Where to invest - Anywhere in Aus?

Sometimes I wonder how accurate these stats really are.
I know the Cronulla market pretty well on the ground and really can't see how houses would have had a -9% CG in 2013.
From what I saw, the figure should be more like +9% rather than negative 9.
That's a massive difference and probably why I never buy based on stats, just gut.
But I'm not a qualified statistician so could be wrong with my interpretation.

Don't know, I was trying to make the point that expensive suburbs don't always grow any better than other locations which would be easy to demonstrate depending on holding period.
 
Oh, that makes it a lot more clear. Another way of explaining why people have interest only loans IPs.

So does that mean it's better to get something that's neutrally geared rather than negatively geared? That way you are not maKing payments in today's dollars. My advisor prefers low yielding properties in expensive suburbs eg a 2 bedded in the eastern beaches in Sydney. She says that CGs are higher. I understand the tax benifits, but is there any data to prove that expensive suburbs have higher growth? I guess it comes down to supply and demand. Her theory is that there will always be someone with a high enough pay packet to rent in these suburbs, even in a downturn, but wealthy people can lose their jobs too.

In terms of neutral vs -give cash flow, the answer is ... It depends. Really on your goals, your job, your total cashflow position etc. If you want a 80k cash flow income coming out of your properties you either need to target solid cashflow and wait for income from rent to increase more than payment, or pay off your loans, or add value(by market or by effort like renovations or developments) and use the equity to sell some properties and pay down the debt on the others. The debt free properties will then create the income you seek.

It is easy to say one area is always better than the other and prove it with a small sample of statistics and depending on what you measure and over which years you can prove whatever you want. As they say there are "lies, damned lies, and statistics". I prefer to target key areas based on a set of forward looking market indicators pointing to immediate growth rather than historical. It's true blue chip areas are in demand and grow well consistently because of that demand, but that doesn't mean they always will outperform. Look for arease with the amemity and the assets that will generate that demand in the future that the market has somehow overlooked resulting in temporarily lower prices.
 
Hi there,

Sure anyone can give advice here, I'll start...

Step 1 - have a plan/goal in mind, 2 years, 5 years, 10 years, it looks like you have already started this step.. keep working on it and expand it

Step 2 - build yourself a good team, a broker that understands and aligns with your strategies, accountant that specialises in IPs, lawyer, property manager etc... There are plenty of the above on this forum.

Step 3 - Where to buy...Once the above is sorted - you can start looking at places that fits into your criteria, always have the mindset "will buying this property get me closer to my goals?"

Personally, I am looking at Brisbane & Toowoomba.
Good luck!



I am interested in forming a team. I have made contacts to a broker and asked around for an accountant.

We met one person through recommendation, but being a newbie in property investment I don't know how to tell if he's good although he certainly sounds better than 3 other accountants that we met who talked more abt non property related stuff :eek:

Can anyone recommend a good accountant in Melbourne and some tips or checklist to identify a good accountant?

Also should I be also asking around for a good property lawyer or can this wait till we sell our investment property in the future?
 
The answer as always is: it depends.

It depends on the scarcity of land.
It depends on the demographic of that suburb.
The unemployment rate.

Take New Farm, 2km from Brisbane CBD for example. The area is land locked, the demographic is young corporate couples on 120-180k.

Therefore the theory goes, the CG for New Farm is more positive than an outer lower social eco suburb like Logan, because in 10 years time a portion of those 120-180k earners will become 180+k executives, and they will be more willing to pay higher rent prices/buy properties in the area at a higher price, to live the luxury lifestyle.

Being land locked also means there are little chance of oversupply.



Oh, that makes it a lot more clear. Another way of explaining why people have interest only loans IPs.

So does that mean it's better to get something that's neutrally geared rather than negatively geared? That way you are not maKing payments in today's dollars. My advisor prefers low yielding properties in expensive suburbs eg a 2 bedded in the eastern beaches in Sydney. She says that CGs are higher. I understand the tax benifits, but is there any data to prove that expensive suburbs have higher growth? I guess it comes down to supply and demand. Her theory is that there will always be someone with a high enough pay packet to rent in these suburbs, even in a downturn, but wealthy people can lose their jobs too.
 
Hi Pavale,

I use Paul@PFI for my tax, if you look under the Tax & accounting section of the forum you will find he is quite popular there :p A lot of forumites use him, and for a good reason, he knows his stuff.

paulgerrard@pricefinancial.com.au


In terms of brokers - I suggest you shop around and have a chat to a few, ask them a few questions based on your personal needs and see how well you gel.
A broker is the most important player on the team, so getting it right is well worth the extra time you spent on your due diligence, Good luck :eek:
 
The answer as always is: it depends.

It depends on the scarcity of land.
It depends on the demographic of that suburb.
The unemployment rate.

Take New Farm, 2km from Brisbane CBD for example. The area is land locked, the demographic is young corporate couples on 120-180k.

Therefore the theory goes, the CG for New Farm is more positive than an outer lower social eco suburb like Logan, because in 10 years time a portion of those 120-180k earners will become 180+k executives, and they will be more willing to pay higher rent prices/buy properties in the area at a higher price, to live the luxury lifestyle.

Being land locked also means there are little chance of oversupply.

Great point! So do you think New Farm will have limited CG in the short term because of the slow economy up there and new stock on the market, or do you think it will perform regardless?

