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Rural vs Metro; Pros and cons of rural residential, vs metro residential
Topic Started: 25 Aug 2014, 06:50 AM (1,514 Views)
silverman47
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Hi,

Just thought i would pick the brains of the other investors on the forum to see what you thought of places like toowoomba / warwick etc. For a long term foundation property.

Compared to Metro bris / melbourne?

What are the reasons you steer clear, or load up.

Personally for me, i like regional because its significantly less risky in my opinion, but the upside for capital growth isnt always there which isnt the main reason for me purchasing an IP.

What are you thoughts, if you are to invest in regional areas, what is your criteria for doing so?
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DragonGM
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I would advise against investing on the hopes for capital growth. A far better option is to invest for rental returns and for that regional appears to be better. If capital growth occurs, then that is a bonus.
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Bardon
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I have a potential development site in regional Queensland, I wanted to get the development urge out of my system and I knew that I could do it in a regional town without risking the lot. The timing isn't right to do it now, so I have a tenant in there paying my holding costs up until I am ready to go.

I think Towoowomba is a pretty solid and growing city and a good place to invest. The capital investment that is hitting there is mind boggingly big, so you can get a decent yield and I believe capital appreciation as well. Warwick is for witches.
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silverman47
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Bardon
25 Aug 2014, 09:26 AM
I have a potential development site in regional Queensland, I wanted to get the development urge out of my system and I knew that I could do it in a regional town without risking the lot. The timing isn't right to do it now, so I have a tenant in there paying my holding costs up until I am ready to go.

I think Towoowomba is a pretty solid and growing city and a good place to invest. The capital investment that is hitting there is mind boggingly big, so you can get a decent yield and I believe capital appreciation as well. Warwick is for witches.
See with toowoomba mate, I think that also makes Warwick a good option, it has fairly decent infrastructure as of late and also a fairly large regional area.

Toowoomba has been a great capital growth story.

Haha Warwick for witches!


DragonGM
25 Aug 2014, 08:02 AM
I would advise against investing on the hopes for capital growth. A far better option is to invest for rental returns and for that regional appears to be better. If capital growth occurs, then that is a bonus.
That's basically my philosophy mate.
Edited by silverman47, 25 Aug 2014, 09:33 AM.
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Poontang
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I'd prefer it too. I am more concerned with generating income than capital gains.

3 $200k properties in a country town could generate around $700pw in rent

A $600k property in Melbourne might get you $500


$200pw extra over 30 or 40 years invested in just a Listed Invested Company giving fully franked dividends gives you franking credits, diversification and another income stream
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zaph
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Poontang
25 Aug 2014, 11:20 AM
I'd prefer it too. I am more concerned with generating income than capital gains.

3 $200k properties in a country town could generate around $700pw in rent

A $600k property in Melbourne might get you $500
What about the level of repairs and maintenance?

3 country properies are likely to have the same r&m as one in Melbourne. What happens with the figures when you take that into consideration?
silverman47
25 Aug 2014, 06:50 AM
Personally for me, i like regional because its significantly less risky in my opinion, but the upside for capital growth isnt always there which isnt the main reason for me purchasing an IP.
Why do you think rural's (I think you really mean regional's) are less risky than metro's? What risks are less in regional's?
Edited by zaph, 25 Aug 2014, 11:34 AM.
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silverman47
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Poontang
25 Aug 2014, 11:20 AM
I'd prefer it too. I am more concerned with generating income than capital gains.

3 $200k properties in a country town could generate around $700pw in rent

A $600k property in Melbourne might get you $500


$200pw extra over 30 or 40 years invested in just a Listed Invested Company giving fully franked dividends gives you franking credits, diversification and another income stream
thats actually not a bad idea i've got some shares but short / medium term holds, i havnt actually got a long term share portfolio set up. I could build that up over a number of years and then have both revenue streams.
zaph
25 Aug 2014, 11:32 AM
What about the level of repairs and maintenance?

3 country properies are likely to have the same r&m as one in Melbourne. What happens with the figures when you take that into consideration?

Why do you think rural's (I think you really mean regional's) are less risky than metro's? What risks are less in regional's?
well i wouldnt say necessarily less risky, but your holding a significantly less amount of debt per property.
Edited by silverman47, 25 Aug 2014, 02:34 PM.
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miw
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silverman47
25 Aug 2014, 06:50 AM
Hi,

Just thought i would pick the brains of the other investors on the forum to see what you thought of places like toowoomba / warwick etc. For a long term foundation property.

Compared to Metro bris / melbourne?

What are the reasons you steer clear, or load up.

Personally for me, i like regional because its significantly less risky in my opinion, but the upside for capital growth isnt always there which isnt the main reason for me purchasing an IP.

What are you thoughts, if you are to invest in regional areas, what is your criteria for doing so?
Just in general, you can get better yield in regional areas. But, again just in general, you need it, because capital appreciation is slower and risk is higher. A regional city is far more likely to run into trouble with a major industry/employer or two going under and people moving away. That doesn't mean avoid regional cities. It means that you need to demand a greater yield for a given amount of potential. It is way too easy to get to a regional city, measure the yield with capital city eyes and overpay without knowing it because the bird has already flown.

