How would we define “set and forget” investing?

Investors’ briefs come in all different shapes and sizes. Our various considerations span from budget size, yield requirement, maintenance limits to future opportunities…. and all the while, our investors want Capital Growth. After all, that’s the main goal for most investors.

Getting it all seems a holy grail.

But when an investor is prepared to forego out-performance capital growth in an effort to find a “set and forget” property, we know where we have a good chance at finding the right property. Provided the neighbourhood is great, the house is sound and the floorplan/style is conducive to attracting the right tenant-family, our clients can also anticipate some capital growth; all be it moderated growth.

A true “Set and Forget” property is one which gives an investor minimal aggravation and minimal out-of-pocket expense, while it delivers healthy capital growth over the long term.

They aren’t as rare as some may think.

Last week we had the pleasure of sharing a road trip to Ballarat with a lovely client of ours. With a budget of $315,000 and a goal to find a 6% gross rental yield house on a full block, we knew that our day had a good chance of being fruitful because these metrics are not unusual for this 100,000 person city just 75 minutes’ drive from Melbourne.

Happily we targeted Mount Clear and Mount Helen; two suburbs to the south of the city, nestled in the gum trees and located within a close drive to some of the regions’s white collar employers including IBM, Damascus College, 000 Emergency Services, the ATO and Ballarat University. Ballarat is home to many professional contract workers and this particular patch is often in high demand for professional tenants and their families; particularly those who enjoy a rural feel within an easy drive of the township.

A lovely agent we’d contacted prior to our voyage had an off-market four bedroom home to introduce us to; and it’s attractive floor plan and great street-scape deemed it the day’s winner… hence the negotiations commenced with gusto.

Pictures sourced from REA

The layout of the home was the draw-card. Being familiar with the vacancy rates in the area, and in particular the seasonal demand for rental properties, we felt that our client’s timing was almost perfect. Arranging a settlement for very early December meant that her chances of attracting a great family for a new year start would be optimal. Appraised independently at $360pw, this four bedroom, two bathroom, double living area home made the 6% target for her and the cashflow calculation approximated a pre-tax out-of-pocket monthly shortfall of a tiny $44. After tax benefits and depreciation, our client stands to potentially hold a cashflow-positive property. 

Mount Helen’s twenty year average house price annualised growth is reported by Residex at an 5.77%. The last year’s growth for houses in this suburb was an impressive 9.41%. The average rent for houses is recorded at $380 per week and average housing rental yields are captured at 5.77%.

 

Many units in metro areas don’t offer these capital growth figures.

Our lovely client can look forward to a popular rental property in an attractive, leafy suburb ticking away, doing it’s thing and coming as close to “set and forget” as a property can.