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Back to the maggot topic, we had some in our rental house on the floor and sofas! It was really freaky and confounding until we realised they were dropping from the light fixtures. Someone had put a box of Ratsak poison in the roof, so when a rat ate it, it crawled under some insulation batts and died so we couldn’t locate it. AFter a week, the most terrible odour started emanating throughout the house. It was by following literally my nose up inside the roof with a torch that I eventually found the dead rat, covered in more maggots. I had to scoop it into a plastic bag without gagging, throw it in the bin and look forward to garbage collection. The bin stunk for weeks. I bought industrial strength de-odouriser and problem solved. Plus, I removed the Ratsak box.
Hi Ravi,
I’ve been thinking of this too. For the initial purchase from the bank I would get a rental evaluation from an agent to satisfy the bank requirement.
For further property purchases, it would be difficult to prove income from the 1st property, so you may want to guarantor it in a Company name and then you can show company earnings over the period of 1 or 2 years in a profit and loss statement to prove viability of the venture. Keep in mind you would lose any CGT discounts on future sale of the property under a company name and everything would get taxed at a flat 30% without clever accounting. Something to consider though.
There are management companies out there. The cheapest I’ve seen charges something like 20%, sorry I don’t remember the name, but looking around that seems to be the minimum you would pay for key management and cleaning.
Also check out State, Council and Strata restrictions on Airbnb and short term lets in general in any area you buy. Many people don’t bother to check and do it anyway, but there have been cases of people getting caught out. At the moment it’s a new investment vehicle and still quite a minefield! Don’t be deterred though, usually the regulations haven’t caught up with the technology, but there’s a risk they might.
Cheers,
Mattall good thanks Wilko… my stupid conveyancer had lost the cheque among paperwork and only found it 2 months after settlement. They have since posted it to the council. Phew! Will never use them again.
Hi Oscar, late to this post, but looks amazing. Great achievement!
With the profit do you start funding your next project yourself or is it still better to get bank loans and pay the interest?
Cheers,
Mattit came back at only $145k rather than the $200k it came back at in early 2013.
Hi Dark Knight,
That’s a really interesting story about BInvested. I always wondered how their clients achieved so many rapid property purchases.
On the whole though, are the properties still cashflow positive? I imagine it will only be an issue for you if you came to sell in the near term future. Is there any other downside to your holding them?Looks like it’s pretty high at 2.97%
http://www.realestateinvestar.com.au/Property/st+marys
There is a rental population of 43.91% though, so a lot of renters out there it seems.No…in the end I flew up there a few times, got to know good/bad areas and bought a house in the centre which ended up going to a sealed bid.
At the time I thought I had paid too much but agents have told me it would have risen in value by now.A buyers agent probably could have got me a better deal but I have some trust issues that I always struggle with.
As a side note, I have a unit in St Marys, near the station, and it is coming up for rent renewal. I just spoke to my property manager who said that rents have gone up but demand for the suburb as a whole (both units and houses) is quite soft at the moment so it’s unpredictable. If it doesn’t get anybody through the door after 1 week on the rental market I will drop the price by $10-$20.
I’m wondering if the softened demand is because so many investors have flooded the area it’s oversaturated?
It depends on what you want to do with the properties.
If you are looking to improve value and get capital gains, I guess you could do that more easily with a house with potential to build granny flats, renovate, develop etc.If you are looking to just buy and hold I always find units are easiest because of very low maintenance. Some would argue that you have to pay body corporate/strata but with a house you have to pay high building insurances anyway, so works out the same in my opinion.
In any case, if I had nailed down the suburbs I was targeting I’d be focusing on yields to ensure my holding costs were kept low.
In the case of St Marys, units would be my bet. 6.13% isn’t spectacular, but it makes it affordable to hold.
Units: 6.13%
Townhouses: 5.71%
Houses: 4.67%To further research and make sure you’re choosing the right type of property take a look at what types of dwellings most people live in on the ABS website:
http://www.censusdata.abs.gov.au/census_services/getproduct/census/2011/quickstat/12405?opendocument&navpos=95
Scroll down to the Dwellings section.
