All Topics / Help Needed! / Investment proposition

Viewing 19 posts - 1 through 19 (of 19 total)
  • Profile photo of Prop_InvestorProp_Investor
    Participant
    @prop_investor
    Join Date: 2011
    Post Count: 3

    Hello everyone,

    Just discovered this website which has a plethora of information which is just sensational!

    On to my question – I am finally looking at purchasing my first IP and I’m looking at investing in Regional Victoria, namely Ballarat.

    I wanted to get your views on Ballarat from an investment perspective.

    whilst yields seem pretty healthy, will capital growth be good over the years? Why? Why not?

    Would love to hear your views on this regional city. I am also looking at Melbourne however the rents vs mortgage payments seem out of whack! Rental yields are very poor and I’d be subsequently bleeding money. Given this, is it a good move to look regional?

    Thanks in advance :)

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    Something that is important to remember is that you don't have to invest in the major cities if you don't want to.  It's not the only way to wealth creation.  Don't let anyone tell you any differently.  As you point out, if you can't afford to make up the difference between the rent and the mortgage, the plan ain't going to work anyway.

    I will however encourage you to read up on "depreciation schedules" if you haven't already.  Basically the building, carpets etc depreciate over time, and a quantity surveyor can produce a depreciation schedule to give to your accountant that will result in tax refunds for the next bunch of years, which often converts a property that is "bleeding money" into a property that is NOT bleeding money.  Generally you'd be after something as new as possible, as the depreciation benefits are higher.

    All that said, there is infrastructure coming Ballarat's way (I believe a new train line so the Ballarat folk commuting to Melbourne do not have to share a line with the Melbourne Metro trains….. check on this, it's something I've heard on the grapevine).  And it is always to invest by means of leveraging new infrastructure that makes an area more convenient to live in.  It is also intended that Ballarat will become a satellite city, since as the Melbourne population explodes, sooner or later it will not be possible to ferry everyone into Melbourne each day for work.  So some people will be ferried to Ballarat and Geelong, which will have major employment centres.

    I'm all over Geelong at the moment, leveraging new freeways, train services, and the forthcoming upgrade of Avalon Airport to become an international airport.  Ballarat is next on my list.  I'm thinking 2 bedders close to the hospital and unis, so that rentability will always be there.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Prop_InvestorProp_Investor
    Participant
    @prop_investor
    Join Date: 2011
    Post Count: 3

    Thanks for your prompt response.

    It’s reasurring to hear that you don’t have to invest in the major cities for wealth creation. Your comments make complete sense as it’s unsustainable for Melbournes population to keep growing as it is forever, therefore the satellite cities that you mentioned will play there part.. Very interesting.

    You are correct about the new rail line that will be built in Ballarat as the Age had an article about this and the State Govts commitment to funding.

    Very interested to hear other peoples views on Ballarat.

    Profile photo of matt_decatmatt_decat
    Participant
    @matt_decat
    Join Date: 2010
    Post Count: 21
    JacM wrote:

    Something that is important to remember is that you don't have to invest in the major cities if you don't want to.  It's not the only way to wealth creation.  Don't let anyone tell you any differently.  As you point out, if you can't afford to make up the difference between the rent and the mortgage, the plan ain't going to work anyway.

    I will however encourage you to read up on "depreciation schedules" if you haven't already.  Basically the building, carpets etc depreciate over time, and a quantity surveyor can produce a depreciation schedule to give to your accountant that will result in tax refunds for the next bunch of years, which often converts a property that is "bleeding money" into a property that is NOT bleeding money.  Generally you'd be after something as new as possible, as the depreciation benefits are higher.

    All that said, there is infrastructure coming Ballarat's way (I believe a new train line so the Ballarat folk commuting to Melbourne do not have to share a line with the Melbourne Metro trains….. check on this, it's something I've heard on the grapevine).  And it is always to invest by means of leveraging new infrastructure that makes an area more convenient to live in.  It is also intended that Ballarat will become a satellite city, since as the Melbourne population explodes, sooner or later it will not be possible to ferry everyone into Melbourne each day for work.  So some people will be ferried to Ballarat and Geelong, which will have major employment centres.

    I'm all over Geelong at the moment, leveraging new freeways, train services, and the forthcoming upgrade of Avalon Airport to become an international airport.  Ballarat is next on my list.  I'm thinking 2 bedders close to the hospital and unis, so that rentability will always be there.

    Without trying to hijcak this thread, i have just built a house, and was going to see if i could get a depreciation schedule organised.  as my parents have had a bit to do with the loan, they have some sort of interest in the property too.  i suggested getting a depreciation schedule, and they waffled on about it not being worth it because i wouldnt have much to depreciate.  out of curiosity, how much could i be looking at getting back in each of the first five years, the cost of building the house (townhouse) was 230,000 (ie, land is not included).

    as for the original post, ballarat isn't a bad place to invest.  what you must do first is develop an investment strategy and see if buying a house in ballarat will be in line with your strategy.  one positive with ballarat is that it is not reliant on one industry like many mining towns are.  therefore if one of the industries goes bottom up, there is less of a risk of the town turning into a ghost town.

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    Give this company a call and they'll tell you how much you'd be looking at getting back on a depreciation schedule; http://www.corpred.com.au

    As a rough guide, someone once gave me an example that a house worth about $400k would have a tax writeoff of about $8k in the first year.  If you are in a  high  tax bracket, this could equate to a refund of about $3k in the first year alone.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi Matt

    I don’t know why your parents would suggest that. You can get the most depreciation out of a new dwelling.

