Nathan, just a question about valuations, resale value and exit strategies.
Country towns with high indigenous populations often have divides more stark than capital cities, with housing commission areas that the property managers won't touch or will warn you from buying.
So assuming the valuer is a whitefella and the local bank manager, won't he mark houses in that pocket low?
That might be fine for you if you can obtain finance from elsewhere, but could it be a deal breaker for whoever's going to buy the house from you if they don't have your ability to source finance?
Then there is who will buy the house?
If you say that the area is no go for whitefellas, that limits the market. Even if the low price makes it affordable to the Coles check out chick, i reckon she'd rather live with the oldies or share-rent in a nicer area than buy in this area.
That leaves several possibilities:
1. Immigrants
2. Members of the local indigenous community who have got work/qualified for loans/wish to buy a place.
3. Investors. Probably from the big smoke who gets excited at the 7-8% yield you'll be able to sell the place to them for.
How likely are each of these?
1. Unlikely - fruitpickers or labourers are itinerant/seasonal while the Indian brought in to ease the town's doctor shortage will have a good income and want to live on the good side of the tracks.
2. Maybe this is possible. But note the low rate of indigenous home ownership - 28% vs 70% for non-indigenous.
http://www.anz.com/Documents/AU/values/AN5324HMIAV13online.pdf In other words far more aborigines rent than non-aborigines.
3. I think this is most plausible. But we get back to property management and finance issues. But if you were to find solutions to this and onsell to clients (eg through your own buyers agency), then you might be able to sell, make a profit for yourself and offload the ongoing management issues to others.
Otherwise it might be better to hold on and enjoy the high returns (but also likely high costs), hoping that your tenant was OK.
My question then is to what extent is having a buyers agency important to provide a market for the property? And given the likely higher risks with tenants, do you think the high return would outweight this if you were to opt to hold?