Times of crisis will always lead to innovation and change. Consider World War Two. Women, generally restricted to working in the confines of their homes, are called on to work in munitions factories as a temporary measure. At the conclusion of the war, segments of society consider "perhaps this 'women working out of the home thing' could work all the time? Not just during war". When you consider the biggest changes to technology and communication, you'll typically find a moment of hardship within our world...
Perhaps the current Covid19 crisis will see similar innovations? Already industries from fitness to education to financial planning have identified new, remote ways to address their clients needs... People all over Australia and the world are working from home. Surely in the coming months, when our world "resumes as normal", some people won't return to normal. Like the women who'd had a taste of employment during WWI and WWII, some businesses and individuals will consider the rent they're paying for their inner city Sydney office or home, and decide that the same outcomes can be achieved working from Dubbo? Perhaps people will feel empowered to have those conversations that allow them the tree or sea change dream, living in Orange and working with their firm in Sydney. Working remotely for the most part and jetting in and out of the big smoke once a week?
Perhaps, having had the fear of being short on essentials (food, toilet paper, alcohol), people will look for a return to the more self sufficient lifestyle of bygone era's, and see a return to the dream of a quarter acre block. We've already seen a national rush to buy laying chooks and veggie seedlings.
Covid19, like any other challenging time in world history, will have its challenges and tragedies. Leaving that aside, perhaps regional cities and their economies will be the winners on the other side. Affordable property, economies built on agriculture, resources, health, education and government industry, and a lifestyle that people the world over would envy...
The short of this article is, that maybe this will shake up the urbanisation movement that has been so strong, not just in Australia but around the world, over several centuries. Two thirds of Australians currently live in cities. Large, crowded, expensive cities, with small land sizes. For decades people have used the argument that there are "no jobs" in regional areas... There generally are, but perhaps their doesn't have to be?
Whether you're 20 or 60, buying a house is a big deal. Buying a house and letting a stranger live in it, with the purpose of bettering your financial situation, is an even bigger deal...
As a 33 year old who has purchased 5 properties in the last 5 years, here are my top tips for the first time investor.
1) Do it. So many people truly believe that they cannot invest in property. Perhaps they think they don't have enough money, maybe no one else that they know has done it, perhaps they are afraid of making a mistake and would rather just play it safe... As a family with one income and three children, we have and continue to invest in property. Change your mindset. If you want it, believe you can do it and make it happen.
2) Educate yourself. This might sound boring, however, you're potentially spending hundreds of thousands of dollars! Read a few books, listen to podcasts, meet with other investors and ask them your questions. Don't just buy a property, buy the right property, based on your research. Taking time to educate yourself may cost you time in the market, but it may save you decades of stress and/or losses...
3) Make a plan. Who spends $400k on a whim? Do you want one investment property, or 10? Do you want the tax and maintenance benefits of a new property, or the value adding opportunities of an older property? Are you in a situation to pay part of the costs from your work income, or does the rental income need to fully cover all the costs of holding the property? Will you pay principle and interest on the loan, or interest only? Are you holding the property for 10 years, 20...? There are so many factors to consider. Buying a property without knowing what you want is akin to arriving at the airport and getting on a plane without knowing where you are going. Make a plan before hand.
4) Have finance pre approved. While this is not a guarantee of full finance approval, this is important to have before looking at properties. Pre approval gives you a guide of what you can afford, so you don't waste time looking at properties you cannot afford, and gives you credibility/bargaining power when dealing with real estate agents.
5) Don't just buy something for FOMO (fear of missing out). The deal of a lifetime comes around most weeks. I've had properties that I was so dissapointed to have missed out on, only to have found a better deal the following week. Be patient. Keep the end goal in mind.
6) When you get to that point that you've found a property that fits your budget, your criteria, your long term plan... buy it. If you've done your planning, identified the property as fulfilling your criteria, don't talk yourself out of it for fear, and don't delay too long, close the deal. Remember that any offer you make should be subject to building inspections and finance anyway.
Regional property has for so many successful investors been a great way to begin their investing journey. Affordability, steady growth and good rental demand make many regional areas a fantastic place for beginning and experienced investors alike. If you'd like information on how we at regionalpropertynsw.com help first time investors, please get in touch using the form below.
