All Topics / Help Needed! / investing in bronxy areas

Viewing 11 posts - 1 through 11 (of 11 total)
  • Profile photo of KiethKieth
    Participant
    @youcandoit
    Join Date: 2014
    Post Count: 3

    What do people think about investing in areas that have a lower socio economic standing?

    Lands cheaper.

    I’m thinking about buying a block and putting a basic 3 bedroom house on it. Has anyone done this and how did it go? I’m looking at a long term investment, positively geared as I work only 3-4 days a week. Finance approved.

    Also how much does a nice no thrills home cost in NSW? I’m conscious that the houses in the area are often wetherboard or fibro.

    Any feedback would be appreciated.

     

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

    Hi Kieth

    Welcome aboard :-)

    It’s a very broad concept. Some would consider the outer Western parts of Syd to have a lower socioeconomic standing but values of properties have risen dramatically in the last 12 months or so.

    There are opportunities everywhere – it’s all about what fits in with your own strategy.

    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 ChazzWazzaChazzWazza
    Participant
    @chazzwazza
    Join Date: 2011
    Post Count: 9

    Hi Keith,

    I have 2 properties in low socio economic areas and im a fan because home/land/unit value vs Rent return is great, i guess the trick is finding areas that are transitioning from low socio to the next stage so you can get a capital boost (of course things need to be happening for the town also). Discussing with agents helped me gauge percentage of govt housing to owner and how owned was starting to dominate over the years as govt kept selling (was at 20% govt when i bought). You can see when you visit the suburb and see a mixture of original homes, rennovated and new builds. (as opposed to whole suburb being original) I find suburb aesthetic ie the cars people drive and gardens/ property maintanence /duty of care levels combined with the above give me an idea. (also these forums have professional investors talking about the best streets of the worst areas)

    Some suburbs just have a bad rep for something that happened in past or ethnicity. I bought a unit in Roselands Sydney back in 2006 and my friends/family said i was mad because it was next to Punchbowl (middle eastern community), not sure if you know sydney but its been the jewel of the everything i ever bought?

    I bought an ex government home for 190K last year and has returned 260pw since, a new build was sold a few houses down the street for $325K 6 months ago and have 4 other new builds on street? I have a portfolio loan so I hope when i reevaluate value to borrow on equity that some of those other sales rub off on the e-val. RPdata search with my broker yesterday and a chat with agents has it about $210-$215K atm. (ill be holding this for quite some time)

    Ok so heres the bad part, had a gang of “youths” throw a large rock through window and smashed front fence, so yeah insurance protecting you for home and as landlord a standard (more exp). Also be patient with agent its not their fault the home and the market the home attracts might bring difficulty. Also found agents less reluctant to negotiate on management (makes sense but thought i would mention).

    People around you find it hard to understand what your doing (Have a mate who calls me the slum lord haha) so if your stout, treat professionally without prejudice or like a challenge then i recommend it, im sure other people would suggest easier alternatives but i like the idea of dusting the dirt off and finding a gem instead of a an old horse apple. :)

    With house im looking at this as a strategy at the moment and finding the relocating home industry to be quite evolved, i.e. hard to find land stock, waiting lists of investors at established house moving/seller companies, so i driving out next week to visit a couple of lots where they have houses already moved (they also have listings of houses still at original address awaiting purchase before removal) and pick the brain of sales reps for more info. Purely an information exercise, ive worked out costings but want them to confirm for me. I thinking i should just learn now in case opportunity comes up.

    Id be interested to hear from someone with personal experience on this, my research has been to buy private $8-$15K or through dealer $20-$35k for basic standard house (with much more additonal costs). People even give away free to avoid cost of demolition.

    Have you researched online? pull together a cost table, contact council, moving company, gumtree, investor forums etc recommended.

    Brad

    Profile photo of KiethKieth
    Participant
    @youcandoit
    Join Date: 2014
    Post Count: 3

    thanks for your responses.

    I’m allways doing research but you can never do enough. I like the idea of a block and brand new house combo for slightly less than 300k. I’ve found the block but I’m now looking for the house. Can you get a brand new three by one for around 150k? I know this would be optimistic but i’ll continue to look

    Profile photo of TheNewGuyTheNewGuy
    Participant
    @thenewguy
    Join Date: 2014
    Post Count: 151

    Hi Kieth,

    Why are you going with a new build?… that might be another topic, but I’m not 100% sure I would do the same without looking at the numbers.

