“Our research proves there are plenty of suburbs within Australia’s capital cities where high rent returns make it easier on landlords to patiently wait for equity gains,” said Propertyology’s Head of Research, Simon Pressley.
“In some locations, even with a low 10 per cent deposit, the typical property is putting money back into the owner’s pocket each year.”
Propertyology analysed data across every suburb in all eight capitals and unearthed the top five in each city based on the annual cash flow position for a typical property.
The table below lists all 40 suburbs in order of best cash flow.
Calculations are based on median rents, interest expenses depending on whether an investor purchased with a 10 per cent or 20 per cent deposit, and a provision for other standard holding costs such as maintenance, council rates, insurance and property management fees.
The analysis focussed on detached housing, although it’s fair to assume that cash flows on a typical apartment in the same locations would be better again. All calculations are before tax and depreciation deductions.
Results show many of these addresses are well within reach of the average investor – with rents covering most, if not all, of the property’s holding costs.
“Even in suburbs where you do need to contribute, the maximum an investor will be out-of-pocket is around $100 per week, or the cost of a decent date night.”
Looking nationwide, Darwin and Hobart have far more opportunities for investors to purchase properties where cash flow is king, Mr Pressley said.
“Australia’s best capital city cash flow suburb is in Karama in Darwin, which is just 10 kilometres from the GPO and has a median house price of only $392,000.”
“This investment will generate a positive cash flow of $3600 per year if purchased with a 20 per cent deposit or $1700 per year using 10 per cent.”
Mr Pressley said it’s an excellent example of how cash flow buys an investor time.
“While Darwin’s market has been an underperformer over the past three years, investors won’t be as concerned if they own a property that’s actually supplementing their income.”
Hobart’s property market continues to produce the strongest capital growth in the nation and there’s plenty of cash flow positive options for under $250,000 in suburbs like Risdon Vale and Chigwell, according to the research.
“Price growth cycles are still ahead for Brisbane, Adelaide and Perth, so high cash flow options are likely to pay off sooner in terms of value gains,” Mr Pressley said.
“Fifteen kilometres south of Brisbane’s CBD, a typical house in the suburb of Coopers Plains can be purchased for just $400,000 and will be cash flow positive by $3600 per year.”
“Cedar Vale, Russel Island, Blackstone and Gailes round out Brisbane’s Top five and are cash flow positive opportunities, too.”
On the flip side, a typical house in a desirable suburb such as Coorparoo purchased with a 20 per cent cash deposit will set an investor back $15000 per year.
Mr Pressley said in Perth WA, the best cash flow properties are located between 25 and 35 kilometres out of town.
“Typical housing in suburbs like Brookdale, Hillman, Dayton, Armadale and Medina are all under $300,000, making them very price accessible while waiting for the next market upswing.”
And the rest
Propertyology’s analysis of the data shows in Sydney, Melbourne, and Canberra, there are currently no suburbs where an investor can buy a detached house and expect it to be cash flow positive with a deposit of 20 per cent or less.
“Even though it’s 80 kilometres from Sydney’s GPO, the Central Coast (Wyong and Gosford) are technically part of Greater-Sydney, while Medlow Bath in the Blue Mountains has a median house price of $500,000.”
Mr Pressley said investors who favour Sydney just need to get out-or-town a little to find houses with strong cash flow.
“For example, a house in Lake Munmorah on the Central Coast will cost $3093 per year to hold.”
“Compare that to somewhere like Blacktown, 38 kilometres west of Sydney. That suburb has a median house price of $740,000 and a property there will cost $11,775 per year to maintain, even if you have a 20 per cent deposit.”
“The figures are even worse for Hornsby, where a median house price of $1.33 million will leave you $26,152 a year worse off.”
Mr Pressley said these investments look particularly tough when you factor in that Sydney’s growth phase ended a year ago and Sydney’s next cycle could be several years away.
“Victoria paints a similar picture with Greater-Melbourne’s best locations for cash flow investors within the municipality of Melton – 40 kilometres north-west of the CBD.”
“Here, the median house price is around $400,000 and will cost those with a 20 per cent deposit just $4000 per year to hold.”
“In the Yarra Ranges, the entry price for a typical property is slightly more affordable and the annual impact on the household budget could be less than $2000,” Mr Presley said.
“Compare those figures to somewhere like Doncaster, 17 kilometres from the CBD, where a typical house will cost $34,702 a year to hold under the same parameters.
“Similarly, Brunswick housing sees its investors contributing $23,805 per year to maintaining the holding – a tough ask if you’re trying to be patient.”
Mr Pressley said investors must remember that cash flow is just one element in choosing an investment option.
“Fundamentals such as proximity to employment nodes, local demographics, and the various factors which affect housing supply are important considerations as well.”
“Suburbs offering both high cash flow and capital growth potential are not common, but they can be found in every state.”
Propertyology’s buyers’ agents are currently investing in five such locations across three different states helping investors take advantage of growth while keeping financial stress to a minimum.
Propertyology is a multi-award-winning buyers agency and national property market research firm, helping everyday people to invest in strategically-chosen locations all over Australia. The multi-award-winning firm’s success includes being a finalist in the 2017 Telstra Business Awards and 2018 winner of Buyers Agency of the Year in REIQ Awards For Excellence.