# Picks For Positively Geared Property



## James_w (15 February 2010)

I am currently researching for positively geared property in queensland

so far I have these suburbs under my radar:

rockhampton
aldershot
torbanlea
howard
blackwater
emerald
dysart
middlemount
stanwell
hervey bay
mount morgan
dalby
dirrinbandi
capella
__________________________________

My 2 favorite are Alderhsot and Stanwell,
becuase both sit about 5mins from large regional city's
(rockhampton/maryborough)
Both also have potentiol for more employment with mining projects.
Houses under 200k aldershot does not have a lot of land atm
Both areas you can buy blocks around $50,000.
Both are a short drive to the coast stanwell 45mins to Yeppoon
and Aldershot 20mins from Toogoom.

If you have more areas in qld or another state please ad them would also be good to hear your favorite areas and why


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## wayneL (15 February 2010)

Every suburb can be positively geared.


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## RazzaDazzla (15 February 2010)

wayneL said:


> Every suburb can be positively geared.




How so?
Unless you get extremely lucky with a cheap purchase price, are then able to renovate and then rent out for more than outgoings; how do you positive gear any property in any suburb?


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## tech/a (15 February 2010)

RazzaDazzla said:


> How so?
> Unless you get extremely lucky with a cheap purchase price, are then able to renovate and then rent out for more than outgoings; how do you positive gear any property in any suburb?




If you cant work that one out then you shouldnt be in property!
Or anything else that involves large sums of money.


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## drsmith (15 February 2010)

I think Wayne is referring to situations where only part of the purchase price of the property is financed by debt.


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## satanoperca (15 February 2010)

Well the obvious would be buy the property with 100% cash and it will be positively geared very easily, other than that I'm at a miss. 

What is a large some of money to one person may be a small sum to another.

Cheers


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## cutz (15 February 2010)

RazzaDazzla said:


> How so?
> Unless you get extremely lucky with a cheap purchase price, are then able to renovate and then rent out for more than outgoings; how do you positive gear any property in any suburb?




Rental income>Interest+expenses.


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## Julia (15 February 2010)

James_w said:


> I am currently researching for positively geared property in queensland
> 
> so far I have these suburbs under my radar:
> 
> ...



Torbanlea and Howard are both horrible little nothing townships, 45 minutes from the larger towns of Hervey Bay or Maryborough.  No industry, no tourism, no nothing, and hot as hell.
I can't imagine why you'd even consider them.



> and Aldershot 20mins from Toogoom.



20 mins from Toogoom?  What's the significance of that?  Toogoom is just another nothing beach suburb of Hervey Bay.
Hervey Bay is growing exponentially.  You'd be better off buying there.
Plenty of very reasonably priced property.



cutz said:


> Rental income>Interest+expenses.



Plus you would hope for decent capital gain.   I don't see much around which will provide a worthwhile return even if paying cash.


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## nunthewiser (15 February 2010)

Huon valley Tasmania 

rentals non existant and what hits the market rental wise is snapped up before it is even advertised 80% of the time .

Plenty of unskilled work available, Huonville has higher skilled occupations and Hobart is a 45 minute drive.

Worth a search on prices for sale then a search on the rentals also .

Oh and a beutiful part of the world if you want your house back on occasion.


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## James_w (16 February 2010)

Julia said:


> Torbanlea and Howard are both horrible little nothing townships, 45 minutes from the larger towns of Hervey Bay or Maryborough.  No industry, no tourism, no nothing, and hot as hell.
> I can't imagine why you'd even consider them.
> 
> 
> ...





nothing there I think you need to read the fraser coast chronicle aldershot has a coal mine waiting to happen 3klms out sawmall aint much of a hike either prefer toogoom over hervey bay as it's 13mins to hervey bay with transport etc and nice beaches oh and less crime....

45mins from maryborough is torbanlea/howard that's some pretty slow driving lol it's not 45mins at all

aldershot is 5mins from maryborough btw... cheaper properties in toogoom then hervey bay atm


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## Bushman (16 February 2010)

If this is to be a meaningful discussion, then you need to state your LVR assumptions first. 

I am assuming that you are pursuing a geared strategy as otherwise you would not be suggesting high-yielding regional towns.