I guess Logan prices will only increase if there is a demographic shift? A lot of investors are looking in Logan due to high yields. Will that inflate prices?
 
Great point! So do you think New Farm will have limited CG in the short term because of the slow economy up there and new stock on the market, or do you think it will perform regardless?

I guess Logan prices will only increase if there is a demographic shift? A lot of investors are looking in Logan due to high yields. Will that inflate prices?

No Logan will increase with or without a demographic shift, lots of people live there for affordability reasons but the population is still growing. Yes investors can inflate a market over the short term IMO but the area will continue to grow price wise just like it always has, it's just starting from a lower base. It contains a lot of very diverse suburbs under the local council area
 
Can't comment on the short term growth but the long term prospects is good.

Just depend on whether the holding cost makes it worthwhile.



Great point! So do you think New Farm will have limited CG in the short term because of the slow economy up there and new stock on the market, or do you think it will perform regardless?

I guess Logan prices will only increase if there is a demographic shift? A lot of investors are looking in Logan due to high yields. Will that inflate prices?
 
Invest in areas for early capital growth

Hi there,

Sure anyone can give advice here, I'll start...

Step 1 - have a plan/goal in mind, 2 years, 5 years, 10 years, it looks like you have already started this step.. keep working on it and expand it

Step 2 - build yourself a good team, a broker that understands and aligns with your strategies, accountant that specialises in IPs, lawyer, property manager etc... There are plenty of the above on this forum.

Step 3 - Where to buy...Once the above is sorted - you can start looking at places that fits into your criteria, always have the mindset "will buying this property get me closer to my goals?"

Personally, I am looking at Brisbane & Toowoomba.
Good luck!


Thats great advice JameZ!

Claire 90,

I start with location. It is the only true intrinsic value in real estate. Builds create rental returns but eventually depreciate.

Jobs grows drives increasing rents and increasing property prices. Infrastructure growth also drives capital growth through scarcity of location near the new infrastructure. Social stability, ie schools, shopping centres, Hospitals, leisure spaces, like parks, beaches, gold courses, further increase capital grow through security.

These are the areas you can find early capital growth for your investment. Especially when jumping ahead of he long term infrastructure projects.

Just buying in a suburb you only get the market based return.

You need concrete reasons for buying there. There are a lot of major pieces of infrastructure being built around the country at the moment.

I am happy to provide a 3rd party report one some if you like.

Feel free to PM me.

Sincerely,

Jerry Parker
0418772714
 
Thanks for all your comments, This forum is really interesting!!



So if the property grows at 5%, but inflation is 3%, does that mean the real gain is 2%pa minus costs?
Does that leave enough of a profit to cover the effort and risks taken by the investor?

Yes Claire90, you are exactly right.

A further benefit you can get with property is the tax benefit of depreciation. You use the depreciation as a tax deduction, then use your tax savings toward paying the interest off. This is how the term CF+ gets a little bandied about. After tax cash flow positive?, or before tax cash flow positive?, which figure are they quoting?

Thats why you are smart in building your team...your accounting books for the year can tell you how much tax you need to avoid (reduce).

Also it is good to remember that depreciation is a real cost. The tax department just lets us pay if forward...before we have to actuall pay for it.

When you buy an older property you have to pay depreciation more upfront otherwise known as repairs and maintenance. You also suffer from lower rental from another form of depreciation called obsolescence, or just old , out of date styling.

A pure investor will tend to buy new, in the right location in an area primed for capital gain.

cheers,

Jerry Parker
 
I can borrow $1M to buy investment(s) anywhere in Australia.
Goal is to earn a passive income of $80k after tax by age 45. (This may or may not happen, but it's what I'm aiming for).

This goal is very achievable if you join up with a property developer. The idea is to develop, retain a portion of the property to rent them out and get rental income, and then sell them when you need/want to. Continue this for a few projects and you are well on your way within a few years.

I am already on my way there with this strategy.
 
The rough plan is to buy and hold as much property in growth areas as I can safely afford. I am keen to diversify across Australia to take advantage of the different cycles. I?m conscious of cashflow in the case of interest rates rising or my situation changing.

I?m developing a good team of professionals.

I like the idea of Brisbane and Melbourne. I would need to use Buyer?s Agents.

I?m very nervous about investing large amounts of money and potentially not seeing much growth over the long term. Boom times are fun, but Sydney?s long term average growth is only 4.9%pa (Residex), which means after interest and expenses, you would only just break even in real terms. Am I missing something?

The only way I could get the figures to add up for my first property was to buy a 2 yo property with great rent and depreciation. Maybe my calculations are wrong.

http://blog.residex.com.au/2015/02/04/property-market-update/

The solution to this is quite simple. Only invest in projects that gives a 30% to 50% return. With this large of a profit margin a lot of the concerns regarding property investment goes out the window. Simply because with such a high return even in a down market you can discount the sale/rent price by 5-10% and still be well ahead financially. Of course if the market does well you stand to increase your profit margin a lot more.
 
Yes Claire90, you are exactly right.


A pure investor will tend to buy new, in the right location in an area primed for capital gain.

cheers,

Jerry Parker

Um, no, not all pure investors buy new.

Claire nothing wrong with new(or newish) but be aware you are unlikely to get the same capital growth as new property does actually lose value as the shine comes off its newness. That is why many successful investors actually purchase established property. Be cautious about receiving advice from those with property to sell. They work for their vendors, not you.
 
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