Invest in Duplex or Funds?

Hey guys,

I found another duplex for $235,000 with estimated value of $260,000 and potential to rent of $400 per week. Compared to the previous one I looked in Elizabeth South SA, this one looks like it is in reasonable condition, but I'll inspect this Tuesday.

My only concern though is its in an area that probably won't have much growth, and I'm wondering whether the returns are worth it. Maybe with landscaping and internal paint, there might be opportunity to bump rental return to $440 per week, and yield to 9%, but then I think that will be the cap and there's not much more you can do to increase the value of the property or returns.

Furthermore rental income would be eaten up by interest repayment, council rates, management fees etc... So I'm thinking maybe it would be easier just to invest in a fund returning +8% net interest of all fees?

What's your thoughts?

Cheers,


David

 

Hi David,

I think it depends on your overall investment strategy and what your ultimate 'end goal' is. Once you know exactly what you want to achieve then you can formulate a plan on how to achieve it, whether that's with property, shares, managed funds, overseas farms etc. etc.

Just my 2 cents

 

Property compared to a managed fund or ETFs / LICs can be a much larger PITA (pain in the arse) but then again you can excersize massive leverage with property with as little as 10% inc of costs of your own money.

Horses for courses and will depend on what station you are at in life, energy levels, experience, goals and availability of funds etc.

 

True that...

The fund I am looking at is Australian Secure Capital Limited

What do you guys reckon of this fund?

 

8.69% paid monthly, good return and probably less hassle then a property, woukd be interested to hear other people's experiences with these guys

 

Second mortgages, probably lots of developer loans. Think about the type of borrowers who have to pay 10%+ on loans secured by property? Less hassle sure until the borrowers stop paying.

 

Don't worry I've had tenants stop paying rent, then after all the rubbish to evict them, go to find the home in a borderline trashed state. Not in a lower socio economic suburb either!

 

So have I. And then you fix it up and after a few years its worth more. What happens when a developer cant pay and you have a second mortgage? If you think its a good investment go for it.

 

10%? The lowest rate they have lent at is 14% ... and it goes up to 54%!!!!!!!

http://www.australiansecurecapital.com.au/pdf/ASCF_Loan_Summary.pdf

At least the loans have short terms, so the crash will be quick!

 

I'm going to have a live chat with them, see about their arrears.
It says to ask them anything!

ETA: I've been first in the queue for more than 30 mins, still waiting for an answer!

 

Without a doubt! Ill be honest property and direct share holdings with the exception of afew recently added LICs make up my investment basket but it never hurts to Learn about other things hence why I asked if anyone had any experience with this company/fund.

 

- I doubt it, as they have only been going for one year.
- The 'loan summary' list on their website is selected deals since they started last year, not current deals.
- the director I 'chatted' with said they have not lost any capital and do not have any arrears
- also said that if there were arrears it wouldn't affect the unit value (which is true, it's only when you realise a loss that the unit value is affected) - does make me wonder how the unit value is calculated and what the threshold for arrears is
- small book of $50m
- the 4 directors listed on their website do not appear to have much experience in the Australian credit context - one is obv from UK, and another from USA
- they are providing short-term business finance secured on residential mortgages, and borrowers are paying interest rates of 14-54% - suggests high to very high risk

My biggest concern - they haven't provided any information about the security valuation process, it appears they do it in-house.

Personally i would steer clear - check out City Pacific, Pyramid Building Society, Bridgecorp etc etc.