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## Julia (16 February 2010)

James_w said:


> nothing there I think you need to read the fraser coast chronicle aldershot has a coal mine waiting to happen 3klms out sawmall aint much of a hike either prefer toogoom over hervey bay as it's 13mins to hervey bay with transport etc and nice beaches oh and less crime....
> 
> 45mins from maryborough is torbanlea/howard that's some pretty slow driving lol it's not 45mins at all
> 
> aldershot is 5mins from maryborough btw... cheaper properties in toogoom then hervey bay atm



Well, being close to Maryborough has little to recommend it imo.
Also hot in summer and cold in winter, and boring as all hell, apart from a few historic buildings.
There's a good reason property is cheaper in Toogoom than Hervey Bay - few people actually want to live there.


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## Tysonboss1 (16 February 2010)

Studio apartment in Kings cross, you can rent it by the hour. 

On a serious note, why not start with a small or studio apartment in an area of sydney that you know will rent well, it will be on fairly good yeild, then smash the loan out for a couple of years, raise the rent and hey suddenly you will find your self with a positve cashflow property.

You can then use the positve cash flow from this property to fund the shortfall in the second for a few years till the second one becomes positive and so on.


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## Krusty the Klown (17 February 2010)

satanoperca said:


> Well the obvious would be buy the property with 100% cash and it will be positively geared very easily, other than that I'm at a miss.
> 
> What is a large some of money to one person may be a small sum to another.
> 
> Cheers




If you use 100% cash to purchase, then the investment is not a geared investment, it's just an investment.


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## prawn_86 (17 February 2010)

Tysonboss1 said:


> On a serious note, why not start with a small or studio apartment in an area of sydney that you know will rent well, it will be on fairly good yeild, then smash the loan out for a couple of years, raise the rent and hey suddenly you will find your self with a positve cashflow property.
> 
> You can then use the positve cash flow from this property to fund the shortfall in the second for a few years till the second one becomes positive and so on.




We looked into this and found it was still not really worth it. Even with rental income, and us putting all our savings (around 15k pa) into paying off the loan we would still only be paying off about 5k of the principal on a 400k pa loan. Just doesnt seem worthwhile to us personally.


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## Tysonboss1 (17 February 2010)

prawn_86 said:


> We looked into this and found it was still not really worth it. Even with rental income, and us putting all our savings (around 15k pa) into paying off the loan we would still only be paying off about 5k of the principal on a 400k pa loan. Just doesnt seem worthwhile to us personally.




When I said small apartment I wasn't talking about spending $400K,

In regards to it being "worth it", thats very subjective. 

Residential property has a low return on capital, in the capital cities it can be as low as 4%, So it operates on a PE of about 25, And so it should, It is one of the safest and regular income streams that you can get, why should somthing that is a cinch produce yeilds of 40%pa.

So offcourse anything that is returning 4% yeild is going to not look so great if you leverage it up to 90% on debt at 8%. 

The way to look at a property investment is that it is an income stream where both your invested capital and income is protected from inflation, with the added bonus of the chance of capital gains should demand for land increase in your area over time.

you also have to remember that you may only decrease the loan by $5000 in the first year, but because the loan is now smaller you pay less interest and the loan may decrease by $5,500 in the second year, and so the amount the loan is reduced by compounds each year ( i call this reverse compound interest), especially as you throw in rental increases over the years.

plus there are many other benefits to property ownership such as depreciation, lower interest rates on other investments, lower volitility, etc


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## Tysonboss1 (17 February 2010)

prawn_86 said:


> We looked into this and found it was still not really worth it. Even with rental income, and us putting all our savings (around 15k pa) into paying off the loan we would still only be paying off about 5k of the principal on a 400k pa loan. Just doesnt seem worthwhile to us personally.




here is an example of how your principle reductions can compound, the below estimations are based on growth in rent collected of 3% per annum and the number stated as the capital growth of the property is based on 3% inflation only, I have not included any demand growth.

the figure starts at year one of a principle reduction of $5000, year two the new priciple reduction of $5,400 due to less interest on smaller loan after paying  the $5000 in year one + 3% rental increase.

$5,000
$5,400 + 480 ( + numbers are 3% rent increase added to priciple reduction )
$6,350 + 495
$7,392 + 510
$8,534 + 525
$9,783 + 540
$11,148+ 556
$12,641+ 573
$14,271 + 590
$16,049 + 608 = $16,657 priciple reduction in the tenth year 

so your Loan would be reduced by $97,176 after 10 years, and would be well into positivly geared territory with the lower interest costs and higher rental income.

