PURCHASING INVESTMENT PROPERTIES IN MINING TOWNS??

Hi

I own property in both these towns and totally agree its all timing.
 
The returns in Newman are fantastic, the entry price is a lot higher. If you become serious on Newman there are a couple of streets you should not buy in, so either go there to understand or ask me more.

Blackwater, Morranbha, Dysart etc are all about timing as well, better entry price still a good returns, just do your homework and as part of a portfolio I don't mind some mining town properties

 Have fun

Barry

Hi

This subject is a real touchy one especially after the GFC and the effect on Real Estate prices and commodity prices in mining sectors.

We have invested heavily in mining towns. One thing we have learnt is that realistically you are not essentially buying property but options on shares that give a dividend return known as rent in what ever commodity supports that town. Buying right is the only way to go. Buying at the height in these towns (when prices have doubled or more and rent returns have dropped below 10% and you get the feeling you're missing out) is very, very dangerous.

Our experience is mainly in Kambalda south of Kalgoorlie in WA. Prices peaked there in November 2007. A brick 3 brm home that was rented for about $400p/w was selling for high $200's low $300's. Now the same houses are rentng for about $250p/w and selling in the mid $100's. Some units there that were selling for $200k rented at $400p/w are now selling for below $100k and renting upward of $175p/w illustrating that the return is again getting back to 10%.

Another lesson is get long term company style leases with options to adjust to market conditions.

Kambalda is one of our  wild cards in our portfolio. It's a market that relies almost entire on Nickel (which is a risky investment) especially over the last year or two. However at the beginning of 2009 the market there crashed…….but guess what the town didn't die. Half the town are die hard Kambalderites who are proud to live in the town so apart from the main stream investor panic selling because of mine closures the town carried on. 

We have made great money in this town over the last 5 years or so and do not see any reason why we should change our formula. We are just waiting and watching for the right purchases to come along so we can add them to our portfolio.

I am not endorsing Kambalda but I own property there

Mikey  

Hi Mel

Regarding Blackwater, I read last week that Anna Bligh has given the nod for 300 blocks of land to be released in blackwater within the next 12 months.

She has also done this for Moranbah in the Bowen Basin and Roma in the Surat.  This release of land is due to the impending demand on accomodation due to future mining projects.  She is trying to make accomodation more affordable in these towns.

I dont see this land release as a good thing – maybe for tenants but not landlords.  Just means more supply for the demand which could keep the rents down.

I have owned property in both moranbah and dysart which i purchased 2 and 3 years ago.  I have done VERY well out of both of these proerties both in terms of capital growth and rent returns.  I have since sold Dysart (panicked when the GFC hit) but kept Moranbah which is ticking away very nicley indeed.

I have just had a major Company sign a 2 year lease at $750 a week with 6 montly rent reviews.  The same Company were reluctant to sign anything more than a 6 month lease 12 months ago and refused to pay an increase in the rent which at the time was a modest $550.00 a week. Gotta be a good sign for the area when they did not hesitate to sign a 2 year lease.

Personally I would recommend Moranbah as a great place to invest as far as mining towns are concerned.  There are so many major projects on the drawing board there that the 300 blocks of land will make no difference to accomodation demand.

Check out the ABARE report for more information on these major projects.

I agree that the timing has to be right and getting a lease with a Major Company is a big bonus.

This of course is just my personal opinion and as with purchasing an investment property personal due diligence is required.

Happy investing

Fingerscrossed

Crystal Ball 1 year on & the demand for rentals are through the roof, 0% rent availability, workers hotseating beds at worst, families renting rooms from $200 – $300, companies renting houses to house their workers & paying up to $1200 a week  & mining companies subsidising their employees because rents are too high.

bouncecf wrote:

My partner and I are building in South Hedland WA  with a look to it being an IP in about 2 yrs. I'm not really sure about Newman – from reading the local papers seems to be a good market there too but I'm no expert. In my (limited) experience it seems like mining towns can prove very lucrative but you have to get in at the right time and know when to get out.
All the best

The WA Pilbara area is undergoing a major upswing in mining activity which is also being supported by state government initiatives to build Hedland and Karratha into bigger towns to such an extent they become eventually become cities of 50,000 people by 2035 (same for Karratha).

Late last year the WA Government completed a series of reports surrounding Port Hedland. These are available at  http://www.planning.wa.gov.au/publications/1136.asp At the same time the WA Government has also released a supplementary report titled 'Pilbara Cities' which is also worth reading.

Link to Pilbara Cities Report http://www.landcorp.com.au/News-and-Media/Annual-Report/Working-with-Government/Pilbara-Cities/

Add to these reports a company releases by BHP, Rio Tinto, FOrtescue Metals Group and so on and most people can appreciate the enormity of plans for the Pilbara. Only recently there was a newspaper article quoting BHP as saying they require 34,000 employees in the Pilbara next year alone. Note that is BHP's requirements – don't forget Rio also play up in thePilbara and FMG is joining the 'big boys'

House prices in Hedland have risen 18%/annum for the last 10yrs so entry level cost are enormous for the average punter.

Having said that we are looking at some developments returning 16% at the moment.