Regional property investment continues to gain momentum. Recently I attended an auction in Orange NSW. This property had no kitchen, no bathroom, broken windows and holes in the floor, and sold for 20% more than the top guide price. The auction saw 60% of bids come from Sydney investors, all indicating their plans to convert the site into a dual income property. It ended up being purchased by a first home buyer. Orange is seeing a strong mix of investors looking for cash flow and growth off the Sydney boom, and treechangers, looking for affordability and lifestyle while maintaining their proximity to Sydney.
Orange is Australia’s 34th largest City, located 250km from Sydney and 280km from Canberra. The City of Orange services multiple outlying towns and villages, giving it a servicing population of more than 53,000 people. Orange’s main employment providers and industries are Health (21.1%), Mining (3.6%), Government (8%), retail (11.9%) and education (10.1%) but is seeing a strong growth in tourism (last year contributing more than $112 million to the Orange economy).
The average house price in Orange NSW is $400,000, with a current average rental costing tenants $360/week. Rental demand is consistently at a good standard, currently seeing 1.6% vacancy rates. Land values, being lower than in capital cities, mean that investors can hold multiple good sized blocks while still remaining under the NSW land tax threshold of $629,000. While smaller regional towns and localities across Australia have been seeing net migration losses, Orange, and cities like it, have defied this trend to be building close to 300 new residential properties a year over the past decade, and has seen a consistent population growth averaging 1% per year.
Orange’s greatest appeal is currently its affordability. Many industries pay workers a standard wage, regardless of the location in which they live. In an interview with regionalpropertynsw.com, Orange based Buyers Agent Matthew Ward suggested that technology is contributing to decentralisation. Rather than being required to live within commuting distance to their office, employees can work full or part time from the home office. The roll out of the NBN, improved air transport, and the announcement of the Bells Line Expressway means that individuals and families can have the home on the quarter acre block, with less commute and less living expenses, whilst still pursuing their career. Facilities and services are critically important to this move, and the larger towns with their restaurants, wines, education facilities, and health services are seen as key influencing factors to people making a treechange. Local agent Adam Scimone identified a growing trend of young professionals and families making the tree change from Sydney, working from home 3-4 days a week and 1 day a week back in Sydney.
Orange was recently announced as the headquarters for the Regional Investment Corporation (Barnaby’s Bank), bringing 20+ high paid jobs to the region. The city has also seen ground break on a new Private Hospital (an estimated 500 jobs during construction and beyond) following a new Public Hospital being completed in 2010. The Department of Primary Industries currently employs 800 Orange residents and in July 2018 announced its plans to construct new premises to house a consistently expanding operation.
Apart from young families who are priced out of the Sydney market and retirees, selling high in Sydney and buying low(er) in Orange, investors have been identifying Orange as having strong investment potential. Matthew Ward from Aspect Buyers Agency identified that Sydney investors who have little faith in the Sydney property market or a budget that does not allow them to acquire into the Sydney or larger coastal markets, are looking to regional NSW. The larger regional centres of NSW and Victoria particularly are benefiting from this, with strong interest in his experience being from investors looking for that mix of capital growth and reasonable rental return.
In interviews with regionalpropertynsw.com, Dr Andrew Wilson (economist and property commentator) and Matthew Ward both suggested that regional NSW is being impacted by the 'ripple effect'. The property markets are a function of economics, thus there has to be price relativity between regional property markets, such as Orange, and the Sydney property market. What we have seen in the past few years are dramatic increases in the Sydney region property values which have slowly filtered out in a ripple effect, first it was the central coast and Illawarra regions then into Newcastle and Canberra and now into the Regional Centres. Ward identifies that 10 years ago, the median house price in Blacktown was $350,000 and Orange was $277,000 about 27% difference, in 2018, Blacktown was $766,000 and Orange $388,000, thus 100% more. This pricing pressure is not being offset by household income with Blacktown residents earning approx. 25% more than median household income of Orange residents.
