All Topics / Creative Investing / Investing in low income areas

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  • Profile photo of v8ghiav8ghia
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    I wouldn't classify them as low income necessarily, but there is still good value to be had in parts of regional victoria – places like Bendigo & Ballarat ? The lower $ end is pretty ordinary, and you need to choose your suburb/street carefully, but yields are ok, and more importantly……..vacancy rates are as close to zero as you'll get. Does'nt always equate to prices though. I'm trying to sell a place in NW Tassy at the moment, and vacany is tight, with rental in very high demand, but it does not equate to 'buyer interest'.
    All the best.

    Cheers

    Profile photo of Tracey BTracey B
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    Hey v8, where's your place in NW Tassie?  The Tassie market is all over the shop at the moment!

    Profile photo of v8ghiav8ghia
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    Hi Tracey,

    We have a place in Burnie we listed for sale mid march (got a couple there as I always thought it was a solid yet undervalued area, and it's always good for a 'tax deductible holiday to God's country……. but only want to sell the one in order to use the funds elsewhere) and have had almost no interest at all – just about to have it's first serious inspection later this week – here's hoping.
    It's at the lower end of the market…..(but not in Shorewell Park!) and must admit I would have thought anything in the sub $180k bracket would have been pounced on by FHB's and owner occupiers when you look at the price of rent!
    I believe you're a local based on your other posts? Might be myself one day.

    Cheers

    Profile photo of Tracey BTracey B
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    Hope things go well with your inspection this week – yes we're in Tassie.

    Just in keeping with the thread – there are some great properties in Tassie, not necessarily in 'low income areas' nor previous housing areas nor mining towns, able to be purchased under $200K well with tenants in place showing 6.5 – 7% returns.

    We have 'low income' tenants in some of our properties and have no arrears –  those on Centrelink benefits have their rent deducted from their fortnightly Centrelink payment.  With the job market being patchy it certainly gives me peace of mind having some tenants not relying on paid work to pay their rent – Julia is a pretty reliable source of income.

    Profile photo of Jamie MooreJamie Moore
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    Tracey B wrote:
    Just in keeping with the thread – there are some great properties in Tassie, not necessarily in 'low income areas' nor previous housing areas nor mining towns, able to be purchased under $200K well with tenants in place showing 6.5 – 7% returns.

    Hi Tracey

    Would you mind sharing which areas you’re talking about?

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Tracey BTracey B
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    Sure thing. I only focus on the Northern part of Tassie as that's near where we live and I can't be fussed travelling further when there's good stuff close to home.  Check out suburbs of Launceston – Trevallyn, Riverside and Newnham in particuar are ones that I like.  Also, Devonport and Ulverstone are hiding some gems.  I haven't explored Burnie myself. 

    There'll be properties in any of these areas selling at a price that will work for investors looking for that sort of return.  It's a matter of talking with agents to dig them out.

    Even though the Pulp Mill is likely to go ahead near George Town, many workers in that area actually live and commute from Launceston so I don't expect to see George Town boom like some mags have suggested…I may be wrong on this one.

    Cheers,
    Tracey

    Profile photo of Jamie MooreJamie Moore
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    Excellent, thanks for the response Tracey.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Scott No MatesScott No Mates
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    A few of my associates are working on some deals (undisclosed locations in sydney metro). Deals will return over 10% irr with little risk to the investors. If anyone wants details send me a PM & contact details.

    Deal value is around $300k & will work inside a smsf.

    Profile photo of CatalystCatalyst
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    angelinsydney wrote:
    Hi robbieP,

    Is there any specific reason you want to buy in low income areas?

    If you are looking for a good rental return and high capital growth, the Northern Beaches is ideal. 

    Angel

    Really? What yield are you saying is good rental return?

    So from this thread I'm gathering that everyone thinks low income =high risk???

    I invest in low income areas but I wouldn't class them as any more "risky" than middle income areas.

    Profile photo of angelinsydneyangelinsydney
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    Hi Catalyst,

    I re-read all the thread, I don't think anyone suggested that low income equates to high risk.  Everyone simply stated, truthfully, that it depends where you buy.

