Forum Replies Created
- streamlineinvesting wrote:I remember recently I made up a spreadsheet on purchasing a mining property as an investment, and comparing to a more traditional investment property.
Obviously the big difference is that mining property has an extremely high rental yield, but loses significant value once the mine closees. Whereas a traditional investment has lower yields but as long as you buy in the right area, well there is the capital gains that you can look forward to.
I guess if you are after instant cash flow, then a mining property would be ideal for your investment portfolio, but looking in the long term, it seems that you are almost always better off with a property that will achieve capital gains in the future. I guess you may be lucky to purchase a mining property, collect some great cash flow for a couple years, and then on sell the property while the mine is still open, hopefully at the same price you initially paid for it, or maybe slightly higher. Then it would definitely be an attractive option, however long term it almost never seems to work out.
Sorry I guess this post is a bit off track with the initial topic, just thought it might be interesting to note.
Fair call here from streamline investing
You definitely have to be more active with your IP’s there and pick your times based on what the market conditions are. Same rings true for the comment about coal prices and downturns in the area although I would argue that if you wisely use your cash flow to pay down the property over time then the exposure is drastically reduced compared keeping any debt you have at fixed interest and wasting the income away. I am also all for a balanced portfolio ( use a combination of cashflow and growth/equity creating properties ) and wouldn’t suggest that your whole portfolio was geared around resource related properties.
Comments from AJ were also very informative and I agree that there is high demand and money to be made but there are also risks that are specific to the mining areas and that accommodation in the area is a big business for investors and for the miners/contractors
Rob
I have a few properties in Dysart and compared to your regular IP it is a no brainer. Current have a $450k purchased property earning $2k per week and with the recent news it might go down to $1200 per week on next renewal – which will still yield a %13.8 return ( oh me oh my what should we do!)
More important than the mine closure due to union and political reasons the mining companies have put a freeze on new rentals which is having a short term effect on all of the towns in the Bowen basin and is unrelated to the mine closure. This is the primary reason rentals like mine will drop from $2k to $1.2k. This will be short lived and is just a rent cooling stunt the mining companies are performing.In fact it irks me a little when investors and media in particular with their measly %4.5 returns and neg growth wave their arms in the air and exclaim their “I told you so’s” with regard to resource based investments.
To make this crystal clear – a severe downturn in the resource market represents a %13.8 return. Need I say any more than this?
All towns driven by mining have their ups and downs due to the volatility of the labour market, unions and general supply and demand however the long term outlook for Dysart and similar towns is very strong. The Norwich mine by the way isn’t fully closed and has direct, non union/contractor staff working it at the moment. The so called closure resulted in a whopping 49 people without work and BMA have even admitted that they will reopen in 2013. For people who don’t know the area there is also a scheduled expansion of the Saraji mine which will require 2500 people to construct and another 1400 people to work it on going for the next few decades. This coupled with Norwich reopened will place a huge demand on housing.
Back in 2008 BMA there was a similar scenario with rents and temporary mine closures. Anyone who purchased in this time got a great deal. Be greedy while everyone is fearful is what ( someone very reputable said) The long term upside is too good to ignore
feedback on this is most welcome and anyone who is after any further information on the area please let me know. We have been working property in the Bowen Basin for the best part of 8 years now and having seen our fair share of property cycles are more than happy to share the experiences.
Rob
House Hunters Australia
http://www.househunters.com.auIf you take the time. And I suggest you do. To read all of the post here you will learn some amazing things
Here is my contribution
1.start investing no matter what you skill and experience an no matter how small the value as it will lead to larger things. Nothing ventured nothing gained
2. Proper planning prevents poor performance ( the three p’s) works for everything
3. Everything is a learning experience even if you lose money There are companies out there that will not hire a person unless they have experienced a severe financial loss due to the the character building and financial experience it gives them.
4 do not let non investors discourage our ostracize you
5. Follow your dream or passion your gut feel will give you directionAll the best
Rob
Hi
Jamie m is on the money. Investment ion property is not to be done ‘just because u you can”
You gotto have a plan to make money from the ip based on a strategy of either cash plus, add value or subdivision otherwise you will be like a mouse on a property treadmill ( should TM that btw)
Hi all
Very informative posts and I understand the nervousness regarding the first ip and which strategy etc etc
The short of it is these common ways to make money in real-estate although there are a lot more.
…A. Positive Cashflow that drives capital growth potential
B. buying a problem property under market , solving the problem, and reselling for profit
Subdivision and development
D. Options and improving the property prior to the option endingA in au is about finding the right resource driven areas to play in on a 2-5 year basis
B is all about local research
C as above but also takes some accounting smarts to make it work
D more for the sophisticated investor and lucrative if done correctlyApologies to all the lengthy best seller book writers who take 200 pages to describe the above.
My recommendations is find a cash plus property in a progressive area to start of your portfolio. We have (unashamedly)
Some of these coming up in the next 4 to 6 weeks. This will provide some positive Cashflow to explore other areas of investment without killing your day to day income.FYI
I am the director of a company called house hunters Australia. Although I have been involved in ip stuff for many years I started with hha 3 years ago. Working with the staff of hha i have personally In the space of 3 years progressed to now own 8 properties in our business portfolio , 5 in my personal portfolio and have another 6 in the near future for settlement. The whole portfolio is cash positive ( 100k plus )
OK
Sorry for the late reply. How would this person contact you?
HI there Micheal
I may have a mortgage broker for you. He does a little more than just that – basically the full gammot of finance from retail mortgage to business finance. He is able to deal with just about any structure you can throw at him and has done both business and finance for 6 IP’s for me in the last few months
Is this the type of person you are looking for?
good one! – should have thought of that myself….
thanks
Rob
Have done but so far they just scratch their heads… I have them insured already but 1200 bucks a shot for 100k of insurance is a bit hard to swallow. I’ll keep looking though..
Thanks anyway
Rob
Spud,
I have 6 kids – although with a pretty good job ( no baby bonus though just missed out on the good stuff ) Aside from that I don’t think it is very constructive anyone to carry on in such a way either. If you have a good opportunity, security for the investor and a reasonable return it would be more constructive to stick to the facts of what you have and ensure that it is a win win deal. If you are confident you have this then you will find an investor – regardless of how many kids you have or where your cash came from..
Thanks Richard – Hope to enjoying , learn something and maybe give a bit back!
Hi all,
With all this talk of first posts I thought it best to put mine down and get it out of the way ( no glow and no affiliations – no questions either for now )
Rob
