Plenty of where to buy threads but avoiding buying a dog of an investment is possibly more important as it can greatly affect your ability to grow your assest base.As the title indicates I'm interested in people's thoughts on locations to avoid buying, it could be due to population or industry decline in an area or just the because the market is over valued or at its peak?
Where to not buy
- Thread starter hugh72
- Start date
Depends a little on ones goals and timeframes. Something that I might like you might totally want to avoid.
In general though, imho
- Towns with only 1 or 2 industries (particularly mining)
- Towns with sub 50k population
- Areas with not only high unemployment, but no change to this in sight (Tas?)
There's some additional ones which are more goal based as in ones that don't meet minimum yield criteria, minimum vacancy level and have already had too much growth (ie probably not much left).
I like to think of rental yield as an analogue to P/E ratio on Shares in this instance. Eg if the 'normal' yield in an area is say 6% and it's been bought so heavily that the yield is now 4% it may be time to take a break from the area til its back at normal.
In general though, imho
- Towns with only 1 or 2 industries (particularly mining)
- Towns with sub 50k population
- Areas with not only high unemployment, but no change to this in sight (Tas?)
There's some additional ones which are more goal based as in ones that don't meet minimum yield criteria, minimum vacancy level and have already had too much growth (ie probably not much left).
I like to think of rental yield as an analogue to P/E ratio on Shares in this instance. Eg if the 'normal' yield in an area is say 6% and it's been bought so heavily that the yield is now 4% it may be time to take a break from the area til its back at normal.
Slight problem DT
The housing market is not a purely investment market. The only suburbs that will follow your 'back to normal' yield are those that are dominated by investors
The suburbs dominated by owner occupiers will keep increasing in capital value and it's unlikely that the yields will ever go back to a range that a cash flow investor is comfortable with
Hi
I think the main factors have already been said
Mining towns are a big NO NO and also some country towns.
Also what are your overall plans with this property? Buy and Hold, Renovate and flip or subdivide?
I think the main factors have already been said
Mining towns are a big NO NO and also some country towns.
Also what are your overall plans with this property? Buy and Hold, Renovate and flip or subdivide?
Agree with all the above but I am going to add some locations where not to buy at this point in the cycle
Preparing to duck for cover
Gladstone
Emerald
Burnie
Devonport
Chinchilla
Broome
Port Headland
Karratha
Broken Hill
Taree
Whyalla
Darwin
Hunter Valley excluding Newcastle
Whyalla
caution required in Sydney and Perth
I'm not saying that good counter cyclical buys in these locations are not possible but better opportunities elsewhere IMHO
Interested if people can add to this or provide an argument why some of these might be a good location to buy
Preparing to duck for cover
Gladstone
Emerald
Burnie
Devonport
Chinchilla
Broome
Port Headland
Karratha
Broken Hill
Taree
Whyalla
Darwin
Hunter Valley excluding Newcastle
Whyalla
caution required in Sydney and Perth
I'm not saying that good counter cyclical buys in these locations are not possible but better opportunities elsewhere IMHO
Interested if people can add to this or provide an argument why some of these might be a good location to buy
Right now? Probably anywhere in Sydney.
Yep I like them.
Darwin has been a star performer for a long time, IMO there has been an overbuild of very expensive high rise CBD units which will take some time to be adsorbed. Until recently prices were comparable with Sydney and so were rents.
Once the construction of Inpex starts to wind down prices might ease further.
The market has run so hard that it must be due for at least a period of stabilization if not some falls. It might be a buyers market but don't you think that better buying opportunities might exist in several years time?
Once the construction of Inpex starts to wind down prices might ease further.
The market has run so hard that it must be due for at least a period of stabilization if not some falls. It might be a buyers market but don't you think that better buying opportunities might exist in several years time?
Definitely agree. Yield is nothing if the demand side is continuing to decline - this means the chance of vacancy increases, upward pressure of rents will cease.
You're essentially buying into a dying town.
Avoid country towns which are getting a highway bypass built as in most cases tourism dries up. Typically smaller towns like Tarcutta, Holbrook, Jugiong etc. Larger towns aren't so drastically affected and have tended to thrive or bounce back eg Mittagong, Bowral, Brisbane, Albury/Wodonga. Conversely, in metropolitan areas a bypass adds value eg M2, M5, M7.
So many great fundamentals have been mentioned that underpin reasoning/rationale for places NOT to buy investment property in.
I stopped buying in Sydney some time ago. My last purchase was May 2012, so almost 3 years ago now. Defo wouldn't touch it right now.
