Strategy question

[MIW]

as you are very aware goals and strateiges change, I m looking for a LOE and LOR approach with a higher concentration on LOE, the way Isee it LOR is a given (alabeit slower and predictable), while LOE is more unpredicatable,

goals havent changed, however, the lack of growth in my regionals (unfortunately) with what I see is potentailly only down fall due to sydney boom either ending or slowing down soon, Im thinking of getting rid of them

but some here say regionals lagg a lot further behind time wise,
which does sound reasoanble as well

Sydney has nothing to do with regional, you need to research more where you invest! What was the growth in where you invested in the last 10 years, what industries are present there, if just mining or tourism then the places can suffer for years, as the whole economy may be reliant on just one industry, so what if there is a downturn?.
The past performance is not an indication of the future performance but you really need to research the areas you are investing into?
Is the population on the increase, is wage growth present, what economy is there, so you see you really need to spend time on research on the place where you wish to invest!
Why did you invest there in their first place, what was it that you assumed that CG would be there?

 

[Brady]

Where have you invested?

Why did you invest there?

What has changed since the time of purchase?

What is going to change going forward?


Answer these and should know pretty quick if you should keep them or get rid of them. I think sharing the answers would provde benefitial to the forum.

 

[WattleIdo]

Thanks everyone. Based on my researxh. I was expecting the regionals would either do better then the average in terms of %cg (this was before the sydney boom)

Unfortunately. Maintenancw on these has been higher then expected.

Was expecti g them to grow decently. Then keep on buying

But i feel that the regionals eg bathurst wagga etc arenot going to do well especially if the boom in syd ends

If you've bought into these country cities then you're doing fine. Not only is there a big build-up of equity in Sydney but once the boom ends, rents will start to increase again. When we start hearing about a rental-crisis, that's when the money starts to hit the regionals.
All sorts of people start streaming out of the cities looking for some kind of relief. They're usually pleasantly surprised about how life can be so modern and so old fashioned at the same time.
Since you're not the inner-city, blue-chip type of investor, why don't you just chill for a while? You're still a baby. If you're working, just enjoy your job. Enjoy earning money to cover your costs.
You're often posting about renovations and improvements. When tenants vacate, put some time and energy into making the properties attractive to the kind of tenants who would make your life easier. That is, no-nonsense, clean-living, pet-loving, reasonable-rent-paying singles and couples who like good internet connection, clean kitchens, baths, showers, decent paint-work, lawns, fences, etc.
You've already got enough assets. For the time-being, put your effort into making them easier to hold so that in 10-15 years they're easy to sell or rent depending on how you feel at the time.

 

[TMNT]

Sydney has nothing to do with regional, you need to research more where you invest! What was the growth in where you invested in the last 10 years, what industries are present there, if just mining or tourism then the places can suffer for years, as the whole economy may be reliant on just one industry, so what if there is a downturn?.
The past performance is not an indication of the future performance but you really need to research the areas you are investing into?
Is the population on the increase, is wage growth present, what economy is there, so you see you really need to spend time on research on the place where you wish to invest!
Why did you invest there in their first place, what was it that you assumed that CG would be there?

I assure you i have done my research and if you think regionals are not linked to sydney then you shouldnt be investing

 

[MIW]

I assure you i have done my research and if you think regionals are not linked to sydney then you shouldnt be investing

You mentioned that the %CG was not there as per your expectations, so all I pointed out was why not, what went wrong in your assumptions, what was the strategy, that's all?
My personal strategy is not to invest regional, in addition I do not invest for the numbers, so I just stick and will continue with what works for me, that's all.
I invested in 2013 and 2014 in different states, yet was able to manufacture around 20%equity and increase accordingly the rents. The renovation permitted no maintenance so far....

 

[MIW]

I was just concerned for the regional areas, as I read on Michal Yardney's blogs that regional employment trends do not look that great.
IMHO, we need population growth and economy or wages, or employment growth (just few very general factors) for growth for properties.

Some of the things mentioned were:

"Regional unemployment trends"
The month-to-month capital city and regional unemployment rate figures by state and territory are wildly erratic, though I have charted them below for completeness.

