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Hi Emma,
Sounds like you have all the analysis about Ballarat covered.
I think Ballarat has a lot of potential given it is only a little over 100km’s from Melbourne with great infrastructure.
The areas you mentioned are on the money. Keep it low maintenance, period and central and you will be rewarded.
Just had a quick look at stock and something like this could work quite (yes a little more than you expected to pay, however it will rent easily and is really well located);
http://www.realestate.com.au/property-house-vic-ballarat-120207309
Keen to hear here how you go with your search. Remember to take action and good luck!
Thanks for the response.
Do you have some advice, in terms of common mistakes your clients make during the development process?
The contract is to ultimately build. The land is already purchased whereby I am receiving rent from the existing property.
Shame Steve McKnight hasn’t responded to your comment ‘the crest’…
Would be interesting to obtain Steve’s view on Ballarat
Interested to hear how you went with Ballarat ‘Joy_Full’?
Noticed in the state budget which was quite a tight one that Ballarat was one of the winners – receiving $120M for investments in hospitals, roads etc.
Interestingly in the same week council approved the re-zoning of land to allow for the UB Tech expansion ($155M) which will create around 1600 jobs: http://www.thecourier.com.au/news/local/news/general/ub-tech-park-expansion-could-create-up-to-1600-jobs-claim/2544362.aspx
Looks like large scale developments are starting to take place in Ballarat incl the $5bn regional rail link. I’d put my money in Ballarat as a future prospect given its low entry price and growth. Geelong is over priced relatively speaking as a Regional.
Thanks Mattnz.
In terms of additional costs, what are the things I should be weary of to manage risk? Are there standard terms that you normally use?
Hi Richard,
Thanks for getting back to me.
Why can’t the land be strata titled before the completion of the project? Vic regulation?
@ Shape
Whilst some of your points are valid, namely how NG may affects banks. The banks have ultimately taken this risk on as they have an appetite for such risk (whether the basis for this justifiable is another debate) . As the banks have transparency over the cashflow position of investors or any borrower for that matter, they can choose to say no, we’re not lending to you because you’re negatively geared .
NG is not the problem, it’s the banks lending criteria that needs to be scrutinised as they should not be lending to certain individuals, which relates back to point one of your post “higher chance of default”. NG when managed appropriately can work well (although I personally prefer positive cashflow), however it becomes a material concern when individuals are given funding from banks which is disproportionate to their cash in flows.
In essence what I’m saying is that the banks have the capacity to control how much NG business they want in their books through more robust policies, however they also have to meet the demanding needs of shareholders and the board, so there is a constant pressure to achieve YoY growth.
I know Leumeah quite well and would never invest there.
Whilst the numbers from a yield perspective may look half decent, CG will be extremely modest.
From a risk vs return perspective it simply does not stack up. You’re dealing with a low end demographic which exposes you to higher risks and the CG’s don’t compensate for that. I don’t have a problem in investing in lower end markets, however I would want to ensure that I an going to be compensated for engaging in such risks.
Also there is little scarcity value in land out there which are the underpinings of a dud investment for years to come (from a opportunity cost perspective).
Also in regards to the RP data and residex Stat’s, be very careful in using them as the reporting methodologies vary greatly which often gives you anomalies, eg I was looking at some data in Carlton and Hawthorn relating to apartments. RPD data indicated that the median unit price was around $200K, however this is so far from the truth. Reason being: there have been a glut of 1 bdr and studio student accommodation developments in these areas which has materially deflated the median unit price, however if you were to purchase a regular 1 bedroom unit in Hawthorn you would be looking at $380 – $450K
There is no substitute to doing your own research based on actual sales and overlaying that with other factors and one of them would be data that you receive from companies like RP D and residex.
Just make sure you test the data as the data quality in my view is low and does not always reflect the true picture.
Great advice Kent. Very well considered.
Just came across this article which I thought I would share with everyone which outlines funding coming into Ballarat as a result of the state governments recent budget announcement:
http://www.thecourier.com.au/news/local/news/general/baillieus-big-present/2155790.aspx
I would have to agree with Ladyhawk, Ballarat is certainly one to look out for.
Geelong is doing very well also.
Sorry not familiar with Creswick.
Thank you JacM:
Areas such as Soldiers Hill, Newington, Ballarat Central and Ballarat East (north of Victoria St) are where you will find Ballarats prime real estate which are close to the major facilities and you are more likely to get a better quality tenant in these areas. Drummond St North (Ballarat Central) is extremely sought after, particularly by medical professionals and middle class families as it is situated in the hospital precinct of Ballarat.
In regards to Wendouree, it certainly is not in the same league as the above mentioned areas, however pockets close to the lake will do well from a capital growth perspective as it will receive flow on effects from the Soldiers Hill area which a joins Wendouree. Yields are very healthy and vacancy rates are low (1%), achieving 6.5 – 7% yields are very doable.
Investing in Redan and Sebastopol did not fit my strategy, which was around remaining central to Ballarat whereby employment rates were solid. These 2 areas have the highest unemployment rate in Ballarat, subsequently you’re dealing with a socially disadvantaged demographic.
In spite of this, I acknowledge that both these areas have experienced CG, however it will never be at the same rate as the blue chip areas mentioned above due to scarcity of land.
Finally, because Ballarat is still very modestly priced, you can quite easily afford to purchase well located IPs whereby the numbers work. Therefore, investing in second tier areas like Sebas and Redan did not form part of my strategy.
I read above that Ballarat is next on your list – good luck with your purchases!
In regards to Ballarat, it has been on my raydar for the last 18 months and I’ve actually just purchased 3 IPs there.
I believe it ticks all the boxes in terms of yields and cap growth. It has good infrastructure – rail, hospitals, unis, quality schools etc. As mentioned above, the regional rail link which is in the pipeline at the moment will enhance the journey to Melb from B’rat by reducing travel times..
Areas like Soldiers Hill, Ballarat East, Newington,pockets of Wendouree and Ballarat central are where you want to invest. Stay away fro
From Radan, Sebas.The govt has promised $60 m on roads, $5Bn on rail and plus upgrades to sporting stadiums to allow for afl games at B’rat..budget night will confirm the true position on these promises..
Given Ballarat is the largest regional centre in Australia it has plenty of potential and is very undervalued.
My IP is in Victoria.
Not sure what the issue is if you have made the tenant aware of the requirement prior to commencing the lease. No issues if its mutually agreed.
I had the same issue. As mentioned above the payback period to implement the separation is too great.
As a result I made it part of the tenancy agreement that the tenant shall be liable for usage. Had no issues with this approach.
Rental yields are very poor in west melbourne at the moment, despite the substantial growth in the west.
Have a look at Regional Victoria, particularly in Regional Western Victoria as prices are starting to increase as a result of government investment and the substantial growth that is taking place in Melbournes West. Areas like Ballarat are already experiencing the flow on effect…
Look into Melbourne Regional centers like Ballarat. Low vacancy rates 1% and great yields of 6%+. The area us about to take off with lots of govt funding. Worth a look. Wendouree or Ballarat East would suite your budget.
Good luck
With Westfield and Highpoint .. these dominate the retailing landscape and create a CBD in its own right.
I’d question obtaining advice from someone that seems to think that a collection of retails stores ie Westfields constitutes a CBD?? Very interesting indeed.
The reason why these areas, particularly Maribyrong have done well is because of its location. I personally think the area is overpriced and filled with Macmassions that lack substance. Its very sterile, unlike other inner west suburbs like Seddon and Yarraville.