Single-horse towns like the mining/resources dependent ones are an obvious no-go zone. The only exception that may be worth considering are single-horse towns that aren't mining dependent. Examples might be say agriculture-thriving towns (pockets of New Zealand are having mini town-population-booms as a result of workers moving in to get farming jobs for the thriving dairy farming industry developing there).
Even 'double' horse towns that are heavily mining and perhaps one other industry only, such as a local Goal or single major retail/business employer; could also be high-risk and ones to avoid.
Multi-faceted industry towns of populations ~30,000+ (IMHO anyway - happy to be challenged on this, as we all have different investment sub-goals, so just talking about what works for me here!); I think these present good buying opps, despite naysayers. There's some great towns of these around.
Can I also add a more personal one here (And again, this is just my personal strategy); but I tend to avoid all of Victoria not because I don't doubt several pockets will perform, long-term, but because of the ridiculously high stamp duty! When I do equity-releases at 90/10 LVRs (whilst capitalising LMI onto the loan!); to be slapped with a few more thousand $$$ of SD upfront; might not sound like much to most, BUT to me, this extra ~$3-5K or so of SD can make the difference between deciding between "1 property in VIC, or say 2 x slightly cheaper properties - with much cheaper SD - in another state".
Look, I know that Stamp Duty is scalable and tier-based in the various states, but overall I just can't seem to get VIC to stack up for me, so I tend to avoid the entire place. That said, I'll get to VIC eventually, once I max out my land tax thresholds per-state, in the other states I am taking interest in for my portfolio
Other than stamp duty and the above around multi-faceted industry locations; I also tend to value (like others have mentioned) a healthy "owner-occupier to tenancy" ratio in a town as an influencer on places not to buy in. I.e. towns where more than say 40-50% of stock are investor-owned rentals, don't favor too well in my book!
I stopped buying in Sydney some time ago. My last purchase was May 2012, so almost 3 years ago now. Defo wouldn't touch it right now.
Single-horse towns like the mining/resources dependent ones are an obvious no-go zone. The only exception that may be worth considering are single-horse towns that aren't mining dependent. Examples might be say agriculture-thriving towns (pockets of New Zealand are having mini town-population-booms as a result of workers moving in to get farming jobs for the thriving dairy farming industry developing there).
Even 'double' horse towns that are heavily mining and perhaps one other industry only, such as a local Goal or single major retail/business employer; could also be high-risk and ones to avoid.
Multi-faceted industry towns of populations ~30,000+ (IMHO anyway - happy to be challenged on this, as we all have different investment sub-goals, so just talking about what works for me here!); I think these present good buying opps, despite naysayers. There's some great towns of these around.
Can I also add a more personal one here (And again, this is just my personal strategy); but I tend to avoid all of Victoria not because I don't doubt several pockets will perform, long-term, but because of the ridiculously high stamp duty! When I do equity-releases at 90/10 LVRs (whilst capitalising LMI onto the loan!); to be slapped with a few more thousand $$$ of SD upfront; might not sound like much to most, BUT to me, this extra ~$3-5K or so of SD can make the difference between deciding between "1 property in VIC, or say 2 x slightly cheaper properties - with much cheaper SD - in another state".
Look, I know that Stamp Duty is scalable and tier-based in the various states, but overall I just can't seem to get VIC to stack up for me, so I tend to avoid the entire place. That said, I'll get to VIC eventually, once I max out my land tax thresholds per-state, in the other states I am taking interest in for my portfolio
Other than stamp duty and the above around multi-faceted industry locations; I also tend to value (like others have mentioned) a healthy "owner-occupier to tenancy" ratio in a town as an influencer on places not to buy in. I.e. towns where more than say 40-50% of stock are investor-owned rentals, don't favor too well in my book!
I noticed the 'Lithgow' thread missing ???
This was the thread that a investor posted that he was an investor in Lithgow but was seeing decline in the town.
Don't know what happened to it?
Maybe a Lithgow resident complained?
Another town I can't see any future growth is Wilcannia in far NSW despite it being near Broken Hill.
mount Druitt area in Sydney's West and In Sydney Southern Suburbs ...Claymore
Gunnedah NSW , Coffs Harbour NSW , Woy Woy NSW Terrigal
This was the thread that a investor posted that he was an investor in Lithgow but was seeing decline in the town.
Don't know what happened to it?
Maybe a Lithgow resident complained?
Another town I can't see any future growth is Wilcannia in far NSW despite it being near Broken Hill.
mount Druitt area in Sydney's West and In Sydney Southern Suburbs ...Claymore
Gunnedah NSW , Coffs Harbour NSW , Woy Woy NSW Terrigal
