Regional Cheapies

Has anyone actually purchased a regional cheapie (50k-100k) and had a good time (not perfect) holding them?

See many towns with these properties where rent appears to be in $200+

Im guessing anyone that gets even 80% tenancy (say over a 5 year period) would be doing quiet well cf wise

Read many stories about these deals (eg property gurus etc and people bashing them) but has anyone had a story to tell after 5 - 10 yrs?

 

Is this what you are looking to do?

Early on in our journey, buying multiple regional properties was attractive...as the dream many sell is is quantity over quality.

Soon enough one of our (now) mentors (from PC) called out that this would go against what our goal was: to leapfrog from one property to the next.

 

No just wanting to hear stories

Ive already realised its quality over quantity though some high yield cheapies do sometimes have its own positives as part of a portfolio

 

Be interested to hear thoughts on these two options:

1. 10% down on a more regional property with 10% yield ($30/40k deposit that you have)
2. 10% down on a more suburban property with lower yield ($60/80k deposit that you'd need to build)

 

Was that aimed at me?
If so I didn't get the question?

 

No, it was more me piggy backing on the discussion and seeing what the general consensus was.

Buy asap with a lower deposit, or save a bit more to buy in a more developed area?

 

It's not as CF+ as it seems when you're purchasing a $50k property. If you need to spend $2k for a maintenance issue that's 4% of the purchase price gone and on a $50k property those issues would be common.

Have a look at larger regional centres if that's the path you're going down. 10k+ population would be the minimum that are not one industry dependant as a general rule

 

Heard that a few times
Im just looking for stories from Investors THAT HAVE ACTUALLY DONE THIS

Sorry if I seem rude but that was the point of the post - ive already heard about the 100 reasons not too theoretically. Im also not saying I am going to do this, im just looking for stories from people that have (can be good or bad)

 

purchase price 48k in 2016
put 25 into it though
investment 73k plus stamps and conveyancer so 75k
current rent 220 per week so headline yield of 15.2%
actual net yield after expenses (assuming no mortgage, 2 weeks vacancy) = around 7.5 -8% depending on maintenance

had no issues
2 tenants in 4 years
vacancy in between was about 2 -3 weeks

just need to make.sure you buy the right product for the town, if you can do this then vacancy risk is a myth
if you dont know.the town and buy in the wrong spot or buy a unit when theres an oversupply you will be in for headaches

do your maths on each deal, 10% yield is not very attractive as a cashflow play , 12% would be minimum with a rent over 250 a week

 

@strongy1986 - Thanks for the post
25k on 48k property wow. Was it in bad shape when you bought it?
Sounds like you bought something nobody wanted to touch and put the hard work in and now getting the reward.

Mind if I ask what town it is and also how much you think a renovated property would have sold for when you bought it
thanks

 

In another 15yrs you may well need to spend another $25k to refurbish the property

 

I bought a cheap regional property 10 years ago. didn't go up in value. Expenses are more in regional areas.

I will never ever buy again in regional,

Only middle-ring suburbs in Melbourne.

 

Regional Cheapies are great if they provide all the money from rents to pay them off each week .They are not good if yr expecting a cheapy property to go up in value in a massive way .
They are great in a balanced portfolio of city properties too and will definately build yr wealth but you have to be willing to get yr hands dirty not just pay tradies for every little issues.

 

We bought a 3br BV house in Warrnambool in 2000 for 130k. Put In a new kitchen along with new carpet and paint. There has been no serious maintenance any different from anywhere else. The current tenant has been there 12 years and had multiple rent increases and has no intention of going anywhere. I think from looking at comparables it would s ll for around 450k.

Another property in a nearby town we paid 135k in 2009 and probably valued around the 200 mark. No major Reno done there to date though. Tenant has been there from 2009 and gets a rent increase every six months. Incredibly tight vacancy.

Quality farmland is where the real money is made in regional property as we see it. Values have gone 30% or more this year. Most of the commodities such as crop,beef, dairy are doing rather well and then there is wind farm and solar development to add to it, among other things.

 

I agree with that, Quality towns are quite different from cheap regional areas.

Some of the towns, it's hard to find a rental property.

 

Based on his figures if he survives 15 (11 more) years with not much vacancy his pretty close to paying back his initial investment plus got the leftovers to do the Renos again

 

That is the way with many low value properties
First year spend a lot to refurbish the property
Second to year fifteen the profit you have made is just enough to pay for the next refurbishment

 

just had a look at numbers
carpenter and plumber- 5,300
purchase costs and holding costs pre reno- ~3k
truck hire, accomo, fuel ~ 3 k
materials
new kitchen ~ 4k
new bathroom ~ 1.5k
laundry ~ 300
ceiling fans ~ 900
split aircon ~ 1.4k
paint int ext roof~ 1500
skip - 260
floating floorboards ~ 2k
blinds - 500
elec switches and power ponts - 250
sundry materials ~ 1.5k

so yeah if we did it all ourselves and lived next door to the property then could of done it for around 17k

pretty much a full renno - done in 7 days - job was rushed a bit

probably needed 3 more days to do a perfect job

we had the house revalued after @100k
i think realistically 90 was more realistic

our house selection was average - good location but no off road parking
would get probably 260 a week with a driveway...
live and learn

 

But 15 after is pure profit haha

 

no point skimping on the renno if it will bring in more rent - every extra dollar coming in over and above your yearly outgoing is profit (less management %)

if your rent gos from 200-250 , your total profit just went from 100 up to 150 per week
so 50% increase in profit on a 25% increase in rent