5 Cash flow positive areas for positive geared properties

When researching an area to gauge its cash flow potential, look closely at indicators that will drive rental prices upwards.

One is the tenant vacancy rate. If this is below 1% it is ideal, while anywhere below 3% is good. The lower the vacancy rate, the more displaced tenants there will be to fight over your property. Suburbs with a shortage of properties both for sale and for lease will ensure you get value growth and increasing rental return.  Another indicator is if properties are close to capital cities or major regional hubs, which have a range of economic drivers; not just a big project or two that might cease production at any time.

Cash flow positive areas: 

Bankstown, NSW

Median unit price: $316,000) (Rental yield: 6.26%) (Vacancy rate: 0.55%)

Selling points: Bankstown continues to grow in value as Sydney’s inner-west spreads outwards. While houses have pushed upwards to a median of $535,000, units are offering opportunities for investors at $316,000, with healthy yields of over 6% providing an added incentive. The suburb has its own airport, as well as access to numerous schools and campuses of both TAFE and Sydney University. With Sydney’s property supply issue, the west will continue to become denser in future, making Bankstown appear closer to the city and driving its prices and demand.

Convenience and lifestyle: Bankstown is located 17km from the CBD, but is brought closer by access to numerous train stations and main arteries. It is abundant in parks, sporting facilities and features the Centro shopping complex and Hoyts Cinemas in its considerable town centre. The suburb is well-suited to family life, with numerous schools, churches, cafes, restaurants and other local businesses bringing the community together. However, it still has some improving to do.

The numbers:

  • Bankstown units are getting snapped up after an impressive average of just 53 days on the market
  • Units make up just 0.72% of all properties on the market and the excellent vacancy rate of 0.55% suggests rental returns will continue to experience upwards pressure

Typical deals: Two-bedroom units and three-bedroom townhouses and houses are the dominant listings. The unit listings aim to attract first home buyers and investors, while houses target families and upgraders.

Nightcliff, NT

(Median unit price: $348,000) (Rental yield: 7.46%) (Vacancy rate: 0.43%)

Selling points: One of Darwin’s original seaside suburbs, Nightcliff is well placed to make the most of the Northern Territory capital’s resource-backed property boom. Located 9km north of the CBD, it is situated between a number of geographical drivers, such as the RAAF base, Darwin International Airport and Royal Darwin Hospital. Houses have risen in median price to rest just shy of $700,000 in recent years, despite a slow 2012, and are offering yields of 5%. Units are presenting investors with the best value, with a median of $348,000 and yields at 7.46%.

Convenience and lifestyle: Nightcliff is one of the more sought after coastal suburbs to Darwin’s south. It is a family-friendly locality, with an abundance of sporting and recreational amenities, plus the foreshore precinct within walking distance. The local Nightcliff Shopping Centre provides food and retail facilities, while the area plays host to the popular Nightcliff markets every Saturday morning. A range of schools exist in the area for children of all ages, while the Darwin Water Gardens and nearby Casuarina Square make for attractive day trips. Nightcliff is well-serviced by regular buses.

The numbers:

  • Units have been selling at a 100% auction clearance rate, indicating that now is the time to snap up some deals
  • Units make up 0.7% of all properties on the market and, with a stunning vacancy rate of 0.43%, rental returns promise to remain strong

Typical deals: An even spread of units and houses are usually listed in Nightcliff. Two-bedroom properties are the most represented for units, while houses tend to range from three, right up to six bedrooms. Older, established properties are available for well under the median, and present the opportunity to renovate and add value.

Andergrove, Qld

(Median house price: $390,000) (Rental yield: 6.73%) (Vacancy rate: 1%)

Selling points: Andergrove is a suburb of the booming Mackay region in Central Queensland. Like many resource-backed postcodes, its rental demand is on the rise and this paves the way for high returns. Houses are providing good opportunities for investors, with a low median of $390,000 being disproportionately affordable, when compared to units ($307,000). Unlike riskier mining areas, the region is strong in its own rights, producing more than a third of Australia’s cane sugar and being situated in a holiday hotspot, just south of the Whitsundays.

