All Topics / General Property / High Yield Properties

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  • Profile photo of wezwazwezwaz
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    Have been reading “Success Stories” by Robert Kiyosaki. I like the idea that he has collated stories by everyday people so we can relate to what they’re doing. It intrigues me though that a lot of the properties usually have astounding yields of 10 – 20% which enabled them to finance positive cashflow deals. I am not an experienced property investor but I have only ever seen the odd yield anywhere near 10%, let alone upwards of 10. I’m interested in feedback from experienced investors to see whether these high yields are available in Australia, e.g. what are the chances of finding more than one in 10,000?

    I guess many of you would have read “Success Stories”. Any other thoughts on the high yielders?

    Profile photo of 1HotValuer1HotValuer
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    Plenty of 10% yields out here in OZ problem is, no one wants to share where they are because they don’t want you buying and creating more competition.
    Ok I’ll give you one suburb to start. Mount Isa, QLD.
    Now I’ve done it haven’t I?

    Profile photo of yackyack
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    In my opinion buying in Mt Isa is like buying a 1998 Ford Falcon. It may be ok now but in 5 yrs time its going to struggle.

    Too much risk for me. The return does not compensate me enough to carry that type of risk.

    Profile photo of 1Winner1Winner
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    Yack, can I borrow your crystal ball?[biggrin]
    Seriously, you cannot say that.
    It is like saying do not buy shares because they are going to fall sometimes in 5 years.

    When care should be take and spread the risk, if you want the yields you must go outside the big cities, buy commercial with a v/high risk or venture in building block of flats with an even more uncertain future.

    And what is wrong with a 1998 Ford?[biggrin]

    May God prosper you always.[biggrin]
    Marc

    Profile photo of truebluetrueblue
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    Our most recent buy is in Maddington, some 15km from the Perth CBD. Property return 11.3%. You do need to look for them. The properties are are there.

    Profile photo of depreciatordepreciator
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    I said in a post some time ago that we were getting lots of calls from people who had invested in Mt Isa. Sure, they were picking up properties with decent yields, but what concerned me was the underlying value of the assets. If the block was worth, say, $20K, and the house $40K, paying $80K for it didn’t make much sense to me even if it was slightly +cf. But that’s just how I view things – I may get shot down in flames in minutes. I think part of the evaluation process when sizing up a prospective purchase should always concern the underlying value of the asset.
    Scott

    Profile photo of wezwazwezwaz
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    To 1HotValuer

    Plenty of 10% yields? Not so sure about that. What’s plenty?

    I agree with Scott in that the underlying value of the asset is very important. A similar situation exists in the share market: no good buying a share for its high dividend if its price is “sliding down a hill”. People try to convince themselves it is paying good dividends. So what. That’s useless if the share price has lost 50% in the past year, say. Have to apply logic. You still have to buy property based on the idea that it will increase in value.

    A lot of the examples in “Success Stories” have enormous yields around 20%! I’m guessing you have to look long and hard to find something like that. Tell me, have you bought a property yielding 20%? Some of the people in the book talk of buying houses to flip at 50% under market value.

    Of course, all this is theoretically possible. I’m not doubting their personal experiences because if that’s what they did, then that’s what they did. Don’t get me wrong. The deals don’t have to be as good as that to be worthwhile. I just think that inexperienced people can start to believe they can walk down the street and find deals like that.

    Profile photo of 1HotValuer1HotValuer
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    The question was asked about yields. Yes there are plenty out there.
    Investing in real estate does not equate to the stockmarket.
    Mount Isa is showing high yields. Although we are not talking capital growth, I do believe I have answered the question.
    I don’t personaly care about capital growth at all, it is irrelevant because I am buying and holding my +cf property. The rental return is the important thing in my books.
    The underlying value of the asset? That would be the market value. Yes it’s important. Not as important as the yield.
    It’s my job to know values, that’s why I can find +cf property easily.

    Profile photo of richmondrichmond
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    1HotValuer,

    It’s garbage to suggest there are plenty of 10% yields around at the moment, because the fact is there ain’t. 12-18 months ago there was, it is not the case now. That’s not to say there’s none, because that is also incorrect…

    cheers
    r

    Profile photo of the Philosopherthe Philosopher
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    Depends on how you calculate your yeilds, if it is simply rent x 50/purchase price then at least in NZ there are still plenty of deals out there, in the last year we have purchased 4 properties with the following yeilds:

    Rotorua 4 bdroom brick house 170 rent & $50000 cost = %17 yeild

    Rotorua 2 x 2 bdroom unit 300 Rent & $130000 cost
    = %12 yeild

    Kakaramea (Taranaki) 3 Bedroom wooden house 120 rent & $39000 cost = %15 yeild

    Eltham (Taranaki Huge old villa, done up & rewired etc and divided into 3 x 2 bedroom flats
    $200 rent & $64000 = %15 yeild
    (We settled this one about 2 weeks ago.

