How to find positive cashflow properties

House on Sedge street, Braybrook

3 bedroom house by the Maribyrnong river valley in Mebourne

With rising interest rates, it is obvious that positive cash flow properties will become more scarce. Buying into a positively geared properties has the key advantage, apart from having a positive cash flow, is its ability to shield the investor from the ups and downs of the property market. When the economy or the property market is soft, a cash flow positive investment property does not add additional burden to the investor because it is more than paying for itself.

A combination of the following factors can achieve a positively geared outcome for the investor:

  • Low interest rates. It is obviously easier to find positively geared properties in a situation where interest rates are low. However, it doesn’t necessarily mean that these type of properties will disappear altogether.  The astute investor will need to make certain assumptions about where interest rates are trending in order to make informed decisions on whether to fix their interest rate on a mortgage in order to minimise the upward exposure on mortgage costs. Read accurately, a good interest rate strategy can turn properties with negative cash flow to positive cash flow even in rising interest rate regimes because the astute investor has fixed his/her mortgage cost base.
  • Potential growth suburbs within capital cities. Every major city has suburbs which have gone through a process of transformation and gentrification. Picking these suburbs involve looking at neighbouring areas which have experienced good capital appreciation whilst property prices in the surrounding (growth) areas have yet to move with the market. As long as these surrounding areas have good public amenities with good access and are located strategically close to the CBD, they are more likely to experience similar growth in the future like their neighbouring areas did in the past.
  • No land tax. A modest property which is within the threshold for land tax could potentially save the investor thousands of dollars each year.
  • No strata levies. Some investors are more partial to buying landed property over apartment units for this reason. Imagine the amount of savings that can be made over the course of holding an investment property which is free from strata levies.

Among some selected areas identified by experts to  experience good capital growth over the next five years and hence increase the chances of properties being positively geared and give investors an opportunity to refinance are:

  • Chippendale and Darlington in Sydney, New South Wales
  • Maidstone and Braybrook in Melbourne, Victoria
  • Thebarton in Adelaide, South Australia
  • Clontarf in Brisbane, Queensland
  • Victoria Park in Perth, Western Australia
  • Glebe in Hobart, Tasmania

Mirvac’s new development will block water views

Mirvac’s proposed new apartments on Mary street in Rhodes will eventually block out the existing water views of the west facing apartments in its older Adina block. The Adina block comprise of 95 units of mainly 2 and 3 bedroom apartments and was completed in 2008. Rotation of IMG_0423

The proposed new development is located directly between the front of the Adina building and the water foreshore of Homebush Bay. Potential investors and purchasers of the Adina apartments facing west to with the water views of Homebush Bay should remember to factor this issue into their buying process and asking price.

Review Body Corporate minutes of your apartment

If you are buying into an older block of apartments, you are entitled to review the minutes of the Body Corporate meetings and AGMs upon obtaining the authority of the vendor. By doing so, you are looking to satisfy yourself there are no hidden problems or issue which you may otherwise be unaware. Among the things to look for in the minutes include:

  • Frequency of meetings and issues discussed. Depending on the Executive committee, which are appointed by the owners’ corporation to manage the running of the building, meetings should be held as least 2 – 4 times a year, apart from the AGM. Typical issues discussed should include the state of repair of the building, the administration costs, sinking fund and its adequacy, complaints and problems which may arise and how these problems are being resolved.
  • For newer buildings, one should look to ascertain how defects are being resolved. The developer is required to fix and repair defects on the building which arise within the first 7 years.
  • The sinking fund is an important element of maintenance of the building to ensure any works required in the future are adequately provided for.

Other handy tips may include talking to occupants of the building to find out if there are any issue or problems associated with the building such as nagging and recurring repairs and the effectiveness of the Body Corporate in resolving these issues. Be aware of whether you are speaking to an owner or a tenant as both will have different perspectives in their views.

TRIO Apartments win UDIA’s 2009 Marketing Award

East aspect from loggia with views to the city

Trio Apartments which is developed by Fraser Property Australia has won the NSW Urban Development Institute of Australia’s 2009 award for marketing.

The luxury apartments were designed by Fender Katsalidis architects and comprise 397 units at the corner of Booth street and Pyrmont Bridge road in Camperdown.

The marketing campaign of Trio Apartments involved an elaborate website and magazine written by style journalists which showcase the eclectic lifestyle of living in and around Sydney’s inner west suburb or Camperdown.

Please look at a review of the Trio Apartments.

Australia’s population boom – 35 million people by 2050

Housing construction

Significant drop in housing approvals and completion 2008 / 2009

According to the Australian Bureau of Statistics, Australia’s population grew by 2.1% to 21.8 million people in the 12 months to 31 March 2009. This growth rate is considered to be unprecedented since the last population boom in Australia in the 1960s.

The Rudd government has forecast recently that Australia’s population is expected to grow to approximately 35 million people, which is about 7 million higher than previously predicted due to fertility rates and current migration policy.

This growth will have significant implications on Australia’s property market. Currently, approximately 72% of Australians live around the major capital cities of Sydney, Melbourne, Brisbane, Adelaide, Perth, Darwin, Canberra and Hobart. Sydney and Melbourne alone account for approximately 37% of Australia’s total population. The concentration of the majority of population in these 8 capital cities is due to regional Australia being relatively undeveloped. This uneven population concentration around the major cities is further compounded by the slow down in housing approvals and completions due to a number of factors.ANZ Housing completion graph

As a result of scarcity of land in and around these major cities in Australia, there will be an increasing upward pressure on housing and property prices as the population grows into the future. The consequent of this is the increasing gap of people in Australia who can afford to live in and around the CBD of the capital cities and those who are forced further away from these areas. It will ultimately depend on the government’s initiatives and policy on how best to accommodate this ballooning growth, that is whether to develop better transport, communication and utility infrastructure both in major cities and regional Australia. On balance, property experts are still advocating investors to consider strategic locations in and around the major cities and in major growth areas approximately 25 – 40km radius of their centres. Due to continued high demand, these areas will continue to convince those already entrenched to stay and entice those who have the means to get in.

Population growth graph

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