The ultimate property investment is free-carry (positively geared), stable income, low maintenance, with capital growth. It took me many years to work it out, but the key to achieveing all these is to think out side the box. More precisely, look where others are not looking.
One of my own SMSF investments is in Armidale NSW (postcode 2350), which is a one hour flight or 6 hour drive north of Sydney (around halfway between Sydney and Brisbane, roughly). Armidale's has two key industries, both of which are quite stable. Firstly, Armidale is central to the Northern Tablelands Merino industry (producing some of the best quality export wool in Australia) and central to the Angus Beef industry (Angus Australia are headquartered there). Secondly, Armidale is an "education city", boasting several well-known private schools (TAS, PLC and NEGS), a reputable university (the University of New England), and the Armidale Teachers College. As such, there is a stable population (of around 25,000), a wider regional population (in surrounding areas, who commute to Armidale), and a transient population (around 1,200 education employees, around 22,500 university students, and around 1,800 private school students). Throw in the fact that Armidale has the highest level of civilian education of any Australian city (due to the high proportion being involved in education), and the fast that it also boasts itself as "Australia's Highest City" (at 3,220 feet above sea level), and you have a really unique investment enviroment.
Unfortunately, though, Armidale is often forgotten by investors. As such, yields tend to be remarkably high, particularly on non-strata unit blocks where gross yields can be above 7%. As the local house price is still relatively low the local investors simply don't have the cash for such investments, with most "small block" (4 to 6 units) owners coming from Sydney, or are retirees who have recently sold their rural properties and are looking for yield.
For example - on the market at the moment is https://www.domain.com.au/1-6-25-27-niagara-street-armidale-nsw-2350-2019721798 which yields around 7.20% (gross). From experience, agents in Armidale tend to charge 6%+GST for management, water rates are roughly $120 per unit per quarter, and a property like this (of this size and layout) would require council rates of circa $6.5k. Add in a little bit of gardening, and you are looking around $12k per year in upkeep and around $6.8k in agents fees, so total costs are around $18.8k bringing net yield to around $85.7k which is a net yield of 5.9%. If you were do do the same sums on your average Sydney unit, you would have a gross yield of around 3.9% and a net yield around 3.5% - considerably less than what Armidale offers.
Hunting around Domain.com.au you will see there are several other blocks currently for sale, ranging from around $700k right up to around the $2m mark. Not going to break the bank, as these prices are very cheap when compared to Sydney or Melbourne.
The big upside of these are rental stability. I have owned my line of 4 for around 8 years and (a) have never had one vacant for more than 2 weeks, (b) usually have the choice of 2 or 3 tenant applications when they become vacant, and (c) have seen my rental income double during those 8 years. Add to that, I usually have 1 year leases and hardly ever have more than one unit (25% of the block, in this instance) vacant at any point in time, so my net income is quite stable. And when it comes to capital growth, gains have been "solid", with my property doubling in price during that 8 year period.
So, What's the catch. Unlike Sydney, Armidale property takes longer to sell/move, so your "liquidity" is far less. For example, a block of 6 units in Sydney will sell in around 10 weeks (give or take), but in Armidale it will take you almost twice that (depending on the area and the metrics of the block). Armidale is also fare less volatile in prices, thus there are less "property spikes" as there are less shocks to supply or demand.
But for an investor lookign for a solid 5-10 year free-carry investment, Armidale ticks all the boxes. For example, using an LVR of 80% (20% deposit, plus a LRBA borrowing into a super fund or a standard investment mortgage if you want to carry it in your own name), your net rental yield (in the above example, 5.9%) more than covers current P&I payments for the 80% borrowing, allowing you to gear-up your 20% and see considerable, stable appreciation over time. A good, solid SMSF investment or a good "less headaches" investment for someone.
Food for thought. Hope this helps someone to "look where others are not looking".