Orange’s property market is ultimately dependant on jobs and an affordable, appealing lifestyle. Changes in technology and further congestion in Australia’s capital cities will likely see some Australians continue to make the move into regional NSW. While demand for housing continues, growth in property values and rental returns for investors should follow. As this economic reality continues to come into play, people with broad or adaptable skills sets will be looking for the regional alternatives to afford to live. This economic driver will continue to strengthen the regional centre property markets where diverse well-paying jobs are available. Thus the markets have some way to go until the economic relativity between the Sydney (particularly the Western Sydney markets) and the regional markets catch up again.
Eight years ago I completed a Psychology degree, various parts of which consistently help me in my understanding of individuals, society and property investing.
People often like to think that they are non conforming individuals, however studies show us that most of us conform our money and investing habits to that of our parents or the people around us. Asch identified that humans will often 'follow the crowd', even when they know they are not making the correct decision, in an attempt to not stand out as being different. Getting results that no one else gets requires doing things that no one else will do.
The Stanford University Marshmallow Experiment (Mischel) involved children in a controlled environment being given a marshmallow. If they could delay eating the marshmallow until the experimenter returned (normally 10 - 15 minutes), they would receive a second marshmallow. The study identified that children who could demonstrate delayed gratification with a marshmallow, would grow up achieving more and being more successful. The recent success of Scott Pape's The Barefoot Investor and the popularity of credit cards and afterpay, demonstrates that for many adults, delayed gratification is not a skill they have developed.
Psychologist Sigmund Freud developed the psychoanalytic theory of personality development. Freud suggested that personality is formed through conflicts among three fundamental structures of the human mind: the id, ego, and superego (imagine three different Jiminy Crickets on your shoulder telling you what to do). The 'id' is reminiscent of a tiny baby who identifies what they want, and expect it immediately. As we grow, we start to develop our 'ego' which identifies that while there might be something we want, we need to wait for the appropriate time or situation for it to be possible. The 'superego' is the moral compass of the group, reminding us of society's and our own values and expectations.
In property investing, understanding the id, ego and superego is extremely significant. In any deal or investment opportunity, you will have the desire to jump straight in and get the property. It's good to not hesitate when you identify a property that suits your criteria, as a wise person once said "you snooze, you lose". At the same time, the deal needs to make sense as part of your long term plan. If the numbers don't add up, you've compromised on too many aspects of the property, or if your due diligence criteria isn't met, then perhaps it's not the right time or place.
Perhaps you're looking at the property market and thinking that investing is out of reach, or that you want your dream home and you want it now? Perhaps your 'id' is telling you that you want it now, but your 'superego' is telling you that, based on the banks criteria, it's out of reach? Maybe your 'ego' (your compromise between the id and superego), could be to do something now, that will mean you can achieve your goals in the near future? For me and many investors, buying property in regional NSW has been the step towards our investment and life goals. Investing in regional NSW property can be done on an average income, with an achievable deposit, to provide good growth and cashflow every week to keep you from being out of pocket.
For more information, check out our other articles or consider subscribing to our premium property subscription, where we identify and analyse current listed, cash flow positive, regional properties, every week.
The baby boomers, those born between 1940 and 1964, are retiring. Many of these hard working Australians have only been contributing to their superannuation since it was made compulsory in 1997. The generation of Australians that have been described as a basketball moving through a garden hose will require funds to retire, and for many, their high priced home in Australia’s high priced capitals will be swapped for an equally nice house in lower priced regional NSW. This new life also comes with lower living expenses and a large quantity of funds left over from their relocation.
The Millennials and Gen Xers, those born between 1965 and 2000, are seeking the great Australian Dream. Many of these young Australians are identifying that buying their quarter acre block with a white picket fence in a capital city is unrealistic. People are seeking a life where they can still further their career, still enjoy an active lifestyle, but have a five minute commute and lower living expenses.
Regional NSW is, according to many, on the brink of a boom like which it has never seen before. According to some property commentators and media outlets, the Sydney property boom has finished its run and is heading for a correction. Many people now believing that 'the Australian property market’ bubble will pop, however, throughout Australia there is not one overall property market, nor have all the individual markets ever moved consistently together. While Sydney has seen much growth over the past five years, many regional markets have been identified by market researchers as starting to move now.
