Any good regional cash flow stories?

Discussion in 'Investment Strategy' started by Mr Properties, 9th Jan, 2016.

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  1. meme plecko

    meme plecko Well-Known Member

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    Skater, did you sell some of these because they were difficult to manage (tenant/PM issues) or was it simply that they did not fit with your strategy at that time?
     
  2. skater

    skater Well-Known Member

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    One was sold due to scumbag neighbours, others sold to invest elsewhere. None had tenant or PM issues.
     
  3. dabbler

    dabbler Well-Known Member

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    Regionals can work well, too many people seem to just think one thing or the other, however for most places you would want to have a lower CG expectation, or not the cycle you see in big cities.

    Get to know the areas, check things out, get a reasonable manager, decide from there is it works for you. The biggest down side is cheaper houses mean you can have more of them, but you have more maintenance exposure, but CG if 5, 10 etc % is the same whether capital city or small town.
     
  4. See Change

    See Change Well-Known Member

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    Re lack of cycles in regionals , that's not my observation .

    We've invested in Townsville and rocky in the past and had good cash flow and capital growth .

    We've just bought two in a large regional city . Both were bought by their vendors around seven years ago . We paid the same price for one and the other we paid the vendor less than what they paid .

    Both vendors bought near the peak of the last cycle , and the preceeding owners made good capital growth while they held the properties .

    Currently we're planing these as long term holds with yields close to 8 % . Both centrally located and in good parts of the town.

    I only look at large regionals with diversified economies . All the ones we've bought in have been costal , though I'd be happy to buy in Bendigo / Ballarat / Dubbo / Albury / Wodonga / Toowoomba / Wagga ( not trashmont ) . Never mining towns .
    We didn't buy in cairns ( in early 2000's due to its relatively tourist based economy , but it still boomed ) .

    Cliff
     
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  5. dabbler

    dabbler Well-Known Member

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    Did not mean no cycles, meant they are different to large cities both in timing and often reasoning.

    Also, when I talk of regional, I am not talking any of the large coastal cities.
     
  6. Srproperty

    Srproperty New Member

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    What have you learnt and what would you do differently?
     
  7. Tony Fleming

    Tony Fleming Well-Known Member

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    The main thing is you need someone on the ground there to help. Find a good PM explain your not from the area you would like there help. They know the bad streets, the neighbours from hell etc. Always get second quotes on repairs in regional areas. Some tradies love to jack up the prices for an out of Towner. I find with regional properties once you have a tenant for a few years they are there for life.
     
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  8. euro73

    euro73 Well-Known Member Business Member

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    Regionals can be fantastic for getting you up and going, but I would qualify that by saying they need to be uber cash cows, which is why I really embraced regional NRAS. I dont think I'd touch any regional that wasnt super CF+ . The 40-50 year old sub 100K stock people are referring to here, in woop woop towns.... no thanks...not for me anyway. And as NRAS opportunities are now almost exhausted, the next best approach in my view is dual occ regionals. They can produce the same sorts of CF+ outcomes as a single NRAS dwelling, pretty much. But you have to purchase in larger regionals with 40K + population, more than 1 economic driver etc. Places like Port Macquarie, Orange, Wagga, Albury, Shepparton etc... they are all diversified and are the sorts of places to invest in dual occ.
     
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  9. skater

    skater Well-Known Member

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    I wouldn't do anything differently! Maybe a little more research in some areas, but overall we are very happy with the results. Even the dogs made money! Not as much as others, but that's fine. There were mistakes....but that's all a learning curve.

    The thing you have to remember is that we were BROKE! We had no choice as to the type of property that we invested in. We did what we could, and built as big a portfolio as we could within the constraints of our income. As they grew in value and because they were all cf+, we didn't have any issues with getting finance
     
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  10. hash_investor

    hash_investor Well-Known Member

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    Hi Skater

    What is your experience like insuring regional properties? Is it similar to metro areas?
     
  11. skater

    skater Well-Known Member

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    Exactly the same!
     
  12. el caballo

    el caballo Well-Known Member

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    Skater .... much kudos indeed! Very well done!
     