As I considered here during the week, the smoothed data shows that regional unemployment is demonstrably rising in Australia.

The most notable divergence between city and regional unemployment is increasingly to be found in New South Wales.

The reported unemployment rate in thriving Greater Sydney has declined to just 5.1 per cent, while regional unemployment in the state is rising materially, now hitting 8.3 per cent, similarly echoing adverse shifts in mining employment.

Here is the smoothed rolling 12 monthly data for New South Wales, with the latest figures suggesting that the divergence will continue."

So you see that's why I back up my statement that regional not necessarily follows what it did in the past, other factors like rising unemployment, may play a role?

 

[Brady]

I get concerned when people make generic comments about regionals.

Regionals had mines, mining boom over, jobs go. That should of been consideration before buying in mining town. Should be looking at the regionals that had diverse industries with growing population.

 

[MIW]

I get concerned when people make generic comments about regionals.

Regionals had mines, mining boom over, jobs go. That should of been consideration before buying in mining town. Should be looking at the regionals that had diverse industries with growing population.

Yes I agree with you, that's what I was trying to point out in previous comments, what was the strategy and what research was done, whether these places were reliant on one major industry or not, what drivers were present assuming the expectation that the %cg would follow Sydney's growth?

 

[TMNT]

ahhh, now this is good discussion,

to add to the discussion, my regionals arent tiny tiny towns, lets say mid sized, although I do have 1-2 mining dependant ones, these are the ones im not worried about or thinking about selling

I chose these regionals because the fundamentals were good, sure they werent perfect, eg crime, youth unemployment were higher then average but I felt the pros outweighed the cons.

I too also subscribe to the theory of once the Metro becomes not worth it for investors, then they move to spill over suburbs/.towns, and this is where regionals come into play. also, their low entry point was another pro for me and suited my needs.

and here we are in 2015 June at this discussion as I was a bit surprised to see the regionals going absolteuly no where

 

[WattleIdo]

Probably a couple of quiet years to sit through but no worries, we have cashflow.
As for unemployment, there are 2 factors that must always be considered.
1/ mining - as already mentioned, the share-house, hotel-living miners are not as prolific as they were for a while. Lots of mining big-wigs have moved on too - leaving behind beautifully renovated houses.
2/ the 'unemployables' - in a healthy economy there'll always be a small percentage of people out of work and looking for work. Then there's the ones who are unemployable. Together, in an ideal world, these 2 groups amount to 5% of the population (or so I learnt in Grade 6).
Regional and rural areas house a lot of the 'unemployables' because life is cheaper, less stressful and freer in the country. On the other hand, there's plenty of work for solicitors, doctors, nurses, teachers, firies, counsellors, posties, pharmacists, plumbers, carpenters, other tradies, bakers etc etc. And increasingly so.

 

[Brady]

Regionals aren't going nowhere.

My West Bathurst property is up 22% in couple years. Mount Austin (Wagga) property is up 12% in similar time.

Where are your regionals?

 

[TMNT]

Regionals aren't going nowhere.

My West Bathurst property is up 22% in couple years. Mount Austin (Wagga) property is up 12% in similar time.

Where are your regionals?

got in bathurst, which to me has gone up 5% in 2 years, im basing that on a chat with the agent,
ashmont
dubbo
orange

maybe im being a bit pessimistic but to me after chatting with the agent if I sold now id pretty much get the same price as what I paid

 

[see_change]

I was just concerned for the regional areas, as I read on Michal Yardney's blogs that regional employment trends do not look that great.
IMHO, we need population growth and economy or wages, or employment growth (just few very general factors) for growth for properties.

Some of the things mentioned were:

"Regional unemployment trends"
The month-to-month capital city and regional unemployment rate figures by state and territory are wildly erratic, though I have charted them below for completeness.

As I considered here during the week, the smoothed data shows that regional unemployment is demonstrably rising in Australia.

The most notable divergence between city and regional unemployment is increasingly to be found in New South Wales.

The reported unemployment rate in thriving Greater Sydney has declined to just 5.1 per cent, while regional unemployment in the state is rising materially, now hitting 8.3 per cent, similarly echoing adverse shifts in mining employment.

