eintracht

We are looking to suppliment our income in Aus. by buying an investment property somewhere (probably Victoria). Do investment properties in Australia make money or at least pay their way like they do in Enlgand ? Out initial thought was to buy about a A$200k house and rent it out.

ABCDiamond

Currently the rate of return tends to be negative for most residentia properties, unless you are able to buy "right".

Property in Victoria, and other areas, have dropped in value, from the BIG increases that we had recently.
A couple of years ago, a good rule of thumb was that if a house was worth $200k then it should get about $200 per week rent, and $400k = $400 pw etc.
This currently does not apply as property prices jumped, but rents haven't yet followed. eg: I have one now valued at $300k but only getting $250 pw rent, although another seems to have defied the trend and gets $410pw and it's worth $435k. So you need to shop around, and only buy the RIGHT property.

There are areas where you do get better rent returns, and maybe even enough to cover the interrest only mortgage payments, but these are generally in low capital gain areas even at the best of times.

My thinking is that you will NOT be able to supplement your income, but you will have to subsidise the tenant, until property growth gives you your profits in some years to come.

Landlords here also pay all Rates, Water more often than not, Insurance and repairs etc, and it can add up. It can however pay dividends later, IF you catch the Capital growth.

bondipom

The taxation system makes capital growth the profitable factor in investment property. A lot of people make running losses on rent to reduce their income tax on the assumption that capital gains will make up the gap and make them profit.

Vic has had some of the biggest drops, especially in the Melbourne inner city apartment market. A lot of investors have been burnt and missold apartments at inflated prices.

Not many are predicting the capital gains required to make an investment property profitable in the short term.

hevs

One of my clients is a letting agent and i asked her the same question. She said that our area was pretty saturated with rentals at the moment. Its probably worth checking with letting agents in the areathat you are looking at re what properties there may be a shortfall of and taking it from there

eintracht

Thanks for all the info guys, very interesting and useful.

My other scatter brained idea was to buy a plot of land, build-off-plan and then sell the completed house at a profit. All sounds great on paper but realistically probably not so good ay ??????

Quinkana

Ever wondered why the banks lend money for housing but rarely own anything except the mortgage?