Forum Replies Created
Hi Soum,
Are you building your PPOR or for investment?
The costs of building in Australia is greatly increasing due to the price of materials and labour. The rise and fall costs of materials are constantly moving upwards (1 to 1.5% every month for the last 24 months) and the shortage of skilled labour is forcing up costs as well. The price of iron ore is set to rise 70% which will have a huge effect on steel and other ferrous products.
The seasonal trends and shortages also have an effect on the building industry’s prices at a national, state and local level.
I am a builder and it blows me away at the increasing costs of materials, labour, insurances and equipment. I think eventually it will be a very wealthy and determined person who will be able to build for themselves. The level of skill in the industry is suffering and consequently the quality of workmanship is too.
The positive could be that the established house price may increase to reflect the replacement costs of that dwelling. As for deprecation on an old building-you can relocate a 100 year old weatherboard house to a new site, re-clad the roof and walls and claim deprecation as new. There are smarter punters out there than me who could really go to town on this one.
Good luck in your search.
JPD
Hi Michael,
That’s a great way of looking at it. I have that approach to most of the deals now. I guess a good philosophic view on the journey is helpful, but I’m still learning patience.
The amount of hours that goes into research and trying to make a deal work before finding some gold in it, can add up.
The property in question has just been flooded in a very wet start to Autumn. I knew we had some drainage to do, but wow its really wet.
The Vendor has been a bit greedy too, as he has removed gear off the property that was itemised to stay. We kicked up a stink with the agent who reported back to the vendor, the vendor wasn’t happy about being caught out, funny how some people react when they have been busted.
Any way I am quite prepared to walk from this deal if the Vendor doesn’t remedy the breach of contract. Cheers.
JPD
Hi Mintpattie,
Are you asking about Ravensthorpe or the RNO 80km east of Ravie? The construction phase of the RNO is in full swing and they are still thrashing out some of the Environmental issues with DEP. The town of Ravensthorpe is pumping with all the construction teams etc. Hopetoun is going ballistic with the state Gov pouring $$ into infrastructure, a mate and I built a cheapie 3 x 1 there 10 yrs ago. He paid $10K for the land and the house cost $15K (he has an a gift at finding bargains and 2nd hand materials), it was appraised at $245K, I think he was renting it out at $120pw for a few years. I spoke to a REA from Bishops Esperance the other day and like most of them have said, that the market has not felt any influence from RNO as yet. He went on to say that houses in the $200K to $250K late last year are now selling between $300K and $350K. Nothing much has happened to the lower end, so we will wait and see (as we have already placed our bets). Cheers.
JPD
Hi Michael,
Hows tings in Bundy? It’s a great place.
Its been 18 years since I was last in Bundaberg and was unintentionally looking at land then. Unfortunately for me I got roped into one of Don Greedy’s early developments at Agness Waters and had a fight to get out. Put me off investing for awhile. I was 22 and a bit naive to the ways of the Queensland Developer. Taught me to be careful though. The land out at 1770 has taken off from what my relatives say, and believe it would have been a good investment.
My priorities were very different then and just wanted to travel. Was visiting family and working on a tomato farm with the intention to travel to Europe when I was nabbed off the street in front of the real estate office and whisked out of town to view some land. After 8 hours of driving and looking at bush lots an ultimatum was given to me. Buy a block now or walk the 80km back to Bundaberg, so I caved in to the tactic (not wanting to walk) and started to look for a lawyer the next day. I laugh about it now but the thug of an agent was very intimidating at the time and had me sign the contract or else.
JPD
Hi Don and Liz ,
Thanks for your suggestions, the areas around are either market gardens or special residential. There is a commercial building on 6000m2 which only uses about 30% of its land, the rest is an over run paddock, not much but worth considering.
Hi Del,
Yes its interesting how we can make the figures stack up when we want to. Sometimes it’s better to seek independent advice when making financial decisions, but there is the dilemma.
• We have had our financial planner ask us for advise on property deals-we no longer pour our $$$ in to managed funs these days.
• Our friends and family are not into investing for their future-we don’t talk much about our investing as the green eyed monster appears.What you’re buying MORE properties!
• We have tagged along to the Red Shirt Millionaires club (not its real name). I think their investment philosophy and advise to investors is great and will buy a few club properties. But we realised its about one type of investing only targeted at a select income type.
• Our Accountant rolls her eyes around in her head when the said plan is spoken of. For good reason too.
I guess this is why I am here now thrashing it around the Forum. The property we are looking at is the cost of a median priced house in Perth and in actual fact we were about to buy through “the club†when my beloved spotted this block on sub-dividable land.Oh yes and her horses were evicted from the free agistment as the land is to be developed for housing.