Convenience and lifestyle: Andergrove is part of a large regional hub, halfway up the vast Queensland coast. Traditionally it has been a place for sugarcane farmers and their families, but is now catering for Fly In Fly Out resource workers and some professionals in that field. A large number of reserves, sporting facilities and forests make it suitable for outdoors types, while a wide selection of cafes, restaurants and entertainment venues are available in next door Mackay.

The numbers:

  • A 71.4% auction clearance rate shows properties in the area are well sought after, by those looking to tap into a healthy 29% of renters in the area
  • A vacancy rate of 1% is a good result and should provide steady support to the yields of 6.73% currently up for grabs

Typical deals: Newer three, four and five bedroom houses are selling for upwards of $500,000, while established properties are available for well less than $400,000. Houses with tenants in place are commanding yields of 8-9% in some more affordable properties.

Ottoway, SA

(Median house price: $316,000) (Rental yield: 6.41%) (Vacancy rate: 0.64%)

Selling points: Considering its location, next door to Port Adelaide, Ottoway is offering exceptional value for investors looking to take advantage of a flat current Adelaide market. Just 10km to the north of the Adelaide CBD, Ottoway has water close to the north and west and is well-connected to the city, coast and hills by main arterial roads. A median house price of $316,000 is more than $100,000 cheaper than Port Adelaide, but rents don’t reflect the same divide. For investors, Ottoway is essentially a numbers play, as the suburb itself is quite small and close to more expensive neighbours.

Convenience and lifestyle: Restaurants, supermarkets and basic shopping opportunities are all within walking distance along the main drag, Grand Junction Rd, while further options can be found in Rosewater and Port Adelaide. Educational facilities are extremely accessible, with 10 schools found within a 4km radius; while a number of open space parks and reserves give Ottoway a leafy, family feel. The suburb is well-serviced by buses, while trains to the CBD and elsewhere can be found five minutes away at Alberton.

The numbers:

  • Stock on market represents an attractive 1.24% of all properties in the suburb. Vendor discounting of 8% has taken place recently, indicating potential for deals to maximise yield
  •  An excellent vacancy rate of 0.64% suggests rents will grow further in the near future

Typical deals: The unit market is virtually non-existent, with a spattering of apartments along Grand Junction Rd. Houses characterize the suburb and there are plenty of three-bedrooms available for less than $300,000 and therefore well below median.

Highgate, WA

(Median unit price: $371,250) (Rental yield: 7.13%) (Vacancy rate: 0.44%)

Selling points: Affordable suburbs situated anywhere near the Perth CBD are showing great cash flow promise, due to the large number of head office mining company professionals renting in the area and willing to pay top dollar. Just 2km north of Perth, Highgate fits the bill perfectly, with a $371,250 unit median representing stellar value. Values have grown by around 10% over the past 12 months, but deals are still on the table for savvy investors. A fashionable suburb, known for trendy eateries and superior public transport, Highgate presents all the perks of inner-city suburbs, except with greater returns.

Convenience and lifestyle: Appealing especially to young professionals, Highgate offers a wealth of café and restaurant options, mostly situated on the famous Beaufort St strip. A number of supermarkets service the area and boutique retail shopping can be found nearby in Perth itself. Outdoor spaces are in high supply, with Hyde Park on one side and the Swan River and embankment on the other.  Central TAFE and the Mt Lawley Cafe Strip and Northbridge area are close by and add a liveability factor to Highgate says Derek Jones of EOS Property Group. “The suburb has undergone densification and almost 75% of the properties are multi-density. A high number of tenancies in the suburb indicate large numbers of investors active in the suburb,” he says.

Period homes and newer apartments lend plenty of character and village feel to the suburb, which is serviced comprehensively by buses and is also close to East Perth train station.

The numbers:

  • Units are very well sought after, reflected by a 100% auction clearance rate
  • A vacancy rate of 0.44% is a very good sign and renters make up 59% of the demographic

Typical deals: Two and three-bedroom apartments and townhouses make up the vast majority of affordable listings in the area. Luxury homes going for $1 million plus have a small presence on the market, as well as a few one-bedroom units offering potential yields of 8% and more.

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