Returns on real estate

[Stan 101]

There is good money to be had in property you just have to find it.

Sure is Wild. I am finding it and it is nowhere near Townsville hehe. As I mentioned in an earlier post, there are positive returning properties around, they are just harder to find. Having to prop a little capital off the investment loan to push them into positive or even better neutral territory is what seems to be the norm for what I'm finding.

Railway Estate is primed and certainly moving forward. All the best with it. I started investing in the northern beaches, Aligator Creek and Nome some time ago and the returns have been good. Prices have slowed in that region now, though.
All the best with the sub divisions in the future.

cheers,

 

[Plasmo]

For the life of me I can't understand why you would be a landlord;

Owning property is like owning shares, except:

1) Worse returns

2) Worse liquidity

3) Higher transaction costs

4) You waste your time trying to collect the rent, interviewing people and arranging repairs

Unless you are particularly good at being a landlord (ie you want to personally spend your time upgrading a place, for example because you enjoy making houses prettier) it's truly pointless. The promotion of negative gearing is 9 times out of 10 a scam anyway.

The only reason I could see to get into property is to have a stable environment to live in, or to exploit government grants and artificially low interest rates.

 

[wildkactus]

Stan 101,
Thanks, and all the best in your investments also.

many the money flow free.

 

[Julia]

For the life of me I can't understand why you would be a landlord;

Owning property is like owning shares, except:

1) Worse returns

2) Worse liquidity

3) Higher transaction costs

4) You waste your time trying to collect the rent, interviewing people and arranging repairs

Unless you are particularly good at being a landlord (ie you want to personally spend your time upgrading a place, for example because you enjoy making houses prettier) it's truly pointless. The promotion of negative gearing is 9 times out of 10 a scam anyway.

The only reason I could see to get into property is to have a stable environment to live in, or to exploit government grants and artificially low interest rates.

You are completely ignoring the aspect of capital gain.
In the present property environment, you do have a good point.
But when the cycle once again turns in favour of property, which of course it will, the rewards of investment property are very worthwhile.

I've had IP on which I've experienced 80% capital gain in less than a year.
And that was in addition to very high rent and a choice of good tenants.
Essentially, it's a case of choosing your investment according to the prevailing conditions.

 

[Plasmo]

Wow 80% in a year, that could never happen with a stock, I guess I've neglected "capital gains", the area where property beats shares hands down.

 

[adobee]

Personally I have a problem with RE agents voicing their opinion of investment potential. RE agents are not qualified to give financial advice. They are in a position to influence and persuade to meet their own personal gain. Now I call that a conflict of interest

I agree .. I dont think they should give financial advise as they dont know the persons circumstances and they are also not qualified to do so.. There is no problem with them however advising the market rental and price for a property and what this equals in a gross and net return.. taking into account usual outgoings..

 

[Tysonboss1]

For the life of me I can't understand why you would be a landlord;

Owning property is like owning shares, except:

1) Worse returns

2) Worse liquidity

3) Higher transaction costs

4) You waste your time trying to collect the rent, interviewing people and arranging repairs

Unless you are particularly good at being a landlord (ie you want to personally spend your time upgrading a place, for example because you enjoy making houses prettier) it's truly pointless. The promotion of negative gearing is 9 times out of 10 a scam anyway.

The only reason I could see to get into property is to have a stable environment to live in, or to exploit government grants and artificially low interest rates.

There are lots of pros to property investing,... Using property, shares and business togerther is where the awesome power is. any one of the three by themselves has serious draw backs.

 

[Jimminy]

For the life of me I can't understand why you would be a landlord;

Owning property is like owning shares, except:

1) Worse returns

2) Worse liquidity

3) Higher transaction costs

Will agree with points 2 & 3.

Just purchased a $770,000 commercial property. Transactions costs (approx):

1) $1650 transfer costs
2) Solicitors fees - $2000 +
3) Stamp duty - $28k
4) no gst payable as owner wasn't registered thankfully.