I guess we’ve gone down the path of, the rent on a IP in Perth vs a 14ac lot that could service a similar size loan through agisting, with the potential of creating 17 x 2000m2 lots in 5 to 7 years.
To have the same benefits as an IP in Perth the horse thing has to be run as a business to qualify for the tax breaks. An IP in Perth would return $280 to $300 at best, the agistment could return ? at worst. From what we have observed when looking at other agistment places there is more than 1 horse to 5ac and yes the properties are dust bowls.
The intention is to develop further on down the track so we are not wanting to invest to much in infrastructure. There is a 400m2 shed which we will modify for storage of food and tack with a few stalls for overnight holding. The fencing, machinery and gear we have left over from our previous farm, so the set up costs will be minimal. I can imagine my building skills will be of a benefit as well
Thanks to all who have replied and look forward to more feed back.
JPD
Hi Marisa,
I should also add that there are only 3 REA’s offices in Esperance, with about 2 PM’s in each. We use Throp Reality and find that they are OK to average and like all PM’s in WA charge the going rate (over charge what they are worth). It appears that every time a small problem occurs they want the landlord to sort it out and don’t earn their $$ or respect from tenant or landlord. This seems to happen everywhere, not just Esperance.
Received an Email from the PM the other day asking me for direction on a tenant that has requested replacement fly screens and a barrier door. We bought this IP with the tenant attached. During all our inspections of perspective IP’s we photograph and carry out a detailed inspection report, which need to meet set standards before putting in an offer. This has proven invaluable for further reference, as the photos and report show that the screens and barrier door on this particular property were in excellent condition four months ago. Have Emailed the pics and report to PM, one of the photos shows myself and the REA inspecting the windows and screens in September before we put in an offer.
We self manage 2 IP’s in the City where we live and have found that the PM’s are more work that the tenants. I guess they are surrounded by REA’s and their tactics rub off. It would be a wounder surprise to experience a PM that is actually professional in their approach to property management.
We have used PM’s for about 15yrs now and lost count of the individual PM’s that have managed for us. In that time we have not found one that has keep to their contract or shown any ethics and most times the breach of contract has occurred in the first six months.
I apologise for side tracking your thread.
JPD
Thanks Curtis for the tip. We are looking into a tier rate for various paddocks. Funny you should mention finding extra land! The land owners next door have an overrun paddock and we are going to approach them and see if we can keep our own horses there. We would feel a bit awkward using someone else’s land and be making $$ from it.
Hi Pinnypoo, my previous reply was meant to have been addressed to you but somehow Karinthomson name crept in there, sorry about that.
JPD
Hello Karinthomson thanks for your input.
I must say that the dust factor is a prevalent concern in this thread along with the manure, can say that I agree. The idea is agistment and play areas, the owners will need to hand feed on a daily basis, as my partner does at her current agistment. I guess the intention would be that the property is on a high quality bridal trail which would encourage the owners to exercise/ride regularly.
The intention is that the we would want responsible owners/carers and this would be reflected in the contract which the owner would sign. We want the owner/s to be aware that if their animal is unwell and is not attend to adequately then we will call in a vet at their cost, if they don’t pay then we sell the horse. If the animal looks maltreated on arrival we will decline agistment and notify the appropriate authority.
The current land use is zoned rural and having spoken to local gov they say fine.
There are adequate shelter belts dividing the property into several paddocks and we would encourage owners to rug their horses in winter.
The density is an issue and we need to consider this in the daily management. Our friend says the 8ac property is a sand patch with numerous horse flies in summer. The horses are stabled at night and exercised at day, the owners hand feed, pick up dung and attend to the needs of their animal or the managers charge labour, vet fees etc. The health of the animals is a reflection on their business and this I imagine would be paramount to encouraging healthy and well cared for animals.
JPD
The insurance you asked about Somja, its with CGU and includes $85k for building, $20k fencing, $35k bobile machinery, liability of $5mil, covers 3rd party if an animal escaps and causes injury or damage, but does not cover riding lessons. Premium $1300.41
JPD
Hello Sonja and thanks for your reply, it helps to discuss with others what alternatives are out there.
Our management plan includes the removal of manure from the small over night pens and harrowing of the major paddocks. Because of the previous land use there is an extensive irrigation system that we plan to use when paddocks are rotated. We do not plan to house horses in stables over an extended period of time but only for pre-events where the owners maybe competing in dressage etc.
We imagine that the numbers will wax and wane during the season and this will allow for some spelling of the paddocks.
Wash bays are in the plan as well as showers for the punters. I have the building bug and would like to construct a club house for the more social types, as I hear owners appreciate a good chat. We also plan to put up a map of the various trail rides, as the land in question fronts onto one of the most specky coast lines in the Great Southern.
