Wezwaz,

I came across this post today in another subject forum about property investors getting together to discuss investments in Toowoomba, so it may be a good point of contact to get a clear picture about the state of the property market in that area.

Good luck

Martin

__________________________________________________________________________________________________

Robyn has been doing a great job of organising this meeting at Toowoomba. Why don't anyone of you interested in mixing with other like minded investors come on down. I've duplicated Robyns message here to spread the word. Tell anyone else that you think might be interested or bring them along with you. You don't have to be supper experienced you don't even have to know anything just come along and have a chat. And share all the benefits of mixing with a like minded gathering. – Jaffasoft

HI yáll

I read this article recently – see http://www.realestate.com.au/review/…ml?from=review

Seeking out like-minded people

If your friends and family just aren’t interested, why not seek out new people?

“We truly have a lot of success when we’re motivated and supported by people who think like we do,” Lomas says.

It’s a great way to stay motivated and to learn from other people’s experiences. And you’re likely to find plenty of people who are happy to celebrate your successes with you.

Would you like to get together on Sunday 27th May from 11.30 a.m. for Sunday lunch at the Irish Club, Russell St Toowoomba to meet with like-minded people to talk about property and other investments?

If you are interested, please send an email or telephone, so I can organise a booking at the Irish Club.

thanks

Robyn Davis
[email protected]
46130032

Hi Lilyhutch,

Is that $45,000 (see your last post above) or $4, 000 – $5,000 …… We have just bought a house on 800m2 corner block in Redbank Plains, which can be subdivided. Can you confirm the price please.

Thanks
Martin

thanks Tom, but I live on the far south coast of NSW ….. so notice boards no good for me, … that's why I asked for someone to recommend someone trustworthy and reliable as I'm not going to be able to oversee in person. I'll probably end up using the handyman that the rental management agency uses.

Martin

Hi Tom

Inala was on my hit list, but we just happened to find properties in Goodna and Redbank Plains recently (read above).  I think Inala is a older ex-housing commission type suburb, but it is definately and older suburb with older homes, but that wouldn't worry me.

A good article was written in API  magazine… It was the October 2005 issue (just looked in my files)….. worth buying the back issue and having a read. It talks in depth  about Inala, Darra and Goodna. 5-6 page report in the "The States – QLD" section at the back.

Martin

Hi Scott d,

You may be interested in this article posted on Terry Ryder site hotspotting.com.au about DHA investment properties. We were looking at DHA  homes as an investment, but after I researched, I commented to my wife that I felt you were paying premium purchase price, but below market rent returns and then I found this article which confirmed my suspicions.

We have 4 investment properties, none of which are DHA. We like the idea of being able to negotiate price, lower rental management fees, and freedom to control our investments.

Anyway ….. I hope you find the article helpful .

Martin

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DHA investments don't stack up

12 January 2007:

There seems a ready market for Defence Housing Australia products but I can’t think of a worse investment in the property market.

I believe defence housing investments fail most key criteria. They’re over-priced, provide low returns, have high management fees, the capital gains prospects are weak and there’s a narrow market if you need to sell.

Defence Housing Australia (DHA) is a branch of the Federal Government’s Defence Housing Authority, which builds homes for Australian Defence Force personnel.

The DHA sells the homes to investors on leaseback. This means they must be rented to Defence Force tenants for a specified term – anywhere from three to 12 years. There are 17,000 of these houses, apartments and townhouses around Australia.

Marketers extol the long leases to government tenants and the property management service offered by DHA (some properties are re-painted and re-carpeted at the end of the lease). They’re considered a safe, hassle-free form of property investment.

But property investors want to make money out of the deal. Capital gain is a primary motivation which means investors need to buy at the right price and get a property that will grow in value. DHA properties fail that test on two counts: they’re invariably sold at above-market values and they’re usually in locations (close to military facilities) unlikely to deliver good growth.