    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 matt_decatmatt_decat
    Participant
    @matt_decat
    Join Date: 2010
    Post Count: 21
    Jamie M wrote:
    Hi Matt I don't know why your parents would suggest that. You can get the most depreciation out of a new dwelling. Cheers Jamie

    I don't get it either.  their theory was that it costs too much to get the house assesed. but if it was to cost $500 to get the report done and i was to get a tax refund of $1000, then im up $500.  what they are effectively saying is that if i went up to them and said if if you give me $500, i'll give you $1000 they would turn the offer down.  Being a student, I am in the lowest tax bracket, and expect to be until the 2013-14 financial year so i dont anticipate getting a whole heap back, but getting something back is better than getting nothing back.  Ill try and knock up some figures to persuade them.

    Profile photo of kris07kris07
    Participant
    @kris07
    Join Date: 2007
    Post Count: 101

    In regards to Ballarat, it has been on my raydar for the last 18 months and I’ve actually just purchased 3 IPs there.

    I believe it ticks all the boxes in terms of yields and cap growth. It has good infrastructure – rail, hospitals, unis, quality schools etc. As mentioned above, the regional rail link which is in the pipeline at the moment will enhance the journey to Melb from B’rat by reducing travel times..

    Areas like Soldiers Hill, Ballarat East, Newington,pockets of Wendouree and Ballarat central are where you want to invest. Stay away fro
    From Radan, Sebas.

    The govt has promised $60 m on roads, $5Bn on rail and plus upgrades to sporting stadiums to allow for afl games at B’rat..budget night will confirm the true position on these promises..

    Given Ballarat is the largest regional centre in Australia it has plenty of potential and is very undervalued.

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    Great post kris07! 

    Would you consider letting us know the reasons to steer clear of Radan and Sebastopol?  And of course the reasons why you'd recommend Soldiers Hill etc.  It's also be super handy to know what kind of demographic is attracted to each area?  (eg students tend to live in suburb X, nursing staff in suburb Y….)

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of kris07kris07
    Participant
    @kris07
    Join Date: 2007
    Post Count: 101

    Thank you JacM:

    Areas such as Soldiers Hill, Newington, Ballarat Central and Ballarat East (north of Victoria St) are where you will find Ballarats prime real estate which are close to the major facilities and you are more likely to get a better quality tenant in these areas. Drummond St North (Ballarat Central) is extremely sought after, particularly by medical professionals and middle class families as it is situated in the hospital precinct of Ballarat.

    In regards to Wendouree, it certainly is not in the same league as the above mentioned areas, however pockets close to the lake will do well from a capital growth perspective as it will receive flow on effects from the Soldiers Hill area which a joins Wendouree. Yields are very healthy and vacancy rates are low (1%), achieving 6.5 – 7% yields are very doable.

    Investing in Redan and Sebastopol did not fit my strategy, which was around remaining central to Ballarat whereby employment rates were solid. These 2 areas have the highest unemployment rate in Ballarat, subsequently you’re dealing with a socially disadvantaged demographic.

    In spite of this, I acknowledge that both these areas have experienced CG, however it will never be at the same rate as the blue chip areas mentioned above due to scarcity of land.

    Finally, because Ballarat is still very modestly priced, you can quite easily afford to purchase well located IPs whereby the numbers work. Therefore, investing in second tier areas like Sebas and Redan did not form part of my strategy.

    I read above that Ballarat is next on your list – good luck with your purchases!

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi Kris

    Very insightful post – thanks for sharing. I’ll be on the hunt for another IP in the not too distant future and Ballarat sounds enticing.

    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 Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    Thankyou heaps for sharing Kris !!!

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Prop_InvestorProp_Investor
    Participant
    @prop_investor
    Join Date: 2011
    Post Count: 3

    Hi Kris,

    Thank you greatly for sharing this very useful information.

    It’s always handy to know which pockets to look out for.

    It was reassuring that someone else thinks Ballarat ticks all the boxes as it has the right fundamentals, schools, unis, hospitals and great streetscapes with consistent period housing.

    Thanks again for all the responses, this is such a great website!!

    Profile photo of madeinitalymadeinitaly
    Member
    @madeinitaly
    Join Date: 2007
    Post Count: 47

    Hi guys,
    Exciting post!
    What about creswick north of ballarat, anyone got anything to say about that place?
    Cheers,
    Andy

    Profile photo of kris07kris07
    Participant
    @kris07
    Join Date: 2007
    Post Count: 101

    Sorry not familiar with Creswick.

    Profile photo of kris07kris07
    Participant
    @kris07
    Join Date: 2007
    Post Count: 101

    Just came across this article which I thought I would share with everyone which outlines funding coming into Ballarat as a result of the state governments recent budget announcement:

    http://www.thecourier.com.au/news/local/news/general/baillieus-big-present/2155790.aspx

    Profile photo of jojo42jojo42
    Member
    @jojo42
    Join Date: 2011
    Post Count: 6

    Hi
    Just read the post on investing in Ballarat- sounds terrific and coming from
    someone who has one IP in Moranbah QLD , and as i live in Victoria- it might be
    just me- but the idea of having an Invest prop a bit closer feels a bit more secure
    – Perhaps!!

    Good Luck

    Cheers
    Jo

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    There's a lot to be said for being able to pop over to your IP and take a look at it if need be.  For example.  Let's say a tenant trashes your property.  If you are going to let your property manager sign off on the insurance claim, you might find you are very disappointed in them missing lots of detail and damaged stuff.  They just won't care as much as you do, and such a situation could end up costing you tens of thousands of dollars.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Mickp10Mickp10
    Member
    @mickp10
    Join Date: 2008
    Post Count: 3

    We live in Ballarat and purchased a property in Invermay Park November 2009. It has had a rental return of 6.38%, and capital growth of 22.8%.

Viewing 19 posts - 1 through 19 (of 19 total)

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