VIC Warrnambool v Ballarat

Hi there, I have been researching investment properties in my home town Warrnambool, and intend to purchase soon. I have had a house in Warrnambool inspected by a builder, and have finances ready. My concern is that Warrnambool currently has poor capital growth (2.5%) but it has reasonable rental returns. The house I'm looking at is $300k, expected rent $330. BUT I'm starting to consider Ballarat, current capital gain 5.5%, but harder to service loan, with poorer rental return. If you had access to borrowing around $300k which would you go for. Plan is for long term hold. Any advice gratefully accepted.

 

Warrnambool brings back memories. I had kidney stones while travelling on great Ocean road and had to be admitted to Warrnambool district hospital. I thought I was going to die.

I think it depends on your strategies and financial circumstances. If holding costs become too great a burden and CG is average then you'll find it difficult to service and you may need to adjust your expenditure.

 

That is a return of 5.7%, you can easily obtain same/better in Ballarat believe me. I bought a place late last year for $212,500 that rents for $250 per week.

That aside, you need to make sure that you have a well thought out strategy for why you are buying an IP in the first place. Your strategy will then define what and where you look to buy.

 

Get something in Mt Helen/Clear, rent it out by the room to those uni kids over at Uni of 'rat/works at IBM (I don't think they've got such a large presence there anymore...)

 

Thanks for the replies. Just made a bold low offer on a Warrnambool house post auction when there was only a vendor bid. The strategy is to hold, gather some equity through P&I payments, minor reno's to increase value, and then hopefully some reasonable capital gain over a 10-15 year period. Cheers

 

I think if you are buying into country towns, Bendigo is also a worthy consideration. You can get good returns from some houses there, plus reasonable capital growth if you buy in the right areas.

E.g. I bought a lousy house for $188,000, spend $45,000 to do it up and it is now renting for $290pw. And I think it has good prospect for reasonable capital growth as it is located 2km from the CBD.

I am not familiar with Warnambool but it seems to be a town that won't see much population growth nor capital growth to me in the near future. At least not as much if compared to Ballarat and Bendigo.

 

I'm about to settle on a Ballarat purchase. I found a cash flow positive property with a 6% yield so it can be done. I would go Ballarat, the projected demographics shows higher percentage of year on year population growth than Warrnambool, there are also better prospects for future employment drivers with the government considering moving departments there. Also, it is within commuting distance to Melbourne. Research these things for each town and factor them into your consideration.

This is of course unless you want to manufacture growth through renovation and you have some skills. Maybe it would be good to be close to home for your first go at that. And if you do buy in Warrnambool make sure you do your research on where in Warrnambool.

Also, I would revise the P&I strategy and move to an interest only loan: Research why on this forum.

 

Thanks for the thoughtful comments. The ability to find cash flow positive properties is obviously a bit of an art. Cheers

 

Thanks, I have considered Bendigo, bit further from home so a bit harder to research, not a lot dissimilar to Ballarat I reckon. Cheers

 

If you're into yield have a look around Ballarat East, Canadian and Ballarat North. Median yields are 5.3% at the moment. Ballarat Central on the other hand has a median yield of 4.8%. Figure out the what you think the property will rent for or find one already tenanted and ask what it's leased out at. If you want a minimum yield then use this calculator to make an offer: http://propertycalculator.net/calculators/what-to-offer.aspx

Obviously you will have to factor in your views as to capital growth when making your decision. I personally purchased a free standing four bedroom weatherboard in Ballarat East in order to get a 6% yield.