    SO the places are still out there, and we have a very restrictive set of buying criteria

    So now you Aussies, go out and increase the value of our properties by buying the ones next door
    [biggrin]

    David

    Profile photo of 1HotValuer1HotValuer
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    Except with Rotorua, I suggest buying sight and smell unseen !
    Go you good thing.

    Profile photo of richmondrichmond
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    As anyone who is a regular on this site knows, yes, there are plenty of 10%+ yields in NZ… my comments pertained to the Australian market. Apologies for any misunderstanding.

    Cheers
    r

    Profile photo of 1HotValuer1HotValuer
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    There are at least 15 suburbs in Australia that I know of that have returns of 10%. I’m not arguing this point any more. Je suis fini.

    Profile photo of richmondrichmond
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    15 suburbs in the whole of Australia is hardly “plenty”, 1HotValuer… go have a look at the back part of the White Pages that has all the post codes… 15 suburbs out of all those is barely any, and the areas where they might be allegedly “plentiful” are often very questionable.

    There are plenty of people whom I respect that have been in the “game” for a long time that agree with me. You say they’re plentiful, I say they’re not… however they can be found, and sometimes in good areas, but they are hardly in large numbers.

    I’ll leave it there

    cheers
    r

    Profile photo of depreciatordepreciator
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    No, ‘Hotvaluer’, the underlying value of an asset is not at all the same as market value. This distinction is particularly relevant in country towns. But you have indicated you aren’t interested in this discussion any longer. Good luck.

    Profile photo of wezwazwezwaz
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    It’s one thing to say you’ve heard about high yielding properties, and you are all pumped and excited about how you are going out to find them. It’s great to be motivated.

    However, it is completely different if in reality you can’t find any. If you actually own properties yielding 10 – 20% – fine. You are giving me evidence of your practical experience, just like “the Philosopher” has done. There are always exceptions to any rule, but that also happens every week when someone wins the lottery.

    I’m not interested in hearsay. It’s been done to death on many forums. People should pass on wisdom from what they have actually done.

    If there are “many” high yielders, I guess they won’t be hard to find then. I’m still thinking they are pretty scarce, but I could be wrong.

    Profile photo of IbuycashflowIbuycashflow
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    Hi Wezwaz

    Most evidence of 10% + yields are going to be historic – the deal having already been done.

    Sometimes, or should I say most of the time you have to create a higher yield by adding value or by buying at a significantly low price in the first place.

    A property for sale may not be advertised at a 10% yield but by being able to tweak the rent higher and offering below the asking price you end up with a good yield.

    Another example would be purchasing a property on a subdividable block at say 8% yield. Then either selling off part of the land or building another dwelling on the extra land so that you yield moves upwards.

    It’s not just looking it’s thinking as well

    Cheers
    Jeff

    Profile photo of wezwazwezwaz
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    Thanks, Jeff, for your constructive comments.

    Back to the properties in “Success Stories”.
    I listed all the property deals that were done by the people in the book: purchase prices, rents and yields. Here is what I found on 27 deals:

    Prices from $35,000 to $770,000 for a variety of properties, including houses, apartment complexes and even a medical centre.

    The average yield was a staggering 17.8%, with a range from 8.6% to 34.6%.

    One propery was purchased at Kangaroo Point in Brisbane with a yield of 33%, so it’s not only in America.

    I don’t know if we got the full story about how they achieved such high yields in doing their deals. Anyone could finance +ve cashflow property with yields like that. It’s a no-brainer.

    I say finding property like that is almost impossible. However, prove me wrong and tell me you own a property yielding upwards of 15% like most of the ones mentioned. I’d love that. Then I’d know it is a realistic goal to search for them.

    Profile photo of melbearmelbear
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    Wezwaz, two things about ‘success stories’

    1. Many, many submissions were made – they of course would have chose ‘awesome’ results, as opposed to just average.

    2. The results people achieved were probably at least 2 years ago, so prices have obviously moved, whereas rents don’t seem to have moved much at all.

    My point, yep there are some deals out there, but apparently there are lots of needles in haystacks too. Being creative to make those sorts of yields I believe is necessary in the market in Aust at the moment.

    Cheers
    Mel

    Profile photo of wezwazwezwaz
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    Yes, Mel, I suspect you are correct in your assessment. So, while the stories are inspirational, they are not entirely indicative of what can be achieved in the current market.

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