    As for me, I have investment in high end places like Avalon and Cammeray in Sydney and Tea Tree Gully in SA..  But I also have properties in Richmond NSW, Smithfield Plains and Millicent in SA.

    It's really not whether its low income areas, it's about picking the right houses in the right location. 

    I only wondered why he picked low income areas that's all.  There was no suggestion of high risk.

    My next project will be likely in the Eyre Peninsula of SA.  Not high income, is it?

    Take care.

    Angelina

    Profile photo of Caroline EdsonCaroline Edson
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    We have previously invested in low income areas & will no doubt again. 

    A lot of the areas everyone has indicated are great places to look at. 

    My only comment would be is to clarify through searches that whilst the area may be low income it isn't due to a high unemployment rate.  You want to have any investment property to obviously have tenants that are paying on time. 

    Be careful if the home you are looking at is in an area that relies predominantly on tourist trade as you may run into problems with payment reliability.

    Profile photo of Andrew_AAndrew_A
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    Low income areas like high income areas have good and bad patches, good and bad streets and good and bad neighbours, which can be worked out quite easily by thorough research. We are fortunate in Australia that with our capital cities almost all areas tend to get better over the long run, or at least don't turn into no go zones, nothing yet like Detroit in the USA thankfully.

    There are a few areas in the greater Brisbane region with some choices in the under 200k price bracket, Logan most people know about already but there are others, In 2010 I saw a 3br brick house sell for a tad over 200k in a beach side suburb (small poetic license used here, but it's technically so!) 30k from the Brisbane CBD, reasonable condition and a nice block of land as well. Property was on the market in the morning and sold by the time I called just before lunch :) Someone walked in off the street and asked for cheap property and bought it straight away.

    Profile photo of kasdkasd
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    Great thread people, just the sort of thing I am looking for:)
    Just a quick one though, the areas are listed but how do you go about finding the better ones to go with? Growing up on the western suburbs of Syd I know these areas well but not well enough to put the money on the line.
    A couple of key points if you will for a potentially cash positive place
    Thanks

    Profile photo of Heath WorkmanHeath Workman
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    Hey guys, didn't realise there were some Tasmanian investors on the forum. I'm from north west tassie myself currently looking into buying my second IP. Regaurding the original question there are also a few mining towns on the west coast of Tassie. Rosebery, Zeehan and Queenstown, you can pick up positively geared properties down there for under 100k.

    Profile photo of Jamie MooreJamie Moore
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    Heath Workman wrote:
    you can pick up positively geared properties down there for under 100k.

    Hi Heath

    What’s the historical growth been like in these areas and are there any driving factors that will lead to growth in the future? Everyone loves a CF+ IP but if there’s little or no growth, it’s not worth it (in my opinion).

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of JT7JT7
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    Jamie M wrote:
    Heath Workman wrote:
    you can pick up positively geared properties down there for under 100k.

    Hi Heath

    What’s the historical growth been like in these areas and are there any driving factors that will lead to growth in the future? Everyone loves a CF+ IP but if there’s little or no growth, it’s not worth it (in my opinion).

    Cheers

    Jamie

    Tasmania is a beautiful part of the world but I’m just not convinced on the economic drivers as Jamie suggests that drive growth. Are the younger generations staying in Tasmania or are they migrating to the mainland in search of work? From memory, demographic statistics suggest they are. You may see the shift of baby boomers migrating to Tassie in retirement or perhaps they would prefer to down-size and move from cities such as Sydney to the central and southern coast of NSW or the Fleurieu Peninsula from Adelaide and remain close to their families ie. grandchildren.

    IMHO I’d prefer to put my money elsewhere. If your looking for high yields then I’d prefer the Western Suburbs of Sydney, Orange, Bathurst where the economic and the underlying fundamentals are solid. Or alternatively, if you are a believer in the resources story you can chase spectacular yields and cap growth in the resource rich states like WA or QLD and soon, SA.

    Just my opinion guys but food for thought.

    JT7

    Profile photo of Heath WorkmanHeath Workman
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    Jamie M wrote:
    Heath Workman wrote:
    you can pick up positively geared properties down there for under 100k.