In an interview with regionalpropertynsw.com, Dr Andrew Wilson (economist and property commentator) suggested that regional NSW markets are showing many signs of being at the start of their growth cycle. Dr Wilson cites the 'ripple effect' as being a prominent factor in regional property market growth, as many people are now priced out of Sydney. Dr Wilson also expressed people's desire to live in places with space, wanting the 'Australian dream' of a house on a quarter acre block. While this is becoming harder in capital cities and will often involve a considerable commute, in regional areas people can have the 'great Australian dream', within several kilometres of the CBD, with a considerably smaller mortgage.
People have for decades given many reasons for not investing in regional cities. No jobs, no capital growth, no tenants, one industry towns... I think these people are imagining small, one pub, one shop towns with tumble weeds blowing down the main street. Do some research and you'll find many jobs available, many diverse industries and a high demand for rental properties in large regional cities. Cities such as Orange and Bathurst are large regional centres that emulate capital cities. They have all the businesses and services of a capital city, on a smaller scale. Some parts of regional NSW have the potential for investors to find positive cash flow, affordability and capital growth with a diverse economy that has seen consistent growth over more than 100 years.
With population, comes a need for shelter. With the need for shelter, comes higher purchase prices and rental yeilds. Perhaps the factors for a wave of growth in regional NSW is beginning? Will you be ready to catch it? Find out more at regionalpropertynsw.com or like our page on facebook.
There's been alot of discussion going on lately within the media regarding the Australian property markets (note that I say markets).
Many people believe and are coming out with comments suggesting that 'the Australian property market bubble will pop', but throughout Australia's 'property history' there has never been one overall market, nor have all the individual markets ever moved consistently together. While Sydney has seen much growth over the past 3 years, in the 5 years prior to the boom, Sydney saw minimal growth. Many regional markets are starting to move now. In an interview with regionalpreopertynsw.com, Dr Andrew Wilson (Chief Economist for domain.com) suggested that regional NSW markets are showing many signs of being at the start of their growth cycle. Dr Wilson cites the 'ripple effect' as being a prominent factor in regional property market growth, as more and more people are priced out of Sydney. Dr Wilson also discusses the need for decentralisation. A larger supply of housing in Sydney can only go so far to solve the under supply and affordability problems, the government and employers need to look for a movable workforce and for opportunities to live outside Sydney while still doing the same job.
Decentralisation makes sense on a variety of levels. For a company or government organisation to expand or move into a regional city compared to a capital city, they will face less rent and utility costs. The ongoing costs of running a business or government organisation in a regional city will generally be significantly less as will be the cost of living for their employees. In addition to this, decentralisation lessens the overcrowding present in many of our capital cities and contributes to businesses in regional cities that have a smaller population to support them. A fantastic example of this is the NSW Department of Primary Industries (DPI) that in the early 1990's moved from Sydney to Orange. More than 50% of the original staff made the move to Orange and the DPI has continued to expand, to be larger and do more than it was able in Sydney. The current Federal government is working towards the relocation of the Australia Pesticides and Veterinary Medicines Authority (AVPMA) from Canberra to Armidale.
In the interview, regionalpropertynsw.com and Dr Wilson also discuss people's desire to live in places with space. People still hold true to the 'Australian dream' of wanting a house on a quarter acre block. Dr Wilson suggests that while this is becoming harder in capital cities and will often involve a considerable commute, in regional areas people can have the 'great Australian dream', within 10 kilometres of the CBD, with a considerably smaller mortgage. In a recent interview, Warren Buffet discussed his 50+ years of commuting 5 minutes between his home and office in the regional US city of Omaha. He then speculates how much of his life would have been spent commuting if he'd lived 30 minutes, or even further, from his office, and ho much less he would have been able to do in other areas of his life. Long commutes, high mortgages and overcrowding are leading more and more people to leave capital cities and create a new life for themselves and their families in regional NSW.
For more information on regional property, or to view the interview with Dr Wilson, see our site or facebook page.
