QLD Cairns Unit - Potential to be positively geared?

Discussion in 'Where to Buy' started by Chatto, 10th Dec, 2017.

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  1. Chatto

    Chatto New Member

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    Hi All, I'm just starting out on this property investing journey but I recently went to Cairns, QLD for work and noticed the price of 2 bedroom units was quite affordable (for me anyway) compared to what I've been looking at in the greater melbourne area.

    I'd like to get the collective knowledge of this forum on if this unit is a good deal:

    Cairns Unit Listing - $115k

    I inspected it while I was up there and it needs a good clean, bit of paint and to kick the current tenant out as he's made the place stink of smoke. It's currently rented for $190 per week but after talking with the agent who looks after it, she said the unit 2 doors down in the same block, which is the same layout/size, is rented for $270 per week! Only difference is its clean and doesn't stink of smoke.

    So ~$4k for a clean, paint, smoke free furniture and a months missed rent.

    Costs:
    Loan Repayments $432.00
    Water $23.19
    Body Corp $210.67
    Rates $203.08
    Rental Management $93.60
    Total Monthly Costs $962.55
    Rental Income $1,170.00
    Profit (Monthly) +$207.46
    Profit (Yearly) +$2,489.46

    I know Cairns isn't high flying like Melb/Syd but its rental yield is pretty good with very low vacancy rates and values seem to be static for a while now. This is just one of them, there are others like this.

    So my simple question is... is this a good buy and hold property as I do have a long 5-7 year investment timeframe?
     
  2. Marg4000

    Marg4000 Well-Known Member

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    In real estate considerations, 5-7 years is NOT a long time frame.
    Marg
     
  3. Chatto

    Chatto New Member

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    Really? What would be a long time frame given the way the market has gone the last few years?
     
  4. Marg4000

    Marg4000 Well-Known Member

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    A long time frame would be at least 10-15 years. Or more.
    Marg
     
  5. strongy1986

    strongy1986 Well-Known Member

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    I wouldnt buy something like this to make capital gains but hey it could happen!
    I would look at this as more of a forever hold.

    Take thie loan out of the equation and all of a sudden your monthly cashflow is $639 or $7,668 per year on a 115k investment or 6.6% return per annum
    You did hiwever forget maintenance! I would say for a small unit $1,000 would cover it so yiur new return is 6668/115k = 5.8%
    Maybe bargain the price down to 100k and you still get a 6.67% return with capital gain upside potential

    So yeah im not saying go for it or not. It depends on your situation. If your relying on this money some point down the track to buy your own house then it may not be for you.
    However if you had a lazy mill in the bank and were happy on 67k a year then maybe you could go out and buy 10 of em (probably speead the risk a bit but you get the drift)
     
    Last edited: 11th Dec, 2017
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  6. Rich2011

    Rich2011 Well-Known Member

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    Ask Margaret Lomas about Cairns, she bought her first investment property there about 20 years ago, a two bedroom unit for approx 160k. 20 years later its still worth 160k!

    Look in Logan Brisbane you can find neutral/positive cash flow on houses...
     
    Last edited: 11th Dec, 2017
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  7. Chatto

    Chatto New Member

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    Thanks for all the tips and info! Huge help :)
     
  8. hammer

    hammer Well-Known Member

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    Can you move to Cairns?

    There's a helluva lot of value in having a PPOR mortgage of only 115k!

    As an investment might be worth seeing what @Kinnon Bell thinks as she's a local.
     
  9. Kesse

    Kesse Well-Known Member

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    As a pure cash flow play I guess it's ok.... Location isn't too slummy where you'd be subject to endless problem tenants you might just get the occasional difficult one as opposed to it being a sure bet :p Ground floor is a bit off putting though for opportunistic break-ins. Not overly sure what the vacancy rate is with units off the top of my head but I know the house market is pretty tight across the board.

    As others have said don't expect any capital growth BUT I do know of someone who, as of about 12 months ago, was successfully flipping units in Cairns but that's a whole other ball game.

    But it also depends on how it fits in with your big picture and goals. Just because you can do something doesn't mean you should.
     
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  10. hobo

    hobo Well-Known Member

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    For a 5yr-ish time frame, I wouldn’t touch this. Heck, I prob wouldn’t touch this at all, ever. Sorry.
     
  11. Hannah K

    Hannah K New Member

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    [QUOTE/]agent who looks after it, she said the unit 2 doors down in the same block, which is the same layout/size, is rented for $270 per week! Only difference is its clean and doesn't stink of smoke.
    [/QUOTE]

    Hi Chatto - sorry im a bit late to the party! i'm new to this site but i have three apartments in parramatta park (a fair bit closer to cairns town than your option) that i bought 18 months ago for cashflow so i have a bit to add on this one.

    Agents lie about rent. To illustrate i googled rental history for the block you are looking at. The unit renting for 270 is fully renovated with new bathroom, is top floor and also fully furnished /air conditioned. There's one on the ground floor renting for 245 but that is clean with new flooring and air conditioning. to get you even to the point of the 245 rent you are looking at minimum 10k for air conditioning, painting and new flooring. chances are there will be some overrun there too so i would budget about 12500 in case you need to replace bathroom fittings.

    vacancy over the summer months can be lengthy as cairns is seasonal and a lot of people move home at xmas time so there's a lot of competition so you may have to drop the rent. factor in 3 weeks a year.

    also unless you know someone who lives up there maintenance is going to sting, anything organised by the agent has a 300% mark up, this is not an issue if you are happy to organise your own quotes but much more time consuming remotely.

    don't let me discourage you though - the cash flow is still very good.. ive bought another place up there since the ones in parramatta park.

    hope this helps.
     
  12. Chatto

    Chatto New Member

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    Thanks for all the great advice everyone :)