We have our finance in place and have been pounding the streets in the suburb that we are looking to buy in. Prices seem to be rocketing and a lot of people are just trying their luck with high prices for pretty poor houses.
What I am finding is that in our price range and preferred property type, (3 bed house, 600-700m2 block for around $300-$340k), would give a gross yield of around 5%.
We are looking at a buy & hold strategy, hoping to acquire enough properties over time, and eventually pay down the debt, so as to be able to live off the rental income.
The problem is, house prices seem to be forging ahead far quicker than the rental increases, so yield would only seem to get worse over time. Looking at how long it would take us to be able to get another IP after this one, it would seem that yields would be even lower then, and so on and so on, thereby making each subsequent property purchase more and more difficult to achieve and more costly in terms of holding due to lower yields.
For those of you that have been investing in property for along time, are gross yields cyclical? I mean, eventually is there some kind of correction and prices stagnate whilst rents increase and bring about better yields again - or have gross yields generally been in decline for along time?
What I am wondering is, with a relatively conservative approach to accumulating properties (as in only buying when we can put a 20% deposit down each time), will there still be the opportunities over the next 10 to 15 years to see as good a return as people have seen over the previous 10 to 15 years, or has property 'had it's day' as a golden goose?
We're still confident that we are doing the right thing by purchasing an IP and starting down this accumulation path, but at the same time trying to gauge how realistic our expectations should be with regard to potential income and the number of properties it would be possible to accumulate with declining yields and higher holding costs, if indeed that is the case.
Thanks.
What I am finding is that in our price range and preferred property type, (3 bed house, 600-700m2 block for around $300-$340k), would give a gross yield of around 5%.
We are looking at a buy & hold strategy, hoping to acquire enough properties over time, and eventually pay down the debt, so as to be able to live off the rental income.
The problem is, house prices seem to be forging ahead far quicker than the rental increases, so yield would only seem to get worse over time. Looking at how long it would take us to be able to get another IP after this one, it would seem that yields would be even lower then, and so on and so on, thereby making each subsequent property purchase more and more difficult to achieve and more costly in terms of holding due to lower yields.
For those of you that have been investing in property for along time, are gross yields cyclical? I mean, eventually is there some kind of correction and prices stagnate whilst rents increase and bring about better yields again - or have gross yields generally been in decline for along time?
What I am wondering is, with a relatively conservative approach to accumulating properties (as in only buying when we can put a 20% deposit down each time), will there still be the opportunities over the next 10 to 15 years to see as good a return as people have seen over the previous 10 to 15 years, or has property 'had it's day' as a golden goose?
We're still confident that we are doing the right thing by purchasing an IP and starting down this accumulation path, but at the same time trying to gauge how realistic our expectations should be with regard to potential income and the number of properties it would be possible to accumulate with declining yields and higher holding costs, if indeed that is the case.
Thanks.