Here is the smoothed rolling 12 monthly data for New South Wales, with the latest figures suggesting that the divergence will continue."

So you see that's why I back up my statement that regional not necessarily follows what it did in the past, other factors like rising unemployment, may play a role?

Michael Yardney is quite good , BUT , he only advises people to buy good well located properties . I've never heard him recommend somewhere like Mt Druitt or Logan or regionals . He will often advise people against that type of property .

Lots of people on the forum have made money in those types of areas . The main employer in those areas is the government ( via Centrelink ...)

Regionals follow Sydney . We have a weekender in North Arm Cove , near tea gardens and even that's started to move now . Follows around 18 months after Sydney .

People cash up in Sydney , and move to a sea or tree change or get priced out of Sydney .

Cliff

 

[Brady]

got in bathurst, which to me has gone up 5% in 2 years, im basing that on a chat with the agent,
ashmont
dubbo
orange

maybe im being a bit pessimistic but to me after chatting with the agent if I sold now id pretty much get the same price as what I paid

Mine was based on valuation which I can use for finance, I have no intension of selling so it works for me.

Will also depend a lot based on the price you paid for the property.

 

[TMNT]

Mine was based on valuation which I can use for finance, I have no intension of selling so it works for me.

Will also depend a lot based on the price you paid for the property.

Yeah i agre with you
My yields are great however the maintenace and vandalism and vacancies are pretty bad hence if i feel likenits not going to perform theb id rsther sell

 

[MIW]

Michael Yardney is quite good , BUT , he only advises people to buy good well located properties . I've never heard him recommend somewhere like Mt Druitt or Logan or regionals . He will often advise people against that type of property .

Lots of people on the forum have made money in those types of areas . The main employer in those areas is the government ( via Centrelink ...)

Regionals follow Sydney . We have a weekender in North Arm Cove , near tea gardens and even that's started to move now . Follows around 18 months after Sydney .

People cash up in Sydney , and move to a sea or tree change or get priced out of Sydney .

Cliff

Agree with the first paragraph, but not ALL Regionals follow Sydney, really do they? The person suggested in the thread that did not receive the expected %CG, perhaps did not purchase at the below or market value?
As you know deals are to be found everywhere, depending on the strategy, but paying a fair price is important, IMO too.

 

[TMNT]

Agree with the first paragraph, but not ALL Regionals follow Sydney, really do they? The person suggested in the thread that did not receive the expected %CG, perhaps did not purchase at the below or market value?
As you know deals are to be found everywhere, depending on the strategy, but paying a fair price is important, IMO too.

Hang on, a few paragraphs ago you were telling me that regionals in NSW dont follow sydney

also, buying under market value doesnt = capital growth,

buying a 400k property for $200K but with no growth 5 years later, is NO capital growth, but a good purchase.

To me fair price, is market price or intrinsic price, ]
buying below market price is not fair price, but simply lucky/good negotiations/desperation via the vendor/ignorance etc. etc. etc.

 

[Allgood]

Hey, I have one in bathurst and one in wagga and I agree cg hasn't been there since I purchased although it's been less than 12 months and I think I've bought bought near the top of bathurst. I'm hoping for cg of just 3%pa so hopefully I'll get it, but don't know if I will.

I've also been looking at Orange but worried about vacancy rates and that it has been flat for a while. Does that mean it will stay flat or ages or is it due for a rise?? Who knows...

 

[tj22]

as you are very aware goals and strateiges change, I m looking for a LOE and LOR approach with a higher concentration on LOE, the way Isee it LOR is a given (alabeit slower and predictable), while LOE is more unpredicatable,

goals havent changed, however, the lack of growth in my regionals (unfortunately) with what I see is potentailly only down fall due to sydney boom either ending or slowing down soon, Im thinking of getting rid of them

but some here say regionals lagg a lot further behind time wise,
which does sound reasoanble as well

what is a LOE/LOR strategy?

also what is LOE and LOR stand for?

 

[jerrybee]

what is a LOE/LOR strategy?

also what is LOE and LOR stand for?

I think living off rent / living off equity. The latter would be achieved through drawing line of credits and just spending that, and paying it back with future rent increases, LOC's or selling down. Just a guess though.