You can achieve good capital growth and positive cashflow in the same property, if you know where to buy: Terry Ryder
You can have positive cashflow and good capital growth – but many investors think you have to choose one or the other.
It’s a frequently asked question: should I go for growth properties or for positive cashflow? The question assumes the two things are mutually exclusive.
They’re not. Both can be achieved in the one property, if you know where to buy.
Earlier this week I did a webinar with Melbourne mortgage broker and author Jane Slack-Smith to address this subject.
We discussed ways to achieve positive cashflow investments (without resorting to high-risk locations like mining towns).
The current climate presents great opportunities for investors to achieve this because interest rates are so low and rents are strong in many locations.
Australia has many solid regional centres where rental yields above 6% are common and capital growth prospects are strong.
This week’s webinar focused on opportunities in four of those locations: Albury-Wodonga at the NSW-Victoria border, Bendigo in Victoria, Rockhampton in Queensland and Palmerston in the Northern Territory.
In each case, there are ample opportunities to find properties that pay for themselves with the investors needing a deposit of less than 20% - in some cases, less than 10%.
Each of those locations has multiple growth drivers and plenty of capital gains potential. There are many others across Australia with similar credentials.
The suburb of Berserker (not sure how it got the crazy name) in Rockhampton has achieved growth in its median house price averaging 12% a year over the past decade. Most investors would be delighted with that kind of growth, which suggests property doubling in value every six years.
But the median rental yield for houses is above 6.5%. Vacancies are low and rents are strong. The suburb has two major shopping centres, plenty of schools and lots of Queenslander-style houses with character. But the median house price is under $250,000.
Rockhampton is a substantial regional city. It’s not only “the beef capital of Australia”, but the administration centre for central Queensland. It has the economic diversity I always seek in potential hotspots and it’s on the cusp of a new growth phase.
A big rise in the number of dwelling sales is usually a forerunner to price growth. Rockhampton recorded a jump in sales volumes late in 2012 and then, in the March 2013 Quarter, recorded the highest median price growth in Queensland, according to data from the Real Estate Institute of Queensland.
Rockhampton has had major flooding in the recent past and buyers need to check that factor. Agent Jason Rayner of Harcourts says upper Berserker is flood-free but lower down buyers need to be a little cautious.
There are hundreds of possibilities like this across Australia where investors can achieve the trifecta of affordable prices, positive cashflow and great growth potential.