Not to mention over this time the property would have increased to atleast $537,566.50 ( based on 3% inflation only with no growth in population or demand, actual gain could be much higher if you factor in gowth in demand)

So after this 10year period (or perhaps sooner at the 5 year mark) you could then use the postive cashflow to fund a second property and have 2 sets of reverse compound gowth work for you for the next ten year period requiring no input from you ever again.


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## prawn_86 (17 February 2010)

Thanks for the examples Tyson. We are only just beginning to look into property now, and i have to admit i dont know much about it. But if i was to do it then it would need to be based on cashflow, and no capital gains assumptions. That is, any capital gains are just a bonus


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## tech/a (17 February 2010)

Here's a heads up!!

Not exactly on topic but SA Govt announced duplication of the southern expressway in 4 yrs to South of Adelaide.
Thats my specialty and if your smart then it should also be yours!
Regardless of where you live.
$3-350K homes will be high 4s if not 500K in 5 yrs!

Google 

Seaford /Seaford rise/Maslins beach/Aldinga/Mc Claren vale/Christies beach/Port Noarlunga

Dont say the duck isnt a generous one!


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## doctorj (17 February 2010)

tech/a said:


> Here's a heads up!!
> 
> Not exactly on topic but SA Govt announced duplication of the southern expressway in 4 yrs to South of Adelaide.
> Thats my specialty and if your smart then it should also be yours!
> ...



Doesn't look that great.... assuming you can sell a house for $500k in 5 years, purchased today for $300k with a 8% mortgage and rent it out at $200/wk (and ignoring transaction fees, rates, other costs), IRR is only 8%...


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## drsmith (17 February 2010)

tech/a said:


> Not exactly on topic but SA Govt announced duplication of the southern expressway in 4 yrs to South of Adelaide.



Unless a second CBD is developed adjacent to Flinders Medical Centre it won't be of much use. 

The big $$ for transport infrastructure (including Federal money) is happening to Adelaide's north.


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## James_w (20 February 2010)

Julia said:


> Well, being close to Maryborough has little to recommend it imo.
> Also hot in summer and cold in winter, and boring as all hell, apart from a few historic buildings.
> There's a good reason property is cheaper in Toogoom than Hervey Bay - few people actually want to live there.




I said some are cheaper not all your assumptions on more people want to live in hervey bay are dead wrong theres no difference in living in one end of hervey bay itself then toogoom actually schools shopping centre etc are closer in some circumstances,

the main problem is people move to hervey bay from out of state etc and have no idea where toogoom is and think it's in the sticks when infact it's 
13mins or less away with daily transport heres an example sydney couple drive 40mins to work live in a nice beachside suburb move to hervey bay after a few years decide to travel to the miles away toogoom and realise it has shops pub on the beachfront daily transport etc meanwhile theres a house there for under 300k brick 3 bedder about 100metres to the beach
on a 800sqm block they bought a townhouse for 350k+ no land componant etc andf feel they would be better off having a yard for there growing family and know comonwalls etc what do you think they will do?

investor reads the chronicle and does his dd sees that a coal mine is opening within the next 12months or less not to far away from toogoom beach 
(most miners love the beach) finds out it's only 13mins to hervey bay city
and short trip to the mine seems to need about 100 fulltime empoyees who will be looking for somewhere to live preferably near the coast and not a far drive to work remember contractors building the mine will also need accomdation untill the mine is fully operational.

btw this isn't just pure speculation I have friends in the mines and know of at least 4 family's wanting to move here for there sector alone

fast forward 2yrs later mines operational houses in toogoom are being chased by mine companies and workers what happens to the hosuing market then?

btw I personally believe toogoom has always been undervalued area

blocks were 25k in 1999 by memory most being 1/4 acre and a few hundred metres to the beach 10 years later there 110k for the 1 cheapeast block 600sqm and 1/4 acres fetching 160k

this is in the area no one wants to live houses were also 80k then for a 3 bedder brick now there worth around 270k

not a bad R.O.I wouldnt you say?

btw quite a few beachfront have sold in the mill range

commonsense tells me and being an ex miner myself if I was going to work at the mine I would be looking to buy in toogoom and for the last 15yrs I know of several miners have bought houses in toogoom rather then hervey bay itself I guess time will tell commonsense tells me anywhere near the beach close to a large city will have good growth:


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