More cheap properties or less expensive

It's also been mentioned previously but more people can afford to buy slightly cheaper properties, the yield is better, holding costs are less, they are easier to sell and are easier to value with lots of comparables.
With serviceability becoming more important for serious investors moving forward with borrowing capacity clipped no matter what your income I think yield will become fashionable again and properties around or slightly under the median are more likely to do well.

 

Hi well to me thats buying at good value at a good time ... not cheap!!

 

Hi See change,

Are the properties you buy in the 200-250k older age and need much work? Do they have alot higher maintenance cost ?

 

They're older , but generally sound . Having to do some cosmetic work in some .

We avoid ones requiring more significant , however for some people looking for a way to increase their equity , in particular if they can do the work themselves they can make a good option.

Organising reno's interstate can be a frustrating experience as we've found out . Because you're not on the ground , it's harder to watch what's going on .

Cliff

 

+1, our properties fall in to this category 400-500K, because of our strategy which is focused on long term CG, and a half a dozen other factors.

My perspective is that it's the strategy that dictates the purchase, never the other way round.

 

Thanks all, loads of good advice in there.

See Change, are all the $200-$250k properties that you're buying at the moment houses or some apartments?

 

houses . Saw a couple of townhouses with good gross rentals but the BC costs made a serious dent into that , bringing it back to an average return .

Cliff

 

I'd imagine most older homes in the $200-$250k price bracket would require some cosmetic work to make them more attractive to renters and potential buyers when time comes to sell..... has the frustrating experience made you less motivated in buying these products so far ?

just out of curiosity how much does it usually cost for you to do a minor cosmetic reno in QLD per property ?

 

We've never had issues with renting of selling our cheapies in the past . Always at nice profits .

We only buy where there is a demand for those types of properties.

Cliff

 

i see, what % rental yields are you getting on the most recent purchases ?

 

Great thread and some interesting posts.

 

I vote for 10x $200k!
That way you can get a yield of say 7% rather than 4% on the 2x $1M properties.

I know this is a bit oversimplified, but the difference in rental income would be $60k per year.
Obviously costs would be higher as well, but certainly not $60k higher.

 

Last one settled was 6.5 %

Cliff

 

For me the sweet spot is around 350-500k and a yield of around 5-7%. The problem with cheaper properties is that although the yield may be similar the rates, insurance, maintenance costs (plumber charges the same for a 200k house or a million dollar house) are generally similar to more expensive ones which quickly makes the net yield look not so great. I would rather have a higher value portfolio with less overheads.

 

Cheapies for me. Chuck the tenants on Centrepay and you're sorted. For some absurd reasons my cheapies have been far easier to manage than that >$1mil beast of mine where the tenants constantly managed to find things broken or needed attention. At least it's (almost) neutrally geared, could be worse.

I think it comes down to the cheapies are like ah **** I'm paying peanuts I can't demand things and if I break things they gonna chuck me on TICA.

 

Is that net yield Cliff?

 

Gross .

You'd have to be doing something different than standard B&H to get that ...

Cliff

 

When I started out my investment journey I could only afford the deposit for cheap single bedroom apartments so I focused on finding secure apartment complexes with a high rent demand close to essential services. I made the best of the situation by buying under market value and adding value with a renovation to increase the amount of rent it could achieve and creating equity. This meant the IP's were either neutral or positively geared from day one. Drew equity out, saved every cent I could to scrap together the next deposit and repeated. Several years later I have shifted from apartments into houses to focus more on future capital growth/equity rather than cash flow to help continue building my portfolio.

 

My preference is to have several properties that start off off being a cheapie but because they were purchased at the right time they are no longer.

 

My most demanding tenants have always been those in the more expensive properties paying higher rent.
Maintenance as a percentage of rent probably would be slightly higher for cheaper properties but handyman and tradesmen work is often cheaper, this is especially the case in regional NSW where I'm amazed at how cheap some quotes are.