I’ve been writing about DHA investments for years and every valuer I’ve spoken to tells the same story: DHA houses are priced well above what you would pay for an equivalent house in the same area. The DHA admits this is true but claims that the security of the long-term lease covenant warrants the higher price.

Adelaide buyers advocate Chris Waterman says DHA properties are sold at “very full prices”. He believes they compare poorly with other property in the market.

Paul Nugent, general manager of Wakelin Property Advisory in Melbourne, says: “If you’re getting a guaranteed return you’re paying for it in the purchase price. It concerns me that often DHA homes are artificially priced and don’t present good value.”

Brisbane buyers agent Scott McGeever of Property Searchers says he found DFA properties were priced above normal market levels when he worked previously as a valuer. “None of them ever stacked up on the asking price,” he says. “They were always 5% to 10% above market value.”

Capital gain prospects are another concern. Perth analyst Gavin Hegney of Hegney Property Group says DHA homes tend to be in low-growth areas and so a high portion of the value is in the improvements rather than the land. “I wouldn’t invest where most of these properties are located,” he says. “They’re just in the wrong areas.”

Nugent agrees: “The bulk of what people are paying for is the improvements on the land and the lease benefits, rather than the land value itself. With a good investment property, 60-70% of the purchase price is directly attributable to the land value – and I believe it’s the reverse with most DHA property because of the location.”

The lack of growth prospects compounds the problem of paying above-market prices in the initial purchase.

The high prices also translate into low returns. Most DHA houses have gross yields below 4%, some below 3%. Recent offerings in Sydney, Newcastle, Adelaide and Brisbane had yields from 3% to 3.5%.

DHA charges a management fee of 16.5% of the gross rental income. This compares with mainstream property managers who charge 7.5% or 8%. DHA says its fees are justified because they cover the cost of managing the property and most day-to-day maintenance.

Even the long-term government lease is perceived as a negative by some. Nugent says: “You’re losing one of the key benefits of owning property – having personal control over the asset. Another thing that’s good about property is that it’s negotiable but with DHA you have very much reduced capacity to negotiate.”

DHA conditions include restrictions on how the property can be marketed, to “protect the privacy of Defence tenants”. This means inspections by buyers need to be co-ordinated with the DHA.

The issue for investors is selling during the lease period. The property must be sold with the balance of the lease term and conditions intact. This limits the selling options for the owner by eliminating owner-occupiers (who comprise the bulk of the market).

Hegney says investors are only 25-30% of the buying market. “That security of tenure can be great for an investor but when it comes to selling it limits your market for buyers – so what you gain with one hand you more than lose with the other. It’s just too limiting.”

Hi

I contacted some buyers agents recently to buy properties in SE QLD as we live on the far south coast of NSW. I was astounded at the figures they were throwing around to find and negotiate a property purchase for us. Especially as I had done all the research work and had narrowed down the areas I wanted to invest in.

They were talking about an upfront fee and around $7500 on purchase and were telling me that as the area was hot that they could secure a deal for around the asking price as no room for negotiation as the properties were selling within hours of being listed.

They were right about properties selling within hours of being listed, but as we had done all the research work already, we decided to fly up to Brisbane for 3 days armed with contacts and a list of properties. We stayed with the brother in law. The trip cost us $1,000 all up inc flights and car hire ….. well worth the investment as we found two properties where we negotiated $10k off one and $21k off the other,

So not only did we save approx $15,000 buyers agent fee's but we negotiated $31,000 off the combined asking price.

We also have properties in Vic and SA, which we flew into to personally purchase, so we were happy to travel to do our own bidding again, …… It's just that we had difficulty finding the time to travel to QLD and getting time off work.

I personally think the price of a buyers agent is over the top, but I suppose I look to invest in the lower end of the market and I love the research aspect of this business.

anyway, .. not sure if this helps you

Martin

I hope it's not one of the two that I'm buying in QLD at the moment Dom 

Martin