Why don’t we go for it? Well its me that needs convincing as I just don’t understand the horse thing and need to get further feed back.
The area where we live has an equine industry worth $8mil and growing. The local development council has done a feasibility study into providing an equine centre for multi use, haven’t heard the report yet.
Thanks again Sonja much appreciated.
JPD
Thanks Ibuycashflow for your input, I imagine some agistment isn’t set up as a business but just happens. We would like to combine both interest and business. We have drafted up round yards and various pens for activities and holding.
Dazzling maybe you are confused because I didn’t mention the loan amount, but I imagine when I say all out goings it really means all out goings. Im sorry I don’t share your humour.
Waynel thanks for your concern about the land management issues I did not mention that as it can be in-depth. We have a management programme that we would set in place if we go ahead with settlement. My partner is an environmental officer for the Department of Environment and we are positive that what we put in place will be far better land use than what it is currently. Most agistment sites in WA are on sensitive sandy soils that break down with intensive use, hence it is common practice for owners to hand feed their animals. The soil structure on this property has a complex matrix that will absorb and fix nutrients efficiently.
I would appreciate any more cognisant feed back.
PS this is for real if anyone is woundwering.
JPD
Hi Marisa,
My partner and I have bought 3 IP’s in Esperance at the bottom end of the price range mid last year and can share our opinions/experiences.
The suburb we bought in is not all that flash but there is an effort by Department of Housing and Works to remove the old Asbestos houses and pretty up the streets.
We figure that to replace a 3 x 1 in Esperance would cost between $215K to $245K depending on the construction. The 3 little cheapies we bought were under $80k with a rent return of about $155pw average. The logic we have followed is that these houses are well below replacement costs and that when demand increases so will values. (I have posted a similar thread on the other forum and found the replies not very favourable in this line of logic, in fact Esperance was shouted down as an over priced hick town). This is our first time in buying multiple properties and have thought it through well enough to have a go.
The research we did over the course of 2004 revealed that the cheap suburb had doubled in the mid 1990’s due to a large amount of public and private works at that time. Since then it has been nominated as one of the worst performing suburbs in WA, may be time for another bump? (again this logic is under scrutiny). The vacancy rate for residential housing is currently 0.1% to 0.3% with rent increases every 6 to 12 months CPI indexed.
The Ravensthorpe Nickel Operation (RNO) is valued at $1.2billion and is still in the construction stage, and will be in full swing in early 2006. BHP has sent a flyer around to all REA’s seeking new houses for their key staff in Esperance, as the Gallop Gov and BHP have singed a letter of understanding that the RNO would NOT be a fly in, fly out so as to keep the $$$$$$$ local.
The residential market has enjoyed a price increase over the last few months as with most coastal towns. The local REA’s believe it is a stand alone increase and not related to the RNO. The talk in town suggests that prices are yet to be influenced by the RNO, and expects an increase late this year into early next year.
Hope this is some help in making a decision.
JPD
Interesting to see the lack of cohesion and fear in the residential market. Maybe in a century or two the banks and insurance companies will become large players in the residential market, like in Europe. No worries then about making a decision on rent increases!
JPD
Originally posted by JPD:I agree with Dazzling that the urban sprawl needs to slow and a more sustainable approch to development adopted. The outcome would benefet all.
JPD
JPD
I agree with Dazzling that the urban sprawl needs to slow and a more sustainable approch to development adopted. The outcome would beifet all.
JPD
No, but I wouldn’t raise the rent if the was a major and sustained down turn in the ecnomy.
JPD
Hi Shaztaz,
in our part of the world we are experiencing a shortage in rental properties with an even tighter market forecasted due to state and local economies doing so well. Even so we (my beloved and I) have written into our tenancy agreements that the rent will be reviewed every six months and adjusted to meet the current % rate of CPI (2.6%). We make sure that the tenant/s is/are fully aware of this before signing the 12 month lease. On average the rent increases every six months by $5 with no problems so far. I imagine as the rent increases so does the compounding effect of CPI of the years previous, so a review of current and future trends needs to be observed so no one feels ripped off.
I believe this is a more balanced way of approching business than the good old knee jerk reactions to external infuances. Chao for now JPDJPD
Looking after an IP yourself can be as time consuming as chaseing up a poor property manager from my experience. If you select the right property which requires little maintenance and is easy to rent out, then the hard work is done. However one bad tenant can do a lot of damage, that is why landlord protection insurance may eliminate some worry. I personaly beleve it is a state of mind as to how we approch investing for the long term (positive attiude or poor attitude).The rest just falls into place with good planning and hard work.[thumbsupanim]
JPD
