Searching for 7%+ yields

Hi all, chasing 7% yields … yes - this is what I need to make my numbers work!

Realise I will not get Sydney CG … it’s a cashflow play for where I am at the moment.

Anyone happy to share ideas of areas ?

 

• Buy & hold?
• Add value & hold?
• Redevelop & hold?

 

Logan, Brisbane. You will need to do a small makeover/renovation. Yes it can be done remotely!

Just make sure you buy the right asset. Simply buying a house and doing a makeover probably won't work, you need to know what tenants want to maximise the rent.

I've just completed one in Logan. Purchase price $323k. Reno costs are about $30k. Weekly rent will be $550 giving a gross yield of around 8%

Before you ask... No Logan doesn't have a problem with finding decent tenants and yes there should be some good growth to come. Just look at the last 9 months!

*** It's essential in Logan you select a good property manager. If anyone needs a good PM please message me.***

 

@hillsguy 7% gross yield?

Currently purchasing one near the beach in Mackay, QLD - $285,000 3 bed 2 bath, fully renovated, big corner block with subdivision potential

Current rent $400 pw, sits a bit above 7% gross... will go to $420pw when lease ends.

Interest, rates, insurance and management costs obviously eat into that figure - giving it roughly 2% net return at present.

 

Seven percent net yield ?

 

Is there much there with a 7% net yield ?

 

Why would anyone, in their right mind, rent a place for $550 pw when they can buy for $323K?
The mortgage repayments, based on 80% LVR would be about $265 pw.

I'd understand if you'd say that some cannot afford the deposit (or 65K), but if they can pay $550 pw ($28,600 PA) - numbers just don't add up.

 

Yes it makes you wonder, doesn’t it. In my regional area so many people are still doing this. They wonder how my daughter at 21 bought a house, but mortgage repayments are cheaper than if she rented.
When my son, who is 17, said he would buy his first property at 18, his coworkers were saying no you can’t, you’re only an apprentice, no one can afford to buy a house when they are 18. Coworkers are 25, still renting. Don’t think beyond this week.

 

There's plenty of areas that will get that, but are you prepared to buy there, is the question.

Looking at your avatar, it says you are from Adelaide. Well, just a short trot out from there, you will find Elizabeth. Plenty around there for a high yield. Not your appetite? OK, well lots of regionals in all States that will give you a high yield, but the highest yield that I can think of, off the top of my head is Broken Hill. You'll get much higher than 7% there.

 

So it's predominantly the type of renters you'll likely to have all sorts of issues with?
The ones who cannot see beyond the next week or the next fix and rent will always be lower in the priority.
And would it also mean, most likely high yield / low CG due to the socioeconomic setting?

That actually make sense.

 

Yeah, that's what I thought.
So in reality, it's hardly never the "7% yield" even if the spreadsheet says it is...

I'm on about 4.6% and feeling very lucky.

 

I think it is possible in Sydney with granny flats.

 

You would think that, but there are a number of reasons such as
- no deposit
- not able to meet bank serviceability
- bad credit
- lack of common sense

 

You could get 6/7% gross yields in Rockingham, WA. Beachside area

Now the thing is generally with resi high cashflow you are usually trading cash flow for CG

The beauty here is that this is a booming red hot market and u will achieve both, which is quite rare. Why????? Coming in from a very low base and there is no/low stock which is driving prices north

Another little gem is the fact that rents are going bunkos, there is a woeful undersupply. Its pretty much a winner

google. Suburbs in Rockingham

 

Trust me, the numbers add up!

I did say 323k plus a 30k renovation.

Usually the tenant would have no hope of saving the deposit or have the money for the renovation. Even if they could save the deposit and the house didn't require any renovating they may not qualify to service the loan because many will be paying off other items such as cars, exp phones and household goods etc and some simply have no interest in buying a house and committing to a mortgage. I have a client who just sold a property in Logan. The same tenants had been in the property for almost 20 YEARS! The house would have been about 60k back in 2001, it just sold for close to 400k. The tenants are now looking for a house to purchase!

 

There is a Perth-based company I work with that specializes in sourcing/developing shared accommodation aka room by room and getting 10%+ yields, they also source and manage the tenants as well. Apparently it's in high demand which I tend to believe.

 

Always the same story .
So expensive can't afford it .
These cottages are from 1947 .
£4 to buy ...oh so expensive

 

So it's going back to the same risk: if they can't get the basics to allow themselves to secure a purchase, but suppose to pay twice as much in mortgage (the only way for LL to get 7%) - they are high risk of becoming non-paying, which can easily lead to reduce rent, meaning the 7% would no be 7% very quickly.

Huge risk.
Too much to my taste, I have to admit.