Many years ago I saw the film, The Matrix, the general idea of which is that humans are being controlled, prisoners within a system. We go to work, pay our taxes, fulfil our obligations because we can't see any other way. Many people identify that this is more than fiction, that many people today live their lives as slaves to their jobs, their career progression, their debt or their need to consume. Perhaps you've heard of environmentalist Annie Leonard who has at various time suggested that humans today often seek their spiritual satisfaction in the acquisition of 'stuff'? It's known as consumerism, the idea that we are on a treadmill where we work, where we are exposed to media telling us our lives aren't good enough, and then we shop to make our lives better, requiring more work. It may or may not ring true of your own life, but for so many Australians, this treadmill will form the basis of the majority of their lives. Many people are happy in this, and good for them, but a growing minority are not and are exploring different ways of life.
The tiny house movement (google it) is an architectural and social movement that advocates living in small homes (generally under 15m2) within communities of like minded people. This, combined with a growing movement of people leaving behind huge mortgages and long commutes within Australia's capital cities for 'tree changes', many baby boomers needing to sell their capital city homes and move to regional areas to fund retirement, and growing infrastructure and opportunities in regional NSW, are signs of people getting off this treadmill.
More and more people are searching for a way to get off this treadmill, for a way to eliminate the need to work as much, and instead enjoy their family, their passions and experiences. More and more people are seeing property investment in regional areas as an opportunity to earn a passive income, that is, an income that does not require trading your time for money. While an investment property in most capital cities will cost you money to allow someone to live in your house, even after the tenant pays rent, many regional properties will see the rent cover all costs in addition to putting money in your pocket every week.
There is a parable known as the Mexican Fisherman. The story explores the idea that we often overcomplicate our pursuits, rather than simply identifying what is really important. property investment has for me and many meant that we can have a hope for a comfortable future, while not costing our entire lives until retirement. Check out the parable below to find out more, but mainly, ask yourself, are you happy on the treadmill and are you willing to work to get off it?
An American investment banker was taking a much-needed vacation in a small coastal Mexican village when a small boat with just one fisherman docked. The boat had several large, fresh fish in it.
The investment banker was impressed by the quality of the fish and asked the Mexican how long it took to catch them. The Mexican replied, “Only a little while.” The banker then asked why he didn’t stay out longer and catch more fish?
The Mexican fisherman replied he had enough to support his family’s immediate needs.
The American then asked “But what do you do with the rest of your time?”
The Mexican fisherman replied, “I sleep late, fish a little, play with my children, take siesta with my wife, stroll into the village each evening where I sip wine and play guitar with my amigos: I have a full and busy life, señor.”
The investment banker scoffed, “I am an Ivy League MBA, and I could help you. You could spend more time fishing and with the proceeds buy a bigger boat, and with the proceeds from the bigger boat you could buy several boats until eventually you would have a whole fleet of fishing boats. Instead of selling your catch to the middleman you could sell directly to the processor, eventually opening your own cannery. You could control the product, processing and distribution.”
Then he added, “Of course, you would need to leave this small coastal fishing village and move to Mexico City where you would run your growing enterprise.”
The Mexican fisherman asked, “But señor, how long will this all take?”
To which the American replied, “15-20 years.”
“But what then?” asked the Mexican.
The American laughed and said, “That’s the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich. You could make millions.”
“Millions, señor? Then what?”
To which the investment banker replied, “Then you would retire. You could move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”
Lots of people, some very successful property investors (many not), will tell you not to buy investment properties outside of the capital cities. Sure, I'm not about to tell people to go out and buy any property in any regional area and promise that it will be a good investment, but on the same level, why are people so willing to put a negative blanket statement across all of regional NSW property?
Encouraging people to avoid investing in regional NSW assumes that all regional cities are the same. Encouraging people to invest in capital cities assumes that all investors have a minimum of $500k at their disposal... People who make such statements are ignoring the potential for every day Australians to become property investors, they are ignoring the individual characteristics, economies and industries of regional cities and in doing such are ignoring the potential.
I've heard many reasons of why not to invest in regional cities. No jobs, no capital growth, no tenants, one industry towns... I think these people are imagining small, one pub, one shop towns with tumble weeds blowing down the main street. Do some research and you'll find many jobs available, many diverse industries and a high demand for rental properties in large regional cities. Cities such as Orange, Bathurst, Dubbo, Nowra and Wagga Wagga are large regional centers that emulate capital cities. They have all the businesses and services of a capital city, on a smaller scale. The regional cities that regionalpropertynsw.com identifies as meeting our criteria of having the potential for positive cash flow, affordability and capital growth have all got diverse economies and have seen consistent growth over more than 100 years.
