Cash cows

Even at P&I, the dual occs would remain 3-4K CF+

The sub 800K market in NSW will remain strong because of the new stamp duty stimulus. 650K and below will be very strong. We are already seeing land prices surge in Orange and Bathurst.

In Kelso and Raglan for example, you cant get land before next Feb/March 2018, unless you are willing to take 500M2 lots. There are literally half a dozen small lots floating around and nothing else available. Anything 800M2 or larger , the prices on the last few of those jumped from 25% from @ 160K to @ 200K overnight. All snapped up. You will find there is NOTHING available on realestate.com.au (other than 500M2 lots ) now, and agents are telling me they have hundreds on the waiting list for the next tranche of land to be released early next year. Same thing is starting to flow to Mudgee, Dubbo...

Builders are reporting that trades are in short supply... School enrollments have jumped in the past 12 months - so combined with scarcity of new registered land, it's obvious to me that the larger centres in regional NSW are starting to see some very good momentum and I expect the stamp duty stimulus will drive that forward, further.

I just resold a 3 bedroom NRAS approved townhouse in Orange for a client who has moved overseas and wanted to sell some properties off... . Purchased mid 300's @ 1 year ago... we sold it at low 400's a couple of weeks back. These aren't spectacular , Sydney type numbers, but 10%+ in a year isn't to be sneezed at. Especially for a product so many on here have criticised as being "niche" in the past...

Im doing regular business in regional areas and have been for @3-4 years. First I was told the NRAS townhouses wouldn't work because everyone wanted big blocks. Well they worked a treat. And the first resale test has proven it. Then I was told the 1 bedder villas wouldnt work because 3 and 4 bed houses were so readily available... wrong again. Worked a treat. There's a waiting list for people to rent them... who knew people in regional areas actually craved some personal space and privacy? Or just didnt want to deal with the maintenance of a large block any more? Now I'm being told 4 bedroom houses with detached 1 bed granny flats on 800-1000M2 lots wont work either. And just like before, the critics will be wrong because they arent fully comprehending the demographic shift at play nation wide, and they are underestimating the APRA 2 impacts and how quickly investors will need to change gear to chase yield when the P&I cliff arrives...

So I just dont agree with your analysis that regional areas ( the larger ones, specifically) havent shown growth and wont show growth... they have. they are. they will. Add in some good cash flow and I don't see any "bomb" on the horizon..I see something that helps defuse the P&I bomb

Anyway... moving along.

 

That's at rates of around 4.5% correct? I think they will be higher in 5 years. Being conservative with 5% rates below at 500K 25 year loan.

500k @ 5% interest only repayment p/month - $2083

500k @ 5% P&I repayment p/month - $2922

P&I is $10,068 more a year. So the cashflow is completely wiped out. Granted, yes you are actually paying down the loan now (good!) but this doesn't help them service the rest of the debt from prior properties they have on P&I now.

 

And 6 years from now what can it realistically grow to?

Wouldn't be suprised if it sees 10% growth over the next 6 years.