Stamp duty is a killer, not to mention agent fees if you sell.

 

[mime]

Investing in RE is a bitch and I would strongly recommend against it useless you have the significant resources. There are so many things stacked against you such as poor liquidity, massive taxes, dealing with tradesman and councils and a poor rental return vs expenses(if your lucky maybe 5% pa vs 10%pa).

The only way to make any serious money from RE is the intangibles which no one else such as sub division or development but they are beyond most people.

I had an idea about RE investing. Buying a cheap house which is rich in materials and sack it of it's copper, steel and what not. Then demolish it and sell a vacant block of land.

 

[Tysonboss1]

I had an idea about RE investing. Buying a cheap house which is rich in materials and sack it of it's copper, steel and what not. Then demolish it and sell a vacant block of land.

The demo would cost more than the scrap retreived,...

 

[numbercruncher]

Thats an expensive way of pursueing the Demolition business !

People often literally give houses away or PAY people to tear them down.

 

[nioka]

I had an idea about RE investing. Buying a cheap house which is rich in materials and sack it of it's copper, steel and what not. Then demolish it and sell a vacant block of land.

Try it. It will be an experience you will only have once.

Now I'll give you a suggestion that does work. Find a commercial property with a good tennant in a good position whose lease is in it's last year and where the existing lease includes all outgoings and maintenance including painting the premises prior to the end of the lease. It is possible to find one where the rent is low and possibly where the rent was not CPI indexed. These properties have poor returns. Commercial properties are usually priced at between 10 and12 times the annual rent. However the rent is usually adjusted again with a new lease. The value can rise substantially. This has worked well for me in the past and will again in the future.

I had another where the lease was for only part of a property which included the building. The balance of the block not included in the lease was vacant land. Hey presto a quick prefab and more rental property without buying more land.

Go commercial it beats housing tennants and you don't get the "tennants from hell" ( I've had a couple of them too.)

 

[MaxInvestor]

Pick up a copy of Weekend AFR and read what it really mean being a landlord
it's not as rosy as many made it out to be.

Well, there is always the option of using a property management company, however it will lower the overall return quite a bit. ;(

 

[Izabarack]

The demo would cost more than the scrap retreived,...

Labour heavy and somewhat difficult to render a house for its scrap. I have a rental that needs some work, lots of work if I want to really do it up. Maybe as much as 50k to redo bathroom, kitchen, roof iron, paint, and carpet.

Have a quote from my neighbour, who is in the business, for 8k to trash house and leave me a grassed piece of land. Timeframe of one day, all done, including me spreading grass seed of my choice. His quote was after assessing whether it was worth stripping and metals and recycling the hardwood frame, and working out how far from the landfill site. In the end, trying to recycle anything was not cost effective.

Only variable that might effect rental return in the near term is location. Near Brisbane and rentals are in high demand given the number of displaced flood victims although I do have some concern about gouging people in distress by asking too much rent.

Iza

 

[klburrell]

It really depends on your investment stratergy,

It's true you can expect an average return from property especially units and apartments in the short term, however

The way I look at investing in property is that a property is an inflation hedged income stream, Meaning that even though your property won't give as good a cash flow return as a cash investment, it will provide you with an income stream of about 5% that grows with inflation mean while your capital ( the value of the property ) should also increase over the years by atleast inflation, So you are getting a 5% return and your capital is protected from inflation.

Not to mention that if you are invested in a growth area your investment growth and cashflow should out pace inflation.

Just curious has anyone invested in the US, we the market being so down and the Australian dollar out weighing the US. It just seems like better since especially if your already doing properties out of area, not your own back yard. You can get US properties from $20k US to $85K US and even the cheaper ones are pulling $400.00 a month cash flow. There's a ton of great markets there although I will advise you to be careful. If a property is super cheap there's probably a reason for it.