    Anyway, my father has a couple of units that are set up through CentrePay and he actually likes it. Basically, it’s about as low as you can get, when Centrelink pays the rent / bond directly to the landlord. He is basically buyying very cheap places that have limited capital gains, but are delivering positive CF from the start and not much hassle with rent as it’s paid from Centrelink. There are other considerations, but I wouldn’t be doing this with a brand new place…

    Profile photo of mattstamattsta
    Participant
    @mattsta
    Join Date: 2011
    Post Count: 604

    Agree with TheNewGuy…. If you want Positive Cashflow properties, they generally aren’t achieved through building brand new. That’s from my experience. Look at the numbers yourself.

    You’re better off finding existing properties in low-socio economic areas that deliver a high % ROI from the current achievable rents.

    Profile photo of DwightDwight
    Participant
    @bigvman
    Join Date: 2002
    Post Count: 42

    I love ugly looking houses!

    There I’ve said it. You can’t be afraid that that property you want to buy is not one you’d even “like” to live in. I own a handful that I most certainly would NOT want to live in.
    However my goal when I purchased was to attain a positve cashflow so I could potentially buy more and more.
    In my experience the homes that produce the greatest yield are in smaller towns, are ugly, are cheap!

    You often find that there is a basic floor on rental in a region, but house prices may vary wildly.
    If you can pick up dwellings for less than replacement cost because someone else thinks there a bit of work then good for you!
    My properties are not where I live so I’ve invested time a rental manager, getting to know them and getting them onside to tell me honestly what they think these places are worth and who might tenant them.

    So far so good in my case!

    Cheers,

    Dwight

    Dwight

    Cashflow Positive Investor

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Hi,
    Over the years (I’m only 30 lol) I bought and sold a few properties. A couple of my holdings where in very average areas. The return on capital growth and rental yeild was great.

    Just remember demographics are changing every day and people are becoming a bit mor fussier

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

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

    Just remember demographics are changing every day and people are becoming a bit mor fussier

    Spot on.

    The suburb I live in was developed for the working classes back in the day. Now they charge $5 for a flat white at cafes and a run-down ex govvy house costs $600k!

    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 Simon Romijn | Stepping Stone ™Simon Romijn | Stepping Stone ™
    Participant
    @simon-romijnsteppingstonewealth-com-au
    Join Date: 2014
    Post Count: 2

    Dear Keith,

    There are select and highly attractive opportunities in investing in lower-socioeconomic areas in inner cities undergoing gentrification. Picking these areas requires a great deal of skill and experience. More generally you need a higher rental yield to justify investing in lower-socio economic area. Firstly, tenant risks need to be more closely managed. Secondly, many of these areas are on urban fringes where there is no shortage of potential housing supply thus depressing capital growth potential. This is well illustrated by the Campbelltown area on Sydney’s south-western fringe. Thirdly, persons in lower socioeconomic status bands have and continue to experience lower income growth than persons in higher socioeconomic status bands, particularly the highest band. For example the lowest 20% band over the last 12 years to 2011/2012 experienced income growth of 3.6% pa versus 4.4% pa for the highest band. Income growth is closely tied to rising housing affordability and capital growth. A difference of 3.6% pa versus 4.4% pa may not sound like a big deal but over a long investment horizon this translates into a very big difference in the value of your investment.

    At Steppingstone Property we consider potential gentrification closely when advising clients. If for example an area with residents in lower income bands gentrifies over 10 years into a higher income area this can lead to average income levels rising by over 6% pa. This sort of rise in average income leads to very successful property investment.

    Simon Romijn | Stepping Stone ™ | Stepping Stone
    http://steppingstonewealth.com.au
    Email Me | Phone Me

    Financial Planners & Investment Property Buyer's Agents

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

    Also how much does a nice no thrills home cost in NSW? I’m conscious that the houses in the area are often wetherboard or fibro.

    Why is the search scope limited to NSW?

    At the end of the day, capital growth is an unknown entity. You can guestimate based on history, but nobody can guarantee what the growth will be. However the cashflow position of a property is an absolute known, because you know the mortgage interest, council rates, etc from day 1. So you know if a property will cost you a lot, or a little bit, or produce a surplus, in year 1 of ownership.

    Unfortunately the checkout lady at the supermarket has no interest in the value of your properties … she just wants you to pay for your groceries, which can only be done with cold hard cash, or a credit card. You won’t have either unless you have yield or a credit card provider to whom you have demonstrated a cashflow position (aka yield).

    To answer your question – a dollar earned in a bronxy area buys the same loaf of bread that a dollar earned in a flashy area would have. The difference is how compromised your lifestyle has or has not been whilst earning that dollar ;)

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

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

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