Case Study: regional investing

Case Study: regional investing

On today’s show, I talk to Glenn Ryan, a 41-year-old investor who is bucking the trend and finding investment in property in regional areas is anything but a disaster.

Read the transcript here:

Kevin:  Property commentators have been loudly criticizing investment in property in regional areas due to some horror stories that have come out in surrounding mining towns. Does this necessarily mean that all regional areas should be no-go zones? It’s certainly safer to invest in property in capital city areas where the economy is much more diverse and therefore property investment could be seen as being more stable.
In the April edition of Australian Property Investor magazine, you might be interested to read an article that was written about a 41-year-old investor by the name of Glenn Ryan, who is bucking the trend and finding investment property in regional areas is anything but a disaster. He joins me.
Good day, Glenn. Thank you for your time.
Glenn:  Good morning, Kevin.
Kevin:  Glenn, tell me, how do you safeguard against investing in an area that’s potentially so volatile?
Glenn:  Basically I’ve been investing for the last 10 years. I have 14 properties, the majority in regional New South Wales and one in Tasmania. My investing has really intensified post-GFC, when investing in regional New South Wales in particular has just been so affordable. In a way, I’m a little bit of an oddity or a curiosity, which is understandable.
What I’ve found in these towns that I’ve invested in is if you purchase entry-level or bread-and-butter properties, there seems to be a general pool of tenants who look for those properties, which reduces your volatility. You have a greater pool of tenants applying to these properties, but they’re not flash. It’s certainly not hard to rent them out. These towns typically have negligible vacancy rates, certainly less than 2% vacancy rates, so sort of safeguards my cash flow and investment.
Kevin:  When you’re looking at these regional towns, do you look for those that have a fairly diverse economy – in other words, not based just on one industry like mining?
Glenn:  I’ve found that with the properties that I purchase, typically Centrelink comes into play. I’ve found that probably three quarters of my tenants are relying on Centrelink. In a way that’s not reliant on volatility or industries, and in another way it’s a recession-proof business model. Of course, the capital growth kick will be with any industries near these towns do take off, and that’s what I hope for and that’s what I’ve researched.
Kevin:  Is it coupled up with affordability?
Glenn:  Yes, definitely. That’s why I’ve been able to afford with these properties. If you want to take out a 30-year loan, borrow out 110%, it’s very easy to get cross-mutual properties in regional New South Wales or Tasmania, where I have another one. Critics of that would say it’s going to take forever and a day to sell all these properties if you wanted to sell them.
Kevin:  In the article in Australian Property Investor magazine, you hinted the fact that there have been a few trials and tribulations. I think your words were something like, “A bit of a rough road.” What have you learned from those experiences?
Glenn:  What I’ve learned is because my strategy has been to purchase entry-level or bread-and-butter properties, what tends to be the issue is that they are basic houses. The challenge has been unexpected repairs on a lot properties. You just have to have that amount of cash and be ready for the next problem that will present with an older house.
Kevin:  What’s next for you, Glenn? What are you considering investing next, and why?
Glenn:  I’m certainly casting my eye over any town in the Gunnedah basin. About one week ago, there was a major announcement that Shenhua Watermark had just been given the green light from the New South Wales government to start a coal mine south of Gunnedah. Certainly anything in the Gunnedah coal basin – Gunnedah, Boggabri, Curlewis. I’m pretty well excited about anything around Gunnedah. It would have to be entry-level. I wouldn’t be going investing in a very expensive modern house with a pool or anything like that.
Kevin:  What is entry-level, Glenn?
Glenn:  Basically, three-bedroom. It would have to have air conditioning. Typically, it would have old carpets in it. It would have an old kitchen. The place would allow me to just do the basic renovations if I wanted to.
Kevin:  What price range, Glenn?
Glenn:  From the $60,000 to the $100,000 price range.
Kevin:  What sort of return would you expect to get from that?
Glenn:  For example, Moree. A lot of people are aware of MoreeIt’s quite a cash cow, but it’s not hard to buy a house in Moree for, say, $100,000, and rent it out for $200 a week.
Kevin:  Glenn, all the best with your investing. You make a lot of sense, and I appreciate you giving us your time. Thank you.
Glenn:  Thanks for your time, Kevin.

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