Looks like most people live in a 3 bedroom house, followed by townhouses, then units.So houses are more popular but more expensive to buy and hold.
Units are cheapest with highest yields but possibly not as much in demand because renting a house is probably almost similar price to renting a unit – so you’d have to find something quite special about it (location to station and shops? renovated? new?)I don’t know about normal,… numbers are misleading (they may be being snapped up within 1 day of being advertised, or they may be languishing on the rental market).
I look at Vacancy Rate figures:
http://www.realestateinvestar.com.au/Property/nsw/penrith#rentalStats-tabPenrith as a region currently has a vacancy rate of 1.34%.
I consider anything under 2.5% to be in favour of the landlord as it means rental vacancy is under the national average.Then I would try ringing a few managing agents in the area and getting their opinion on how long properties are sitting on the books. They are usually very helpful in giving this sort of information. If you do this you might want to ask what types of units/houses are most in demand: how many bedrooms, if a garage is essential, what things attract tenants most – air-con, gardens, built-in wardrobes etc, what streets and areas are best within the suburb…etc.
Sometimes an agent will even volunteer to look at an online ad for the property you are considering and give you a ballpark appraisal of rental figures. They don’t have a vested interest in giving you an inflated price so you could trust the information a bit better than coming from a sales agent.
I have investments (both a house and a unit) in both and I have to say they are currently performing pretty evenly.
Campbelltown has the widening extended highway program underway, whereas Penrith area is undergoing quite a lot of gentrification and investment itself. Being part of Sydney I don’t think you’ll have too much trouble renting out in either suburb, particularly if you choose areas close to facilities such as shops, public transport, or good schools and don’t choose to buy on a busy main road.If I had to choose however I would go Penrith. The hospital is undergoing expansion, you’ve got the Western Sydney University which is also expanding, the Westfield is great, slightly closer to Badgery’s creek so you may get an influx of workers there. There’s also a new IKEA being built in nearby Marsden Park.
The biggest reason for me however is that Penrith is at the foot of the Blue Mountains, so there’s not much further they can build out there. Limited land will result in higher price increases in future.Thanks all for your responses…. all of them rung true with me.
In the end I bought a 5 year old property in Waterford, a southern suburb of Brisbane. The market is sluggish there but it has strong pop growth and good infrastructure investment with one of the highest funded councils in Qld (Logan). Yield is about 6% so not too fantastic, but I figured after depreciation it will be well and truly positive for many years to come owing to the property age. I asked rental managers what was in most demand (4 bed, 2 bath, 2 car, 2 living areas) and cross checked that with ABS stats to see what was the main family structure there and how many cars they owned. It matched, so I bought.
Rental managers told me that Waterford is considered “nicer” than other newer suburb areas like Crestmead and Marsden, and could acheive $10/week more. At only 35 mins from Coolangatta and 20 mins from Brisbane CBD I can’t see anything wrong with the area, but the demand is low at the moment, so it’s definitely a buyer’s market. Looking at buying another there soon.
By the way, I worked out that insurance prices are calculated on each property based on its address. If it’s in a flood zone, it’s high, otherwise, it’s normal.Cheers,
MattHi Ryan,
Definitely try and get CF+ if you can. I always aim for at least 1% higher than the mortgage rate you are likely to be paying to cover any costs such as rental management, insurance, rates etc. And for added security you may want to fix while rates are at their historic low (but that's your call).
The reason to try and avoid negative cash flow is if you're trying to build up your portfolio your borrowing capacity will be limited on your second+ properties. I think many banks only consider about 70% of the rental income to cover their risk thresholds as part of your total income, so servicing additional properties/debt would limit how much more they will lend you.
As from your research, it looks pretty spot on, but the two factors that I believe drive capital growth of an area is high yield and the locals having an income that is seen to be increasing (checkout the Australian Bureau of Stats for this data). Historic growth data is never guaranteed to be an indicator of future growth, so I take that with a pinch of salt personally. Others may have differing views.