I've liked Toowoomba for a long time for all the reasons you have mentioned in another post. Diversified industry base, major infrastructure going in, new industries in the area, etc. But you need to be careful because there has already been a gold rush for property in Toowoomba for a couple of years. My brother just bought a home in Toowoomba and he complains to me that anything that even looks like a 3B1B house or better is being snapped up by out of town investors sight unseen on the first day of listing. He exaggerates a bit, but the point is there. In the meantime, prices have not moved nearly as much as they would move in Sydney under the same conditions. If you are thinking of buying a block and waiting for a rezoning so you can develop, do you know who Clive Berghofer is and where he owns all his land? How about all the other developers with strong links into the council? If you don't, then just don't bother. You will find the next door block belongs to someone connected and gets rezoned for 1/4 acre blocks, while your block becomes the biodiversity corridor for the area. General principle of regional cities: Outsiders will be screwed where possible. That said, I still think Toowoomba has potential, but lots of due diligence is in order and you willl be up against people who know the area intimately and are connected as well as out of towners with more money than knowledge. Go for a place that is already in a good area, pref. with views down the range rather than trying to pick winners in the development stakes. Go north side rather than south side. Harlaxton has always been the poor part of town but is gentrifying fast. (Actually it is a while since I have looked in Harlaxton. That bird may have flown, too.)

I do not, at first glance, like Warwick. It is too close to Toowoomba, which is threatening to suck the life out of it. Industry in Warwick seem to be going bust rather than starting up. Warwick's main claim to fame is that it is where trucks turn off the New England Highway to go down Cunningham's gap into Brisbane. How is this going to change when it is better to go up the Newall Highway, switch to the Gore Highway and go over the range on the new Warrego highway range crossing? Right now taking that route takes about an hour longer. After the new range crossing and the Warrego upgrade between Toowoomba and Brisbane that will be 30 minutes and you don't have the black spots of the range just south of the border and Cunningham's Gap.

You don't buy in Sydney unless you can get 5% yield? Make that 6% for Brisbane and make that 7% for Toowoomba and 8.5% for Warwick. If you are still going to look at Warwick, then have a good hard look at Dalby. That place is growing like a weed at the moment.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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silverman47
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miw
25 Aug 2014, 03:07 PM
Just in general, you can get better yield in regional areas. But, again just in general, you need it, because capital appreciation is slower and risk is higher. A regional city is far more likely to run into trouble with a major industry/employer or two going under and people moving away. That doesn't mean avoid regional cities. It means that you need to demand a greater yield for a given amount of potential. It is way too easy to get to a regional city, measure the yield with capital city eyes and overpay without knowing it because the bird has already flown.

I've liked Toowoomba for a long time for all the reasons you have mentioned in another post. Diversified industry base, major infrastructure going in, new industries in the area, etc. But you need to be careful because there has already been a gold rush for property in Toowoomba for a couple of years. My brother just bought a home in Toowoomba and he complains to me that anything that even looks like a 3B1B house or better is being snapped up by out of town investors sight unseen on the first day of listing. He exaggerates a bit, but the point is there. In the meantime, prices have not moved nearly as much as they would move in Sydney under the same conditions. If you are thinking of buying a block and waiting for a rezoning so you can develop, do you know who Clive Berghofer is and where he owns all his land? How about all the other developers with strong links into the council? If you don't, then just don't bother. You will find the next door block belongs to someone connected and gets rezoned for 1/4 acre blocks, while your block becomes the biodiversity corridor for the area. General principle of regional cities: Outsiders will be screwed where possible. That said, I still think Toowoomba has potential, but lots of due diligence is in order and you willl be up against people who know the area intimately and are connected as well as out of towners with more money than knowledge. Go for a place that is already in a good area, pref. with views down the range rather than trying to pick winners in the development stakes. Go north side rather than south side. Harlaxton has always been the poor part of town but is gentrifying fast. (Actually it is a while since I have looked in Harlaxton. That bird may have flown, too.)

I do not, at first glance, like Warwick. It is too close to Toowoomba, which is threatening to suck the life out of it. Industry in Warwick seem to be going bust rather than starting up. Warwick's main claim to fame is that it is where trucks turn off the New England Highway to go down Cunningham's gap into Brisbane. How is this going to change when it is better to go up the Newall Highway, switch to the Gore Highway and go over the range on the new Warrego highway range crossing? Right now taking that route takes about an hour longer. After the new range crossing and the Warrego upgrade between Toowoomba and Brisbane that will be 30 minutes and you don't have the black spots of the range just south of the border and Cunningham's Gap.

You don't buy in Sydney unless you can get 5% yield? Make that 6% for Brisbane and make that 7% for Toowoomba and 8.5% for Warwick. If you are still going to look at Warwick, then have a good hard look at Dalby. That place is growing like a weed at the moment.
You make some good points. Im actually from around that area so im a bit biased, and since growing up around there i've seen it go from a one horse town to quite a big regional centre with many major retailers etc that wouldnt have been there when i was alot younger.

So its been pretty consistant over the years.
Edited by silverman47, 25 Aug 2014, 07:10 PM.
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miw
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silverman47
25 Aug 2014, 07:02 PM
You make some good points. Im actually from around that area so im a bit biased, and since growing up around there i've seen it go from a one horse town to quite a big regional centre with many major retailers etc that wouldnt have been there when i was alot younger.

So its been pretty consistant over the years.
Yeah. Toowoomba has been on a bit of a tear for about 40 years it seems, and I am positive about the city in general. Have you driven out along Taylor St. lately? It looks like friggin' Paramatta Rd in Sydney, except for big iron.

If you are from around the area then you know the traps. good luck. If you really know the area, then have a look at Highfields area. It's a bit of a crapshoot but people who make the correct decisions will do very well I think.
Edited by miw, 25 Aug 2014, 07:28 PM.
The truth will set you free. But first, it will piss you off.
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