Good day! My name is Ben Everingham and I’m the director here at Pumped On Property and today we’re talking about how to find a positively geared investment property.
So positively geared investment property is basically any property that provides you with surplus income in your pocket, after you factor into account all of the income and all of the expenses from the property. In Australia, there’s two types of thought processes around what is a positively geared property. The school of thought that I believe in is basically a positively geared property is any property that provides you with income in your pocket after expenses, before tax. But there’s also people that consider properties that give you a positively geared outcome after tax as still a positively geared property. The problem with that is that as things change into the future, for example, if the government was to ever get rid of negative gearing, or they change their rules around depreciation, some properties that investors are holding on paper that look positive after tax, aren’t actually positive at all and may actually be going backwards.
So whichever school of thought you come from, today’s video is gonna focus on how to find that positively geared property in the Australian market right now. So I’m excited about this one so let’s get started.
So the first way I’ve identified where you can find positively geared property is in regional marketplaces. So as a buyers agent, I personally don’t love regional markets, but I know there’s a heap of people that don’t have problems with them. So I’m gonna be talking to those people today. In regards to the types of regional markets we’re looking at, I still believe in the investment fundamentals. So it’s gotta have a decent size population, it’s gotta have long term population growth, long term job growth, it’s also gotta have a diverse, local economy. So regional markets I’m talking about might be places like the Gold Coast, the Sunshine Coast in Queensland, Ballarat and Bendigo in Victoria, we might be talking about Wollongong and New Castle to Sydney in New South Wales. That’s probably as far as they go. I know there’s some other biggies out there, but these regional market places are often great sources or areas to begin looking and starting that positively geared property search.
The reason these regional markets have these positively geared options is because generally, the purchase prices of property in them are lower. And the income from the property that is coming in each week is higher. So let’s say, for example, that you were to go to one of these regional markets, Aubrey in New South Wales, and you were able to find a property that cost you two hundred and fifty thousand dollars. And for that two hundred and fifty thousand dollars you were able to, you know, give it a quick coat of paint, clean it up a little bit and rent that property out for three hundred and fifty dollars a week. That’s an example of a really nice, based on a five percent interest rate, property that’s gonna give you a little bit of surplus income each week. You might even be able to go and add a granny flat to that property, because it is in New South Wales, and maybe get another extra couple of hundred dollars a week. Therefore, giving you an even better positively geared outcome.
So one of my favourite sources for identifying and finding positively geared properties in regional market places is actually a good friend of mine, OnProperty. If you go to www.onproperty.com.au, Ryan’s got a little subscription service that you can sign up to for, for three hundred or four hundred bucks a year, and for that, he will send you positively geared properties straight through to your email address every week and every month. So that’s a really cool little way if you want to get someone else to do it for you. Otherwise, you can literally jump on realestate.com or domain, for example, and begin using those sites and do the numbers yourself. There’s also some really cool paid tools, so you can get the positively geared report from Residex in each of the major states in Australia, which is a really handy tool for finding those positively geared properties in those regional markets. You can also subscribe to services like RealEstateInvestor. RealEstateInvestor has this really cool tool where you just put in, you know, you could start your search Australia wide and you could put in eight percent rent return, for example, in your search filter and it will only show you properties with a greater of eight percent rent return. So that’s a really cool tool, a bit more expensive, probably not for the first time buyer, maybe for the seasoned investor that’s just chasing that sort of product. But a great little tool!
The second thing I wanted to talk about is blocks of units. So, some people go ‘blocks of units, that’s so expensive! I could never buy a block of units, that such a big thing.’ We’re not talking about ten million dollars for twenty units in the middle of Sydney CBD. We’re talking about regional blocks of units in good, high quality regional markets. I recently picked up a block of units for one of our clients, Shane. Shane came to us and said I’m really looking to replace a hundred thousand dollars worth of income through investing in the next two years. I said, ‘okay, we better get started!’ because he was starting from almost scratch. So we found a four pack of units in a regional market place in Australia, which we also believe is gonna get good long term growth. That block of units we bought for four hundred and eighty thousand dollars, and is giving Shane a ten percent return on investment from day one. So again, he’s getting four income streams for under five hundred thousand dollars, which is fantastic and that ten percent yield. So that’s a really cool option.
The other good option with blocks of units is, often they’re pretty run down, often they’re not started. So if you know what you’re looking for, you can actually make a bit of value on the way in. Sometimes, those blocks of units have had long term tenants in them, and its a simple fact that the current owner just hasn’t increased the rent. So by giving them a coat of paint, some new carpet, you can often get an extra twenty or thirty dollars per unit, per week. So again, really good option in terms of getting that passive cash flow that some people who would be listening to this video would be looking for.
The next thing that I really like to target is that dual income style property. So there’s a heap of different ways that this property can manifest itself. You might go buy a duplex with a really good rent return in a metro market or a regional market. You might buy a house, and then add a granny flat to it, which is another great strategy for increasing the rent return and getting that positively geared property. You might go buy or actively look for a property that already has a granny flat on it, so it’s done for you and you can just pick it up. So they’re all different ways that you can, again, create that positively geared outcome that you’re looking for.
The fourth option is a little bit more advanced, and that might be to buy a piece of land that you could potentially subdivide, for example. Or that a piece of land that already has two titles on it, so you can just cut or basically on settlement, once you get rid of the house, have those two individual pieces of land. And so because you’re getting two pieces of land for a little bit of a discount, sometimes you might be able to, for example, sell of one of those pieces of land and then pay some debt down on the other piece of land, and then build something on it. And when you keep that, because you’ve made that money from selling the other piece of land, and all of a sudden, let’s say, the total value of the house after you’ve built it on that piece of land that you have left over is worth five hundred grand, but because of the money you made on the way in, you only owe three hundred and fifty thousand on it. And it rents for five hundred dollars a week. That’s a really cool way manufacturing your own positively geared deal.
The last one is development, which is a little bit more complicated, but I know plenty of investors out there are, for example, building four packs of town houses in high quality market places, selling off three of those town houses, keeping one with either extremely low debt on it, or absolutely no debt on it, because the other three units they built covers the cost of owning the fourth one outright.
So there’s so many different ways in terms of finding a positively geared property. As I said, just to summarize. So you’ve got your option for the regional market place, you’ve got the option of looking at units in regional metro market places, you’ve got the dual income option where you might look at duplexes and granny flats, or you could go to the more advanced development style option where you subdivide or build some town houses. But there’s some amazing tools out there. Positively geared properties definitely exist, you’ve just got to know where to look for them and what to do.
Until next time, thank you so much for your time, stay hungry! Bye!