Regional property could be your way into financial security. Many people, unable to buy close to where they currently live, are purchasing investment properties in the regional cities that we suggest and seeing much stronger rental yields than in any capital city, strong capital growth, and therefore can grow a portfolio quicker than they ever could investing in a capital city.
But don't take our word for it, research it for yourself. Successful investors are the ones who take time to educate themselves and who don't just follow the crowd. As the very successful investor Warren Buffett says, "be fearful when others are greedy. Be greedy when others are fearful". Don't just follow the investment crowd as they continue to restrict their investing, do your research and look beyond the capital cities.
There's been a big fuss this week over "middle aged men" (in their 60's) telling Millennials and Generation Y-ers to quit spending so much on coffee and brunch (smashed avocado with feta on toast), in order to save up for a house. The backlash has been Millennials and Gen Y-ers stating that housing is so far out of reach that it will never be a possibility, that even if they do refrain from buying the brunch or latte, it will simply never happen for them, so they might as well just spend...
To save a 20% deposit for a property in Sydney is anywhere around $200, 000...
To save a 20% deposit for a property in Orange, Dubbo, Bathurst, Nowra, Wagga... etc, is anywhere around $70,000...
For most occupations (teachers, nurses, police, retail workers just to name a few) the income is the same where ever you work in NSW.
There are, despite the excuses many use, many jobs available in regional NSW.
Same income, different living expenses, and some would say better quality of life.
The future of the property market will be based on many factors, but affordability will be a huge one. People, renters and home buyers alike, are looking for an affordable lifestyle that regional NSW presents. Investing in regional property could be your way to ride this wave and create a better life.
Contact us or check out our facebook page for more information.
Heard people say they can't afford a property? To live in, to invest? Have you said this yourself?
Most of us determine our financial habits from our parents. Are your parents financially stable? Are they where you'd like to be? It's likely that to get ahead, many of us will need to completely rethink our financial habits and attitudes. I'm pretty sure there's been times when my parents wanted to stage an intervention regarding us having different attitudes towards money, but if like me you're ready to rethink the way you think about money and move closer to financial independence, keep reading.
I have people who live in my properties that, on observation, have nicer furniture than me, nicer cars than me, eat out more and go on nicer holidays. I once inspected a property and commented on the huge TV to be told it was a new purchase. In the same breath, they asked if they could pay rent late, as they were short this week. This didn't seem like a problem to them, but it reinforced to me that most people do not know the practice of 'delayed gratification', the idea of making sacrifices to save for a better future. In my own home I have a mixture of second hand and home made furniture, I would rather sit on a second hand lounge, eat at my home made table and save for my next property, knowing that one day, these properties will pay for all those things others are buying with their time and credit, plus more.
Part of this mindset also includes a willingness to work. I've crawled under houses, insulated tight ceilings in 30 degree heat, and cleaned up dead mice, but as I'm doing it, I tell myself that I'm providing a nice home for a family and establishing a better future. I have struggled through month long renovations, doing jobs most people would snub their noses at, to make more in that month than most make in a whole year of employment.
There are people who love to show on facebook and in real life how 'wealthy they are' (keep up with those Joneses!). I've made a decision to make a better future for myself and my family, which requires some sacrifices now. I'm not living in poverty, and I still enjoy life with my family, but have a mindset for the future. I think the first step to investing is getting your mindset in order. After that, investing in the future will become the norm.
Investing in property in regional NSW can be cash flow positive, meaning that you can invest without losing money each week. Despite this, depending on your situation you'll still need to save money to begin and most of all, develop a mindset that doesn't care about impressing people today and is prioritising the future.
For more information on investing in regional NSW, see our facebook page.
We are property investors who have, over significant time, seen regional markets out perform the capital cities in terms of cash flow and growth. We are writing to inform others of the potential that lies in regional property, particularly over the next 10 years.
All information is the intellectual property of the author, of regionalpropertynsw.com.