©2020 Propertyology Pty Ltd
               

Complete this form and we'll be in touch

Shares

Locations Where Property Cash Is Flowing From Day One

Locations Where Property Cash Is Flowing From Day One
February 11, 2020 Propertyology Head of Research and REIA Hall of Famer, Simon Pressley

Do you know how much money you would make in a year if you had $45,000 sitting idly in a term deposit? A whopping $540 – perfect, right!

Yep, with that amount of cash, you could buy groceries for a week or two at Aldi, or perhaps “splash out” on a low-rent motel by a noisy highway for a two-night romantic getaway.

Call me facetious, that’s OK because I’ve been called worse, but that’s not a “return”, it’s a joke!

You can probably already guess where I’m going with this, can’t you?

That’s right, with the same small pool of funds, you could invest in a property in a multitude of places across the nation and see cash flow in the thousands of dollars into your bank account each year instead.

On top of that, if that same property is purchased in a strategic location there can be exponential capital growth for years to come – whereas there is no capital growth from a term deposit.

So, while the cash is flowing, that property is growing in value by many multiples of that annual yield.

To prove I’m not pulling these numbers out of thin air, this report contains real numbers from a sample of locations all over Australia.

The Low-Down

With any research of this nature, there are a few assumptions that need to be made, otherwise you’d end up down a data rabbit hole without a cash flow carrot.

For this analysis, I considered locations where you can purchase a median-priced house, using an interest-only loan at 3.75 per cent as well as provisioning for certain expenses each year such as insurance, property management fees and $500 per annum for general maintenance.

I’ve also based cash flow calculations on rent being received for 48 weeks out of every year and excluded the (one-off) costs associated with the initial property purchase.

In theory, you could buy a standard house at the median price and anticipate positive cash flow from Day One.

The table below is by no means a full list, nor is it an endorsement from Propertyology for people to rush out and invest in any of these locations. But it does provide an appreciation of the widespread opportunities all over Australia.

Part of the reason for this new analysis is that thousands of people will already have access to $40,000 to $60,000, but they might not realise that this low interest rate environment means, even with a deposit as small as 10 percent, the “system” effectively will cover the entire annual cost to hold a property.

Similarly, others might have cash squirreled away in the bank, without realising that the annual interest income might be less than the income received from an investment property, even if the LVR might be as high as 90 percent.

I truly believe that the Australian real estate environment is as appetising right now as it has ever been in this Nation’s 230-year history.

That’s because, on the income-side of a property investor’s profit and loss ledger are rental yields of five (5) percent (or more) in many locations, and on the expense-side are borrower interest rates of better than 3.75 percent.

Some Home Truths

The results show that, in a large number of both urban and regional locations, it is possible to buy an affordable investment property and be positively geared from the very first day.

Of course, this is not the case in expensive low-yield cities like Sydney and Melbourne, where investors not only have to stump up huge deposits, they then had to self-fund the significant shortfall between the rent and mortgage repayments every month. That said, we’ve managed to identify a few cheapies in the below table.

Now, it is a fact, that most people who live in our two biggest cities, or who decide to invest there, are not super wealthy oligarchs, so having to find thousands and thousands of dollars every year because the rent from their investment property is well short of all expenses will always hurt them financially.

On the other side of the ledger, though, well-informed property investors appreciate that many well-chosen non-capital city locations require a smaller initial injection of capital (deposits) and can generate high annual cash flows.

These same savvy investors understand that, contrary to misguided perceptions of the masses, the historical proof is that regional locations have just as much potential for capital growth as capital city locations, but no two locations will be doing the same thing in the same year.

They also recognise that the time to act is now. These current unique market conditions are called ‘unique’ because they haven’t been seen before and there’s no way of knowing how long it will last.

Here’s an example of some of our work for a client:

Want to learn about how we can help?

Find out more about where the real cash flow locations are with Australia’s best buyer’s agent and property market analyst by filling out the form below and we’ll be in touch:

  • This field is for validation purposes and should be left unchanged.

You see, large parts of Australia have seen below average volumes of investment activity for much of the past decade, so rental supply has consistently tightened at a time when demand is accelerating.

In a lot of cases, vacancy rates are well below two per cent, meaning rents are already rising and cash flow returns for investors are becoming even more salivating.

Propertyology’s buyer’s agents are currently helping people to invest in several such locations [contact us here].

Several Examples

In addition to its mouth-watering cash flow, official data confirms that Launceston’s median house price attracted a higher average annual rate of capital growth than Sydney over the last 20 years [Research Report here].

On top of that, Launceston and Hobart have a variety of suburbs where you can buy a house from as low as $285,000 with potential annual net returns on your cash deposit of up to 16.5 per cent. How’s those apples?

In the regional Victorian location of Ararat, investors can pick up a house for just $215,000 that has potential net annual cash flow of $4,000, or a staggering 18.5 per cent!

A short 17 kilometres north of the CBD of Australia’s third largest city, the median house price in the Brisbane suburb of Bald Hills is an affordable $460,000 and, even with a small deposit of 10 per cent, will theoretically be cash flow positive by $1,300 per annum.

Numbers like this make those who frequently like to scream “affordability crisis” somewhat silly when you can save your deposit and get in the game!

Related article: Here’s how to win the Housing Affordability challenge [step-by-step guide]

While locations like Whyalla and Port Augusta in South Australia do rely on the natural resources sector, I’d argue that their ridiculously affordable median house prices ($252,000 and $138,000, respectively) largely mitigates perceived financial risks.  Plus look at their cash flows of $3,100 and $4,400.

Ditto for precious metals rich Mount Isa in north-west Queensland.