  13. dabbler

    dabbler Well-Known Member

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    Here are some thoughts.

    People get scared by non coastal regional, good PM can be hard to find or not exist in small towns, larger ones are ok, you can make money anywhere really, just get to know the area and market would be my advice.

    If you look at some Bris suburbs, the average CG is 5% , western regionals, bad ones, are around 3, some more, some may be less (I am generalising) so CG may be lower, but yes, the cash flow should be good, I would not go for 5% returns in western regional unless it will be development or something.

    As for rates and water, well, again, using Brisbane, they flog you hard for water in Bris, in BCC and the regionals outside the BCC area (not sure of inland regionals) they also hit you harder for rate in Bris and surrounds & to top it off, they have an extra charge for investors....cause your rich seems to be the only reason I can see :)

    If you can get 140k returning 270 and low vacancy, well, yes please, just watch out is not going to be a horror tenant or empty half the time, or place falling apart etc
     
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  14. Blueskies

    Blueskies Well-Known Member

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    Hey @euro73, I think there is a lot of merit in this as a pretty powerful yield play, just curious what you looking for in terms of dual occ? Are you talking building new duplexes/dual key, adding granny flats? reno/division of large houses? Always enjoyed your NRA posts, interested in where you are shifting focus now these are no more?
     
  15. euro73

    euro73 Well-Known Member Business Member

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  16. The Sparky Investor

    The Sparky Investor Well-Known Member

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    Sorry I'm still new to a fair bit of this, buying and selling I can fully understand. But why would you sell on this property? Especially if it was CF+.

    Margaret Lomas has written a few books and it seems she always buys in regional areas and she is up to property 40 at this point (Maybe more). I can agree with regional areas, they are where I would invest.
     
  17. dabbler

    dabbler Well-Known Member

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    At some point your going to want to downsize and pay down loans, how you choose or do this is up to you, for me it would make sense to keep things that were close and in a market unlikely to have too much downside.

    I think having a few units in each capital (or your fav capital) paid off when your retired would be a good thing, you do not have to monitor the places so much, less taxable land content & good cash income.

    If you like travel and change, you could move into anything that became vacant for a period, or when lease expired.

    So many things you can do.
     
  18. skater

    skater Well-Known Member

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    Dabbler touched on it. Hubby has retired and that was one of the properties earmarked to go.
     
  19. MTR

    MTR Well-Known Member

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    Its an interesting topic, I believe Skater posted a thread recently where she sold a regional NSW property and it did achieve growth, however this particular property took 13 years to almost double.

    Perhaps investors need to keep in mind that regional buying may likely be a trade off for cash flow today vs CG. Whereas if investors purchased in practically any metro area in Sydney they would have doubled their money in 3 years.

    Its very much dependent on personal circumstances, some investors need cashflow, this entry level is what they can afford. I have witnessed spectacular growth of some major regional centres in WA during the property boom of 2001-2007, however when the market crashed in 2007 they have yet to recover.

    MTR
     
  20. euro73

    euro73 Well-Known Member Business Member

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    To be fair, more like 50-60%.

    People always forget that strong CF+ can also reduce debt. Yet the value of the cash flow when redeployed towards debt reduction , and its equity creation and borrowing capacity benefits - is pretty much always ignored by the forum.

    In simple terms, if you buy a 300K regional NRAS property and it takes 13 years to double, but during the 13 years you can pay 50% of it off, you've achieved a debt of 150K and an end value of 600K . Without the strong cash flow allowing for debt reduction, you would like still have a debt of 300K and a value of 600K if you bought that same property non NRAS - so you'd have been reliant entirely on growth to match the outcome, and even if you;d achieved it you'd still be carrying more debt so your ability to use the additional equity would be more limited due to sensitised assessment of that debt.

    Given the new lending environment, pursuing a debt reduction sort of strategy is going to allow median income earners to build a far larger portfolio as they can create equity and improve borrowing capacity simultaneously. This will in turn allow for a far better passive income outcome in the end game.
     
    Last edited: 8th May, 2016
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