 months for myself and my clients and let me say these arent risky properties, they tick every box, but for the people that bought in these complexes and paid retail it was VERY risky business.

Nath.

 

[onetwothreefour]

I believe mining towns are not risky (compare to units in blue chip areas) and it's annoying when our broker keeps 'scaring' us.

I also like commercial properties, and again our broker keeps scaring us.

Time to find a new broker...

 

[Aaron_C]

I believe mining towns are not risky (compare to units in blue chip areas) and it's annoying when our broker keeps 'scaring' us.

I also like commercial properties, and again our broker keeps scaring us.

Time to find a new broker...

How does he scare you?

 

[mumbai]

How does he scare you?

 

[onetwothreefour]

How does he scare you?

Hard to get bank to approve the loan.
Need 20% deposit
Very volatile
Hard to maintain the high yield.
Need 30% deposit.
Bad areas.
Lease won't be extended.
..
...

 

[geoffw]

I had a DHA property for many years. It was my first IP.

I still have the property, it's just not DHA any more.

It was negatively geared for a number of years- but it is in a good area (Jerrabomberra, near Canberra) but not in an expensive area. When it was negative I had sufficient income to support it, and used the deduction available. Now it's risen in value substantially, as has the rent. It's yielding about 5% on current value, perhaps 12% on purchase price.

DHA had a nine year lease with a three year option, which they exercised. It's been tenanted in the four years since.

Certainly not what I would call a risky investment.

 

[Aaron_C]

Hard to get bank to approve the loan.
Need 20% deposit
Very volatile
Hard to maintain the high yield.
Need 30% deposit.
Bad areas.
Lease won't be extended.
..
...

Oh right. Don't know why some people look how not to do the deal - that's the job of the credit area

 

[HotRod]

I had a DHA property for many years. It was my first IP.

I still have the property, it's just not DHA any more.

It was negatively geared for a number of years- but it is in a good area (Jerrabomberra, near Canberra) but not in an expensive area. When it was negative I had sufficient income to support it, and used the deduction available. Now it's risen in value substantially, as has the rent. It's yielding about 5% on current value, perhaps 12% on purchase price.

DHA had a nine year lease with a three year option, which they exercised. It's been tenanted in the four years since.

Certainly not what I would call a risky investment.

The Margaret Lomas's of this world would say it is risky.

Guaranteeing rents and locked in for a long term, it would be a "scheme" in her book and poo poo it.

The only thing that's ever put me off DHA is the high management fees, but I guess on the upside, you get the property given back to you with a new lick of paint and new carpets after 9 years or so.

 

[geoffw]

The Margaret Lomas's of this world would say it is risky.

Guaranteeing rents and locked in for a long term, it would be a "scheme" in her book and poo poo it.

The only thing that's ever put me off DHA is the high management fees, but I guess on the upside, you get the property given back to you with a new lick of paint and new carpets after 9 years or so.

Rents were neither locked in nor guaranteed. They were reviewed according to the market, and on one occasion, I appealed and won a rise in rent.

Having had a great success with a negatively geared property with solid growth, I wouldn't have much patience with people poo pooing me on a strategy which has already done well, and one which, as a newbie investor at the time, was very secure and worry free.