i am a newbie investor and cash flow positive properties make lot of sense for investments. Such properties are generally found in remote areas. My question is how do we handle the vacancies and find new tenants in such areas? And how these risks can be mitigated specially for the areas where population is low
JaxonParticipant@jaxonaJoin Date: 2014Post Count: 284
- This topic was modified 3 months, 3 weeks ago by Mandar Naik.
Good Day Mandar,
I agree for most situations I do not see why you wouldn’t get an asset that makes money instead of losing it. :) (some exceptions)
So not always remote (depending on your view of such)
So you study the vacancy rates / call agents, study the area & understand the staple local economic situation e.g. farming/mining vs tourism/business etc
that is such a good question about population & I do have a view that’s quite multi-layered but a simple answer would be review
-risk of low population (how many renters vs owners / vacancy rate / growth of sales prices / industry reports)
-future calculations of growth based on reasons to live there
among many other things.
if you can learn to understand these things & more you will see the risk’s for what they are.
(once again this is not catered to you in any way this is just my general view of your statements)
Enjoy your week!
Just want to add that buying in remote areas aren’t the only way to generate positive cashflow property. We have properties in city areas that are positive cashflow. We buy well for the area sometimes well below market depending on the vendor circumstances, and it’s a property that can have value added, in ways that will add value to the rental price. This helps the property be cashflow positive from the start.
thats interesting. Do you mind sharing more details about strategies you use to add value?
Mandar, our approach has been working with houses that need renovating (not necessarily structural), perhaps a house with wasted space or under-utilised space or an inefficient layout. This can be an opportunity for adding extra usable rooms. We have one property that had 2 bedrooms when we purchased it, it now has 5 bedrooms with two bedrooms having ensuites. The addition of ensuites was done in a second round of refreshing work we did after some years. The initial reno was the addition of rooms, taking out a wall, painting, new kitchen. We have used this strategy in a couple of properties.
With one property where we converted a 2brm house to 5 bedrooms 2 bathrooms, we also built a 2brm 2bath flat underneath.
We added a secondary dwelling to a property.
We do furnished room rentals for some of the properties, not all. There has been an obvious recent change in the student market with covid but our tenants have largely stayed as they are not all students, though we have experienced some time with a vacancy or two where normally we would be fully rented all the time. Overall very happy with how we have travelled through the last few months.
This approach suits us, though it’s not going to be right for everyone to do.
Thanks Sara for sharing details. I am still a newbie here so quite limited information I have for renovations. Probably after some experience I can move to this strategy.
thanks again for sharing, appreciate it
The decision around the path forward can also be about what suits your strengths. I guess the underpinning goal with why we started this way was that we wanted to create equity so we could buy again and also help have the property be holdable and in our case, make cashflow. So it depends what your circumstances are in choosing the way that appeals. All the best.