Forum Replies Created
- shoooshoo wrote:yeah but that is still concerning:
http://www.couriermail.com.au/ipad/gas-plans-could-lift-meat-costs/story-fn6ck45n-1226096935838
Shooshoo,
I agree with KeyStrategies.
You need to understand how investment works. Successful investors do their research, work out what they want to invest in and why. Then they just do it.
People who ‘invest’ when all the media is saying how great things are, are not investors. They are the suckers who buy at the top of the boom. True investors ignore the media hype, and as a result almost always buy when the media is printing bad news (or printing nothing at all). The media know nothing about investment, they only know how to sell advertising.
Note: I’m not saying you should invest *because* there’s negative press.
You need to do your homework and then do what your brain says. Ignore media hype, it is not really that useful for serious investors.
Daedalus.
Hi all.
FIFO will only last while it’s cheaper for the mining companies than paying rents in mining towns.
FIFO may occur, and if it does then rents will fall. Then some time later, the mining companies will notice that it’s cheaper to pay for rent than flights, and they’ll stop FIFO.
If FIFO is being seriously considered, then we have an unsustainable situation with rental properties: the yields are simply above the tolerance of the market. Unsustainable situations are ….. unsustainable.
Rents go up and down in mining towns. If you believe that 14% yields will go forever you are mistaken. The market can’t afford it and will seek alternatives – even ones that seem ridiculous.
It would seem though that if rents were a little lower than they are now (but still well CF+), then FIFO would not be attractive to the mining companies. Perhaps we landlords are pushing things too hard and causing our own demise?
You can shear a sheep for life, but you can only skin it once.
Daedalus.
Talismans wrote:3. If my property has a big lawn, would it be hard to maintain? As in, is it possible to make sure the tenants will mow the lawn? And incur penality in the future if they don't maintain it, such as deducting money from the bond to replace the lawn?This is always the tenant’s responsibility and the PM should ensure it is done. I have never worried about this, and never had a problem with it – except between tenants when the PM had to get someone else to do it.
Daedalus.
kirstieh wrote:Hi All
We are thinking of investing in Dysart but are concerned about Fly-in and Fly-out and what impact this might have on the property.market there. Does anyone have any information about if FIFO is going to go ahead for all mines in the area or if it's only going to be for new mines.
Thanks for your help
KirstieAll of the press that I’ve read about FIFO in the area relates to Moranbah, where there is an airstrip. I don’t think there’s an airstrip at Dysart (I don’t recall seeing one). Dysart is 80km from Moranbah, so I don’t think FIFO threatens Dysart as it does Moranbah.
There a lot of mines that bus workers up from Mackay, and they stay in temp accomodation. This has been happening for a couple of years though, so is nothing new.
In my view, Dysart is a good spot because there are a number of mines nearby, but it’s not big enough to have an airport.
Daedalus.
Hi Anna,
It's hard to generalise about pets but my tenants have pets (outside dogs). A lot of places in Dysart are high set, so the dogs can be 'outside' but still under cover.
I haven't heard of snakes being a problem – I've never even considered it before…
Dysart is about 3 hours from the coast.
All the best,
Daedalus.
Hi,
Yes, the locals are expensive – but that's what happens in a micro-economy where everything (including rents) are higher than everywhere else.
It might be a bit cheaper than it was because Dysart has been quiet for a while. I'd get some quotes from Mackay installers for aircon, because the units will probably come from there anyway.
When I need to do major maintenance on my place in Dysart, I usually find it cheaper to fly up and do it myself.
Daedalus.
I agree with Hadi. An investment is an investment is an investment, and should be undertaken with a level head.
Ensure you know your reasons for investing in a certain area – that way when you are in a down cycle, you won't be as stressed about it.
To put some perspective on it, the 1000+pw rents were ABNORMAL – the product of a concentrated amount of mine extension and new mine work. The baseline weekly rental in this area is around 1/2 to 2/3 of that. This is what you should make your investment decisions on – not the 1000+ pw. BTW, weekly rental of 500-600pw is still CF+.
I have a property in Dysart that was getting 1200. It's just gone out of lease and is empty – and I won't be surprised if it remains empty for a little while yet. The boom rents cover the periods of no or lower rent. That's the nature of the beast.
However, there are murmurs of positive activity in the coking sector, with new mines/extensions being talked about around Middlemount and South Moranbah. The long term outlook for coking coal is positive, which is a positive thing for Dysart. Middlemount is pretty much a closed shop, and the accommodation overflow pushes back to Dysart.
I think the prospects for Dysart in the medium term are good, but we're not out of the woods yet. Don't assume boom rents, but when they come they are a nice bonus
Daedalus.
Hi Yorkie,
Somewhere earlier in this thread is a post about my adventures with Moranbah real estate agents – you'll have to look that up
.I use Mackay Rentals in Moranbah, and I'm pretty happy with them.