    Hi Heath What's the historical growth been like in these areas and are there any driving factors that will lead to growth in the future? Everyone loves a CF+ IP but if there's little or no growth, it's not worth it (in my opinion). Cheers Jamie

    From what I've read online these properties generally doubled in value from 2000 – 2010, obviously though double 100k is still only 200k so your looking at 100k of growth compared to say 400k in other parts of the country. The only driver there is the mine really. MMG (Mining Company) reported that current exploration will provide work beyond 2020. Having said that if the miners ever packed up and left I don't know how you'd ever sell a property down there.

    Profile photo of JT7JT7
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    Heath Workman wrote:
    Jamie M wrote:
    Heath Workman wrote:
    you can pick up positively geared properties down there for under 100k.

    Hi Heath What's the historical growth been like in these areas and are there any driving factors that will lead to growth in the future? Everyone loves a CF+ IP but if there's little or no growth, it's not worth it (in my opinion). Cheers Jamie

    From what I've read online these properties generally doubled in value from 2000 – 2010, obviously though double 100k is still only 200k so your looking at 100k of growth compared to say 400k in other parts of the country. The only driver there is the mine really. MMG (Mining Company) reported that current exploration will provide work beyond 2020. Having said that if the miners ever packed up and left I don't know how you'd ever sell a property down there.

    I’d want more security than exploration work beyond 2020!

    Some of the area’s up in Central Queensland such as the Bowen Basin and now Galilee Basin not only have a coal resource expectancy of 100 years but strong cattle and agricultural industries as well.

    Many of these areas offer strong cashflow with cap growth. Simple supply and demand.

    You can still get into areas like Collinsville and parts of Rockhampton for example for sub $200k with much stronger fundamentals.

    Jack

    Profile photo of jim beamjim beam
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    Everybody has their own criteria for investment.  I think real estate in Tassie is appealing becuase its a low capital entry (Hobart is lowest capital city in Aus) and generally offers 5% + return with limited downside. 

    For what its worth hobart had the highest capital growth over the past decade of any capital city in aust.

    before everyone says thats becuase it came off a low base… its still coming off a low base compared to mainland.

    with pop growth of less than 1% (considering it was nil for nearly 20 years!! this is a huge turnaround) if it reaches what the rest of aus is the number of new homes required will triple. There are 43,000 homes needed by 2028 currently there is only 2500 pa being built.

    25m people on the main island and 500k on the small island  

    No one knows what is going to happen its hatrd to argue that capital growth seem more assured in metro mainland  however if Tassie gets found then undoubtledy it will be turn out to reward the investors with continued above average returns  for the reasons above.

    Profile photo of JT7JT7
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    jim beam wrote:

    Everybody has their own criteria for investment.  I think real estate in Tassie is appealing becuase its a low capital entry (Hobart is lowest capital city in Aus) and generally offers 5% + return with limited downside. 

    For what its worth hobart had the highest capital growth over the past decade of any capital city in aust.

    before everyone says thats becuase it came off a low base… its still coming off a low base compared to mainland.

    with pop growth of less than 1% (considering it was nil for nearly 20 years!! this is a huge turnaround) if it reaches what the rest of aus is the number of new homes required will triple. There are 43,000 homes needed by 2028 currently there is only 2500 pa being built.

    25m people on the main island and 500k on the small island  

    No one knows what is going to happen its hatrd to argue that capital growth seem more assured in metro mainland  however if Tassie gets found then undoubtledy it will be turn out to reward the investors with continued above average returns  for the reasons above.

    Fair call jim beam.

    However, my argument would be that states on the mainland have far greater prospects for economic growth, infrastructure investment, population growth. Even though Hobart may have had the highest cap growth over the past decade of any capital city in Australia, there are other markets within markets on the mainland that have had stellar cap growth in the last 10 years.

    Don’t get me wrong mate, Tassie is a beautiful part of Australia but I can’t see the economic and population growth that would warrant me to put my money in the Tassie market. If I was looking for a low entry cost I know I could go to Adelaide with the lowest entry cost of all mainland capitals cities but huge potential with a burgeoning resources industry and huge spending in infrastructure.

    Jack

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