Benny wrote:Quote:For me, Woodridge, Kingston, Crestmead, Marsden, even Waterford West. Woodridge really does have a lot going for it when you boil it all down, but there are still a heap of 30 – 40 year-old "cheap homes" (commission homes) way out-numbering any newer, better ones. So, still cheapsville, but with great potential to my mind. Again though, there are areas within areas too, so softly softly.
Benny – I have also been researching those areas particularly looking at anything that can be cashflow neutral to positive, and I'm finding that even with the cheaper properties in a non-flood affected street the quotes on landlord/building insurance are blowing my figures out of the water, like about $2000/year in some cases. Has that been your experience too?
Hi there,
Two years ago I remortgaged a property I own in London on an expat's mortgage. I found Sherrie See from SeeMoney.co.uk to be very helpful in this…and she even posts the interest rates on the website.
http://seemoney.co.uk/pages/offshore/expat_mortgage_rates.asp
As you can see the LVRs are pretty tough around 75%, so fortunately we had some equity already over there.
Having said that as JacM indicated above there are UK banks in Oz that may be a good place to start too. I hear Lloyds TSB do a lot of expat mortgages.
Thanks all – I took your advice, and it seems the mold is coming up through the subfloor (had to get several inspectors as I am always paranoid that some recommendations are just people trying to sell me something!).
I ensured the roof drains the majority of rain water away from the house but some natural run off still makes it towards some brick work at the front. I've been told to get ducted ventilation put in so am now sourcing quotes for that and have posted a separate post for installer recommendations. If anyone has any please let me know in any case.
I can't do it myself as I don't live near the property.
I'm considering getting one for my IP – but think I can only get it in the livingroom since the bedroom faces the front of the unit block and I don't think the body corp would allow the extractor to sit on the front of the building. Would tenants still value one in the living only?
Hi NHG,
I have a property in the neighboring suburb of Whalan… it's a 4 bed place I bought in March this year for $242000 and rents for $360. For a 4 bed the agent says it is conservative, and seems to be cheapest 4 bed rental in the area (apart from Tregear), so gets demand. I'm happy with the 7.7% yield and no work done.
My advice would be ask managing agents what is in demand. I was there are never enough 4 beds on the market so that's what I aimed for.
I had a look at Bidwill, Emerton, Tregear, Wilmott, Whalan, Mount Druitt, and St Marys.
I think I missed the boat with cap growth on houses in Mount Druitt and St Marys as prices seem to have increased just while i was searching to buy. The others present good value still but I can see they too are increasing, albeit more slowly.
As a debatable topic, I thought the quality of Tregear and Wilmott houses and how tenants were maintaining them was quite poor compared to Whalan. Bidwill and Emerton which all seemed OK to me. For Bidwill and Emerton in particular there, from memory there is a crossroad of shops containing a Woolworths around there, a good school and sports fields, so I don't think being a bit away from the train station is that big an issue. There are plenty of bus routes.
One thing to watch for is the prevalence of power lines which run in many parks behind the houses… it puts some people off due to A Current Affair running cancer scare stories every so often. You can easily see these on Google Maps though. Also, while on the map just check if it's a battleaxe block, as they are common too. Again, not necessarily a problem but may limit any buyers you want to sell on to in future.
Try and look for properties that have other bonuses – such as potential to subdivide, add a granny or just renovate for improved value. I didn't unfortunately, so am only hoping the market goes up in the area!
Good luck!
What I've taken from all this and my own research is:
– Appropriate landlord insurance will take care of your risk of being sued by the tenant.
– The HDT doesn't offer any legal tax benefits over and above having the properties under your own name.
– There is a high cost of setting up and maintaining trusts with little personal benefit.
– There may be a benefit for avoiding family disputes over inheritence (but who cares if you're dead?).Leaves me wondering why anyone would do it!
Thanks Catalyst! Have already ordered the strata report via the solictor route.
Cheers.