 

[klburrell]

Just curious has anyone invested in the US, we the market being so down and the Australian dollar out weighing the US. It just seems like better since especially if your already doing properties out of area, not your own back yard. You can get US properties from $20k US to $85K US and even the cheaper ones are pulling $400.00 a month cash flow. There's a ton of great markets there although I will advise you to be careful. If a property is super cheap there's probably a reason for it.

I was up here at a few open houses from 2 bed units to 4 bed homes of varying levels of opulence in Townsville today and noticed all real estate agents were really pushing home the concept of "great rental returns" and "great cashflow returns."

one example was $260k two bed unit, 80 square metres, no carport or garage, external laundry at the front of the unit masonry block wall with no plaster inside (common up here). Body corp $400 per qtr(inc sinking fund), rates $900 per half.
Rent = $190 - $200.

Now I'm no accountant but to my eyes that is one ordinary return. I was hearing people comment on the Real Estate agent's assumption about the great return and they were agreeing amongst themselves. Now captial growth is always an option but after the stellar performance on these properties up here in the last 3 years, one has to wonder where it peak. Last month unit sales actually dropped in Townsville.

I stood looking at this one particular place and was approached by the real estate agent and asked what I thought about this great little investment. Being out of earshot of all others there I suggested it was not a great investment at all. It was a terrible investment based on yield and was given a right dressing down by said agent!

Where is everybody else at in regard to rental returns? Doesn't the real estate agent have a duty of care to not mislead potential buyers?

In almost the 12 months I have been up here I have learnt that for me personally, Townsville is living in it's own little bubble and it would be good to see a debt ratio per household based on Townsville post codes.

Please comment at your leisure.

cheers,

Just curious has anyone invested in the US, we the market being so down and the Australian dollar out weighing the US. It just seems like better since especially if your already doing properties out of area, not your own back yard. You can get US properties from $20k US to $85K US and even the cheaper ones are pulling $400.00 a month cash flow. There's a ton of great markets there although I will advise you to be careful. If a property is super cheap there's probably a reason for it. I know I had the same reply on a post below but I figure it also fit your comment.

 

[Wysiwyg]

So clearly it's important to have a passive income which is able to keep up with inflation

My 92 year old dad
Would have been better off buying 10 house with his 400 k
Than putting it in his AMP super
It that's hindsight and that's what Craft is trying to avoid

Interestingly present time, it is hard to comprehend multiple house prices compared to the past. My dad sold his low quality home for 7 times the bought price. It is hard to imagine that multiplying again for 2.1 million dollars in 30 years. As SKC noted it is inflation that skews the numbers to seem phenomenal wealth is being created when everything of worth has gone up in price too.

 

[tech/a]

Not so amazing when you realise that it's happened many times before.

Germany
Zimbabwe
Japan
To name a few.

It's just relative ----- at the time.
Only those who can't go with it feel it.
Those who can don't.

 

[notting]

What amazes me is what the big 4 Ausi banks have done in the last 10 to 15 years, compared to the house prices and expansion of the housing market in general.
It's ridiculous how badly they have done in comparison. Maybe their not really funding much of it at all?
ANZ hit $30 in 2006, today 30
WBC hit $30 in Sept 2007, today 32
NAB hit $30 in May 2001!!!! today 30
CBA hit $62 Sept 2007 today 84 not so bad, but hardly has the whole market. Nor is it 130 which it should be if it kept up with price growth in the housing market.

 

[luutzu]

What amazes me is what the big 4 Ausi banks have done in the last 10 to 15 years, compared to the house prices and expansion of the housing market in general.
It's ridiculous how badly they have done in comparison. Maybe their not really funding much of it at all?
ANZ hit $30 in 2006, today 30
WBC hit $30 in Sept 2007, today 32
NAB hit $30 in May 2001!!!! today 30
CBA hit $62 Sept 2007 today 84 not so bad, but hardly has the whole market. Nor is it 130 which it should be if it kept up with price growth in the housing market.

check out their number of shares outstanding. Just scanned through and most added some 1 billion new shares since 2007 each [from Comsec's morningstar freebie].

So that's $30B market cap each in ten years?

That can't be good.