NSW Broken Hill for first IP?

The article says she buys her properties in a company (for asset protection).

Is that the smartest move, from a land tax, income tax and CGT perspective?

 

That's a nice tool I haven't seen that before but I think we are getting off track.

The population of greater Bn is 2.3 million yet Bn LGA area has a population of 1.1 million, 25 km from the cbd is still metro whether we are talking about Brisbane, Sydney or Adelaide.

The discussion left BH and stats comparing regional vs capital city metro were used.

You haven't addressed any of my points, that's okay, I agree that if you don't know what you are doing there is the potential to get burnt in regional centres definitely.
The problem is that large regional centres with universities, hospitals, military bases and many industries tend to get lumped in together with small one or two industry towns which are very high risk.
Just my 2c

 

I agree, good on her for acting and be willing to bare all in a national publication, I couldn't do it.
As for being an 'Investor of the year" the portfolio could be incorrectly interpreted as an example of diversified low risk portfolio.
It's not.
Most of the small towns I don't think are
Investment grade, they are too small and volitile.
Port Headland is probably underwater and the Western Sydney purchases were recent buys near the top of the cycle.
In fairness without knowing the LVR its hard to assess, 90% and all equity could easily evaporate, at 50% LVR or less these holdings wouldn't cause me to lose to much sleep but she is holding too much rubbish.

Might sound a little harsh but some investors might look at this example and try to replicate.

 

Quantity v quality debate I suppose.

 

Given that she went through a divorce and loss of a business she is probably less worried about additional costs and more worried about losing her assets again.

 

Bad for CGT, good for land tax if your maxed in personal name. Not sure about income tax would depend on individuals circumstances.

 

Agree with you on CGT and L/T.

With income tax, companies pay 30c in every $ of income. I would have thought there would better ways of keeping more of one's hard earned income, especially as she is building a +cf portfolio, than buying in a company.

Just my thoughts.

 

YIP does not exactly have a great track record with picking investors of the year... Looks like it's always the same recipe: the higher the risk, the higher one ranks on the investor of the year list.

 

Hey guys ,
I bought a few in BH in about 2004 $37K to $41 then $75K, and still hold them today .
I used the properties(among others) to help build a larger portfolio elsewhere for capitol growth.
I have got excellent rents from these propertes every year since owning them and my strategy is to use the cashflow to pay down the mortgages and then every few years refinance them again and buy more properties in decent growth areas.I have done this around 4 times from memory .(TO BE FAIR YOU HAVE GOT TO BE WILLING TO GET IN THEIR AND GET YOUR HANDS DIRTY)

The beauty with Broken Hill now is it is in a downturn atm so you can purchase properties for $16K to $50K that need a reno and you can rent them for $180-$240 per week.(some of the highest cashflows in australia for lowest cash in)
I would not recommend refinancing them now (unless you have other equity to keep as buffers)instead just use the cashflow to pay them down and keep plenty of equity in them (keeping an eye to keep the loans below the median price for your specific property type to keep you in a safe buffer level)

As some have said it is not a place i would recommend as an only property in your portfolio(as its unlikely you will see capitol growth (only manufactured via a reno)but on the other side if you are new to property investing and want to learn the ins and outs and to see if its for you (being a landlord)then it is not a bad place to learn (in terms of low cash in for high return)

The town itself does not rely on the mining anymore but of course the loss of any jobs in an area of 18000 population does effect things .
It has been around for over a hundred years and will be for a long time yet but if investing there keep an eye on your buffers and only buy way under market median values and monitor it.

 

Good advice Luke. I have noticed first hand, that it's not as easy to find tenants - in that, it may take a number of weeks now that the property is vacant. Factor in four weeks vacancy. I think that capital growth will still be flat for a while - possibly a couple of years? Eventually, all the cheapies will be sold or bulldozed, that should help get the median price to rise. I'd be expecting that by at least 2020, water security via a pipeline from the Murray and Carpentaria's exports of iron ore pellets to Mitsubishi in Japan will be underway. By then, who ever has an IP at BH, would have paid down some more of their loans. Also, you would be positioned to act on any upswing in the town's fortunes that could increase prices.

 

Hey Damage ,
The government has committed $500,000,000(half a billion)to sorting the water supply out so definately that will get sorted out and i agree keep paying them down and using the cashflow and keeping low risk
Re vacancies - I manage mine myself and have some doing holiday accomodation also at times so i havent had any major issues over the years.-Mine are renoed neatly though so that attracts better tenants .
Damage do you use an agency? any success?
For finding tenants facebook can work but you need to see references.

 

Hi Luke,

Yes, I use an agency in BH. Upside, being that I live 1000km's away and don't want the annoyance of dealing with daily problems at BH - when someone else can do it on my behalf. More than happy to out source via a property manager. Also, very handy to use them for any insurance claim requirements. Downside, the property manager's tend to be swamped with tasks - so you have to be patient at times to get a response. But to be fair, these frustrations can occur at any agency in any location.