Pretty much every major regional city along the entire Queensland coastline has suburbs where the official data suggests it only takes a 10 per cent deposit to put skin in the game and own a standard house with positive annual cash flow.

Related article: Queensland property market outlook

In Western Australia, the traditional mega mines of Port Hedland (the world’s iron ore mecca) and Karratha (liquified natural gas) have recently started a new growth cycle. The cash flows are also strong with extraordinary annual net returns of $10,800 and $16,300 respectively on offer. Wow wee!

Other WA coastal locations, with more diverse economies, also have positive cash flows and varying investment fundamentals as the research shows.

Regional New South Wales also has a smorgasbord of locations that have affordable entry prices, tight housing supply, quality lifestyles and positive investment cash flows, such as in Lismore, Coffs Harbour, Tamworth and the university city of Armidale.

Related article: Big investment bang, small bucks, smart strategy

Disclaimer: This report is by no means a recommendation to rush out and invest in the listed suburbs. Propertyology considers some of these suburbs good and some not so good.

City / StateSuburb [km from GPO]Median House PriceNet Annual Investment Cash Flow [pre-tax]Annual Cash Return On Investment Capital
ACT
CanberraMoncrieff (16)$720,000 $3,600 5.00%
CanberraGilmore (21)$565,000 $3,600 6.30%
CanberraCoombs (13)$865,000 $3,300 3.90%
TAS
HobartRisdon Vale (10)$285,000 $4,700 16.50%
HobartGlenorchy (9)$380,000 $4,100 10.80%
HobartWest Moonah (8)$441,000 $3,700 8.40%
BurnieParklands$291,000 $2,300 7.80%
LauncestonInvermay$310,000 $2,500 8.20%
VIC
Melbourne (north)Meadow Heights (26)$475,000 ($800)Nil
Melbourne (south)Franskton North (51)$425,000 ($1,400)Nil
Melbourne (west)Melton (53)$380,000 ($300)Nil
AraratArarat$215,000 $4,000 18.50%
BallaratMount Helen$415,000 $1,800 4.40%
BendigoGolden Square$330,000 $1,600 5.00%
GeelongSt Albans Park$427,000 $5001.30%
MilduraMildura$305,000 $3,100 10.30%
SheppartonShepparton$280,000 $3,100 11.10%
WodongaWodonga$330,000 $3,200 9.60%
WarrnamboolWarrnambool$365,000 $2,000 5.50%
QLD
Brisbane (north)Bald Hills (17)$460,000 $1,300 2.90%
Brisbane (south)Creastmead (25)$325,000 $3,200 9.90%
Brisbane (east)Alexandra Hills (20)$457,000 $2,400 5.20%
Brisbane (west)Goodna$290,000 $3,200 11.10%
BundabergKalkie$310,000 $3,400 11.00%
CairnsMount Sheridan$370,000 $4,200 11.30%
Gold CoastGaven$665,000 $6,500 9.40%
GympieGympie$268,000 $3,100 11.50%
Hervey BayEli Waters$325,000 $4,000 12.30%
MackayMount Pleasant$390,000 $3,000 9.40%
Mount IsaSunset$267,000 $5,700 21.30%
RockhamptonFrenchville$313,000 $2,900 9.10%
Sunshine CoastSippy Downs$518,000 $2,800 5.30%
ToowoombaWilsonton Heights$255,000 $3,100 12.00%
TownsvilleHeatley$213,000 $4,900 23.30%
S.AUST
Adelaide (north)Davoren Park$163,000 $4,000 24.70%
Adelaide (north-west)North Modbury$347,000 $2,500 6.60%
Adelaide (south)Christie Downs$271,000 $3,100 11.40%
Mount BarkerMount Barker$380,000 $2,400 6.20%
Port AugustaPort Augusta$138,000 $4,400 32.00%
Victor HarbourVictor Harbour$334,000 $1,300 3.80%
WhyallaWhyalla Jenkins$252,000 $3,100 12.10%
W.AUST
Perth (north)Mirrabooka$310,000 $2,500 8.20%
Perth (south)Leda$248,000 $4,200 16.90%
Perth (east)Koongamia$227,000 $3,600 15.80%
AlbanyBayonet Head$370,000 $3,100 8.50%
BroomeBroome$375,000 $6,900 18.50%
BunburyUsher$231,000 $4,100 17.70%
BusseltonWest Busselton$406,000 $1,500 3.70%
EsperanceCastletown$310,000 $2,500 8.20%
GeraldtonGeraldton$240,000 $2,300 9.40%
KarrathaBaynton$480,000 $10,800 22.60%
Port HedlandPort Hedland$416,000 $16,300 39.20%
NSW
Sydney (north)Berowa Heights$935,000 ($6,500)Nil
Sydney (south-west)Bonnyrigg$680,000 ($2,500)Nil
Sydney (west)Auburn$825,000 ($7,400)Nil
Central CoastBlue Haven$485,000 $1,200 2.50%
Coffs HarbourNorth Boambee$520,000 $4,800 9.20%
LismoreSouth Lismore$290,000 $4,500 15.60%
MuswellbrookMuswellbrook$302,000 $5,000 16.50%
NewcastleTeralba$420,000 $6,300 15.00%
ShellharbourCalderwall$628,000 $3,000 4.80%
TamworthWestdale$315,000 $4,200 13.40%
NT
Darwin (north)Fannie Bay$795,000 $4,600 5.80%
Darwin (north-west)Karama$383,000 $4,500 11.70%
DarwinLyons$650,000 $6,400 9.90%

Propertyology is Australia’s premier property market analyst and award-winning buyer’s agency. Every capital city, every non-capital city, we analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.

Shares

Shares
%d bloggers like this: