I have the opportunity to purchase a block of 10, 2 x 1 units in a small regional town in WA. The figures add up to make it a positively geared investment. At present it is 90% occupied.
Although this town services other smaller surrounding towns, giving a total population of approximately ten thousand, it’s population is just over five thousand.
I’ve read that it is no wise to purchase in towns with less than 10,000 inhabitants.
What are your thoughts on the matter?
Thanks
Sandyman
Sandyman
It all comes down to what YOU are comfortable with and what your future investment goals are. I personally do not have a problem with investing in small regional towns. My very first investment purchase (besides my PPOR in Perth), was in a very small WA country town. I still have that property and a couple more under my belt and all are doing quiet nicely. No – you may not get too much capital gain….but if someone else is paying it off for you, then you will get SOME won’t you??! AND a nice trickle of passive income in the meantime. My advice is not to put all your eggs in one basket, whilst I like my country properties I also have a negative gear in Perth. Spread your risk. Best of luck Sandy with whatever you decide.
sq
Hi Sandyman
I also have 1 regional property in WA, which is positive and negatives in Perth.
I agree with suzieq – spread the risk.Another point, who will manage your property, is there a PM available? If not, this could be a problem.
sq gave good advice. 10 units gives a good average spread of return. ie you can have 2 units vacant and still have 80% occupancy. Allan Bond owned xxxx and the Hyundai dealership, but couldn’t afford to hang onto them. With a positively geared investment you can. Just make sure the units are not going to be time or repair expensive and that your small town has a reasonable chance of growth and wont turn into a ghost town. I can’t see what the problem is… Go for it !
Hi Sandyman,
What is the trend for the population in the town you are looking at. HAs it been stable and likely to stay that way? I’d only be concerend if it’s declining and can no reason why it would change. But if it’s not declining then go for it.
When you say your figures are +Ve geared, have you allowed for the fact that if you are getting finance then it will most likely be a comercial loan rather than a residentail loan, therefore higher interest rate over shorter term?
I say best of luck and hope it all goes well.
Regards
PKI have two houses in a town in western qld where i lived for 7 years. i found that renting something decent in this town was a problem since many of the houses were below standard. Even now there is no development much in this town accept motels for the tourist trade people use the bush to further their career and usually only stay say 6 years and therefore they are more likely to rent than to buy. Also the govt such as hospitals and the education dept may need good accommodation for their staff to keep them out there the rental return is often higher than the capital gains retun in the bush
m
Sustainability is the key – what is the population trend? how reliable and sustainable is employment? what has been the growth history in the town? what is the schools enrolment doing? single or multi industry town? what is the economical history of the place? how many services (education, hospitals, doctors etc) in town? how active is the shire council? will the next government close the services?
Derek
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0409 882 958
Property investment advice and researched property in quality locations available.Hi,
Have to agree with Derek. It is the future of the place and not the actual size that is of primary importance. Although without knowing where you are talking about 10,000 seems like a good sized place. Would you be in a positions to do some upgrading after the purchase to try and maintain a low vacancy rate?
Don Nicolussi | Mortgage Broker - Home Loan Warehouse
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Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
Good advice guys (and gals).
If I could possible add some suggestions…
Look at the primary industries such as:
Power production, Farming (fruit-veg and stock) Forestry, Manufacturing, Mining, fishing.Try to look for at lease 3 or 4 different industries so that if one is affected then the whole town does not collapse (like when the steel mills were shut down in New Castle – although she has bounced back now)
Check out the last two years Local Council plans and reports (financial) see if:
1. building approvals are on the rise.
2. ANy new infrastructure has been planned or budgeted for
3. rate increases (usually due to population rise and needing more services from council such as town water supply etc.
This is just some of what you could check to get you sold on the town or not.
Cheers
KiwiLooking for Positive cashflow solutions?
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We are investing in NZ so if you are looking for + cashflow properties…contact: [email protected] to join our database.Thanks Guys, great advice.
The town population is pretty stable, apparently been the same for years even though the timber industry has greatly reduced. Other industries have taken it’s place.
I believe this is a good opportunity.
I haven’t checked with the local council yet, so I guess that will be my next move. I will also check the type / term of load as I thought it would be residential.
Can I say, then, that we are all in agreement……Size doesn’t matter ?
[
][thumbsup2]Sandyman,
Many of the banks use commerical loans for properties that have more than 3 or 4 units on it. That’s why I mentined the commercial loan bit.
Unless you have enough equity in other residential property that you could take out a credit line to purchase it that way. Good luck and let us know how it all goes.
Regards
PK
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