Daedaluls
Hi Yorkie,
I like the prospects for Moranbah right now. It's a large town and there's good industry support, even though there's been some negative press.
I agree that there seems like there's some good buying at the moment. It looks like there are some distressed sellers on the market.
Daedalus.
I've used the Ikea glue-together laminate, which has now been down 9 years and looks pretty much the same as the day it was laid.
There is one ding where I dropped a claw hammer on it. It runs into a kitchen and hasn't had any problems with water. It also gets a lot of direct sunlight and hasn't faded at all. An excellent product, but it is slow to install because of all the gluing. Took 4 days to lay 45sqm.
I've also used the Harvey Normal laminate at around $25-30/m. It's the click together one and installs quickly with very good joints (better than my glued Ikea ones
). I installed about 42sqm in about a day.It's only been down for a couple of years, but it's great so far. I'd use it again.
Daedalus
Hi,
I use R&H Mackaey for my Dysart property and Mackay Rentals for Moranbah. Happy with both. I know that R&H Mackay are in contact with BMA, so I'm not 100% about the claim that BMA only uses Vision. It does sound like the kind of story that Vision would spin though.
One of the principals of Vision used to work for R&H Mackay, and I don't think she lives in Dysart.
R&H have a local property manager in Dysart.
Daedalus.
My understanding is that BMA has set a rental limit of $1000 pw. Over that and the property has to be 'something special'. Also, they are allowing their employees to inspect the properties before deciding, rather than just renting them unseen.
This says to me that the demand is lower than it has been, but 1000pw still indicates significant demand.
Daedalus.
Hi ChrisV,
Welcome to the post. I think it's time for care – but then again – all investment is time for care.
HopefulInvestor provides some interesting information, but it's mostly just media quotes, so might not be anything new for you.
There is certainly herd mentality, both in the housing market and in the mining industry (and the media for that matter!). Having said that, labeling it as 'herd mentality' doesn't remove its effects. It's herd mentality that caused the boom in the first place.
So in this regard, I agree with HopefulInvestor that a turnaround might be some time off. But you need to ask yourself what kind of turnaround you're looking for. If you're looking for boom conditions to return, I don't think that's going to happen.
I'm expecting a slight reduction in values, and maybe a reduction in rents, then a period of stabilisation where both stay steady.
I have 2 properties in the area (Dysart, Moranbah). Both have just been through rent reviews. Dysart held at its current rent (which doubled 6 months ago) and Moranbah increased by 300pw. So I'm not seeing things retract yet. Talking with locals (which I rate as more valuable than reading newspapers), there is some caution, but most reflect the sentiments shared in BuilderBob's comments further up the post.
BTW the reason I selected these towns to invest in was because of the size of the local mines (and where the are in their production cycles), the range of mining companies in the area, the type of coal being extracted, and my perception of the world demand for that product over the next 30 years. Those fundamentals haven't changed – it's the expansion projects that have been mostly affected. So with the fundamentals sound, I'm still happy with my investments in the area.
You might want to think about what your investment fundamentals/strategies are, because they will guide you more effectively than the media.
All the best,
Daedalus
Hi Mannia,
With regard to expenses, management fees are around the 8% mark. If you get a property manager from a small town, you may need to keep a close eye on them. I've had less than satisfactory experiences – see previous posts.
Rates are about $1400/year. Incidental maintenance can be expensive, because often the local trades do work at the mines for top dollar – so they're hard to find to do work on your property, and they charge top $$$ to you too. Landlord insurance is about $400/yr.
When you're buying, just be careful to buy a freehold property. Some property in the area is leasehold. While this isn't a problem in itself, it might not be what you are expecting. Check before you get too involved with the transaction.
I haven't been in these towns long enough to experience a drop, so I can't answer Q2. Since the rent has doubled on one of my IP's in the last year, it wouldn't be unreasonable to expect it to halve again. You need to be conservative when working out your viability.
Daedalus.
Hi Manni,
Congratulations on what looks like some good research. I'm not sure I'm going to be able to add much though.
Collinsville is out of my research area, although I don't recall it appearing in any "Bowen Basin" Google news alerts, so I'm not aware of any press either. Looks like a sizeable town though. With projects in the area, accom will become scarce. You need to assess what will happen when the projects are over and the town returns to normal. Consider such things as how difficult it is for the town to expand, either by availabilty of land, or because it's just too expensive to get builders up there to create more housing. This situation helps ensure that when things return to normal, you can still let your property.
Interestingly, I spent this weekend touring the upper Surat and Bowen basins looking at the towns there. Unfortunately I seems to have gone right past Wandoan without noticing it! It is off the side of the highway though. I had a conversation with someone at Guluguba just south of there who was talking about mining activity 'across the road', so yes there is speculation in the area. There doesn't seem to be anything existing (mines), so I would personally view a property purchase in the area as a 'speculation' rather than an 'investment'. That's an important distinction for me. It (Wandoan) is also a very small town. It takes a looong time to sell a house in a small town when the boom has cooled off. Be sure you want to own in a small town.
