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Any good regional cash flow stories?

Discussion in 'General Property Chat' started by Mr Properties, 9th Jan, 2016.

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  1. Mr Properties

    Mr Properties Member

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    Hi all,
    Heard plenty of horror stories about regionals with bad tenants and long vacancies. Just wondering if anyone has any good stories of high yields and good tenants. I am thinking of purchasing one to see how it goes. Sort of properties that are low purchase price 100k-140k with rent of $250-$270 per week. I am chasing cash flow at the moment and not concerned about future gains with that kind of yield. Also is it true the council rates eat all the yield away?
     
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  2. mja

    mja Well-Known Member

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    I have awesome tenants in my Wellington (NSW) properties; one has been there since 2011 and is the most laid back relaxed person I've met. PP in 2010 was $69k and it immediately rented out for $150 week. It's now $200/week. Yield for days. Make sure your property manager doesn't just choose anyone.

    The thing with regionals is most properties require more maintenance because of the age of the houses (a lot were constructed post war). Ensure you factor in a higher % of maintenance as a buffer.

    My council rates are ~ 13% of my gross yield.
     
  3. Mr Properties

    Mr Properties Member

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    That's awesome mja. Dosnt that want you to buy more of the regionals?
     
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  4. mja

    mja Well-Known Member

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    Of course. I'm up to 4 now, with two settling this month. Hunting around for more equity releases to use as deposits for more. Cashflow++ :).
     
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  5. Greyghost

    Greyghost Well-Known Member

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    And that is where you will get stuck.
    That is why it is important to also target cf areas with strong cg prospects.

    What's the point of having a property maybe making you $2000 per annum if maintenance fluctuates and it doesn't grow..
    Where something for 300k with a yield of say 6% grows at 4-6% per annum..
    The property supports itself and after a few years the cg will well outweigh the small $2k you get from your regional town with no growth..

    Don't get too caught up in the limelight of cheap property with just a good yield, you can find yourself at a dead end quite quickly..
     
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  6. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    Interesting post.

    For every "success" I hear a dozen horror stories. Certainly can be done but it seems most folks don't end up with the result they hoped for.

    Why not look create cashflow in metro areas?
     
  7. MTR

    MTR Well-Known Member Premium Member

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    Agree to a point
    Also what is interesting is in boom times you can also experience significant growth in regional areas. Generally speaking they will be regional centres
     
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  8. mja

    mja Well-Known Member

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    Fully agree with this; you have to have a balance of regional/metro/CF/CG properties.
     
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  9. D.T.

    D.T. Adelaide Property Manager Business Member

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    This, really.
     
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  10. Greyghost

    Greyghost Well-Known Member

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    I agree, just depends how "regional" you are speaking!
    Ballarat, Bendigo, Geelong or:
    Sale, bairnsdale, colac, 1 horse towns..
     
  11. beachgurl

    beachgurl Well-Known Member

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    I have one in Orange. PP in 07 was 101k. Currently renting for $210pw. Long term tenant with no arrears.
    1 in Trashmont. Purchased in 07 for 123k. Haven't had any arrears since 2008. Currently rents for $240p/w.
    Both bring in a few k positive after maintenance/repairs and the usual expenses.
     
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  12. skater

    skater Capitalist Premium Member

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    In our early years, we bought a heap of cheap, cf+ properties in regional areas. Some we've now sold, and some we still have.

    Tassy, bought 2. One for $5k, one for around $60k. The cheap one was bought sight unseen & we sold about a year later for around $25k. Didn't make much on it, but didn't loose either. The second we sold for around $170, maybe 5-7 years later. Both of them very much cf+ from day one. I'm a little sketchy on the details, as it was a while ago now.

    Traralgon, Vic, bought for $67k, still have it. Now worth around $220k, rents for $225pw. Only ever had the one tenant in there. It was bought around 2004. Next to no maintenance required, home is an ex-housing dept place in excellent condition when we bought it.

    Moree, NSW, small 3 x 1 bought for $25k with new kitchen, rented from day one for $150pw, sold a few years later for $45k. Didn't make much on it, but didn't loose either, and you don't go broke making a profit. Block of 4 Strata Units, in good area, bought for $225k, still got them. They've got an offer on them at the moment, so I won't reveal anything else about them, except that they are on a head lease arrangement with one of the housing co-ops out there, which means 100% tenancy all year round. Renting for $640pw. Rates are larger than the other two areas, but it's not too bad. Well & truly cf+.

    There's been others as well. Regionals can & do work, but they are not for everyone. At the start, we were on low incomes, so these kinds of deals were the only ones we could get. Could we have done better? Well, yes, looking back in hindsight, most people can improve their first purchases, but we are very happy with the purchases we made. Without them, we certainly wouldn't be where we are now, as the skills you learn as you go, are invaluable.
     
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  13. bez23

    bez23 Well-Known Member

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    I've got 2 main rules of investing:
    1) don't go regional/ mining towns
    2) don't go OTP apartments.

    Everything else can be good if you buy well / add value. That's just me personally anyway.
     
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  14. D.T.

    D.T. Adelaide Property Manager Business Member

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    Works for me too bez
     
  15. Coastal

    Coastal Well-Known Member

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    I strongly disagree

    One can increase the value property in regional areas by renovating. MJA has done this if I recall with one of his Wellington properties, I read on somersoft I think. Nathan Birch has done this plenty of times

    Obviously this requires skill in buying the right property for the right price in the right area.
     
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  16. Beelzebub

    Beelzebub Well-Known Member

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    Purchased a house, corner block on a little over 600sqm in Ballarat with a 6% yield 6 months ago. I like regionals, I'd stick to 50k+ populations with multiple industry, or smaller towns close to 50k+ populations
     
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  17. HUGH72

    HUGH72 Well-Known Member

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    Hi Mr Properties
    I wouldn't be suduced by yield only, at current SVRs once it gets much above 8-8.5% for a house you have to ask why?
    I like regional properties as well but stick to large centres 40-50k+, anything else is more volitile and no mining towns.
    At this point in the cycle there are plenty of metro options with 6-7% yields which I am continuing to look at, think outer suburbs greater BN, northern and southern suburbs in Adelaide for example. Sub 300k and less in Adelaide.Much less volitile and especially in Adelaide an abundance of tenants.
    I have done okay in Rockhampton, Cairns, Orange and Tamworth with very long term holds but I wouldn't recommend any of the above presently except maybe Cairns but its more expensive and insurance costs bite so it is not a yield play.
    Regional centres have grown if you look at 10-15 year figures so CG still occurs but is usually slightly lower and off a lower base.
     
  18. skater

    skater Capitalist Premium Member

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    There are plenty of examples of regionals that have good CG AND good cashflow. Some of them just plod along with no boom/bust cycles, but if you look back after ten or so years, you'll be surprised to find that they have risen quite a substantial amount.

    At the end of the day, you just have to do what suits you, in the situation you find yourself in. Regionals might be the only way forward, or the worst thing you could do. There are just so many different ways you can be successful at this property lark, you just have to find your niche.
     
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  19. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Completely agree@skater .Finding your niche, becoming an expert in it and capitalizing on it day in day out is a very powerful approach.
     
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  20. Greyghost

    Greyghost Well-Known Member

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    Nathan birch didn't make his coin on his regionals. That was on his early days playing around on the tools.