My thinking about Blackwater hasn't changed from a few posts ago, although I've been monitoring again now for a few weeks but haven't seen anything noteworthy.
I'll be writing in the coming weeks about some towns that I did find interesting in that area though, so keep an eye on this thread,
Cheers
Daedalus
Maggi wrote:Thanks guysI agree with all of your comments. Unfortunately I have a few family members who like to put the negative articles under my nose which can have a tendency to undermine all the research and strategies. It is nice to hear a bit of positive back up.
Cheers
These are usually the same people who don't bother to do ANYTHING with their lives. Good on you for taking control of your own destiny! Ignore anyone who hasn't taken control of theirs – they have nothing to teach you.
Daedalus
Hi Maggi,
Maggi wrote:Hi Daedalus
…
It is hard as an investor in the area not to feel a little exposed when the mining companies start to lay off employees.I agree it's hard not to feel a little exposed with the news of layoffs, however my contacts in the area tell me it's not as bad as the news makes out. A lot of those workers will simply change jobs – see http://www.dailymercury.com.au/story/2008/12/17/coal-industry-jobs-still-there-despite-cutbacks/. The Bowen Basin has been in a boom, and booms don't go forever. As an investor you need to allow for that fact.
Maggi wrote:There has been some capital growth in the last 6 months and rents have definately risen however there has also been an increase in homes for sale as listed on realestate.com which could be investors deciding to cash out before the tide turns or residents taking advantage of the higher prices to sell older homes and build newer ones. I would like to buy a second property in the area due to the high yield however whilst most factors are pointing towards growth the thought of a sudden decline in growth and or yield in the near future due to the world economy has me sitting on the fence.My only comments on this are that property is a long term investment. You must be prepared for downturns as well as booms, and your reasons for investing in an area must be based on your views of the longer term opportunities. Sitting on the fence is OK, just don't do it forever. Perhaps while you are on the fence, you can work out some investment criteria for the coming months. e.g. if there is no significant positive news in the area by ?? date, then you will stop looking in that area. If there is no significant negative press by the same date, you will bite the bullet and make an investment, provided it meets your yield criterion. It's important to have a date that you will get off the fence by, one way or the other.
My advice is to make investment decisions that align to your strategy and to the fact at the time of the investment. You can't predict the future. Put a lot of effort into your strategy and investment criteria.
When downturns hit, you look back at your reasons at the time of purchase and work out if and how you would change your criteria next time. Then keep moving forward.
All the best,
Daedalus
Hi RedLeaves,
I think you'd need to find someone from Emerald or Rockhampton – there should be plenty to choose from as they are large towns. Wherever there is some competition, the inspectors are usually good enough. Ask if they provide photographs in their report.
I've recommended an inspector previously in this post, but he's based in Mackay and I doubt he'd go as far as Blackwater.
Cheers
Daedalus.
maurice Levine wrote:Hi Guys, I am new to your forum. There seems to be so many differing opinions on the advantages and risks associated with buying in the mining towns. I have two properties that I am currently considering: 1 is in Dysart – a 4 Bedroom going for $485,000 with a lease in place for $1,000 / week. 2nd is in Blackwater – a 3 Bedder going for $285,000 with a lease in place for $550 / week. I am interested in building a portfolio of positively geared properties and I am less concerned with capital growth. Obviously, I appreciate that mining towns are risky. I was curious to get a read on how risky. Even with a down turn in demand for steel, does the consensus in this forum really feel that mines will be shut down, be reduced, be closed off. Personally, I cannot see it. As I understand it, investments in the mines continue to be made by large resource companies. Do the mining companies have it wrong? Is it a big fat mistake to be too optimistic about the need for coal across the region?It's hard to imagine now, but this time last year there were a lot of empty houses in Blackwater, and many that sat on the market for months (see my early posts in this thread). It was before this latest round of investment started.
These things ARE cyclical. When the investment is on, a lot of labour comes in to the area and the need for accomodation increases. Prices rise When the work is done and the mines are in steady state, less accomodation is required. That's when you get me empty houses and falling prices.
You can do well because the yeilds are better than average IP's, but you need to know what you're in for….
Hope this helps,
Daedalus.
alani wrote:personally i would go for Blackwater. try negotiate a better price, small reno to increase your yield. This will imo reduce your risk. Also consider to buy a cheaper Blackwater property, this way your buying in the lower end of the market.At this point, so would I. Blackwater has only just started to pick up after a long stagnation. Dysart is going strong, but has been surging for a while. It makes sense that Blackwater has longer to run. Also, your capital outlay is less, so your risk is less.
Daedalus
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). I installed about 42sqm in about a day.
