I worked at HB hospital a few years ago, and am familiar with the demographics and economy.

Like any other town, an investor should take their due diligence seriously. If they haven’t, they really need to ask themselves on what grounds they made the decision to buy.

Here’s some reasons I have never considered buying investment property in HB.

– the place subsists on welfare. i.e. it sucks up more govt handouts then it pays in taxes.

– the area exports nothing apart from highly seasonal tourism.

– population growth is fueled primarily by retirees, who seek to buy. They tie their money up in a property, and are then cash poor.

– employment and wages are amongst the lowest in Australia. So non retirees who move there tend to be those who are incredibly naive or are so unskilled or unfortunate as not to be able to make it in a capital city.

– there is no shortage of land to develop, and the HB council is right up there with the most small minded provinciales. It considers itself a business, and knows its income is propped up by approving more development. However, like all myopic small town mentality, this council is too stupid and immoral, to recognise the problem of baiting large numbers of non retirees to an area with minimal commerce.

– I think as part of due diligence, one might like to think about the medical services offered in towns outside capitals. If a place like Hervey Bay cannot attract and retain specialists and surgeons, and ends up the creek like Bundy and HB hospitals, I think it is fair to say the towns are are poor investment choices, especially if you require rental return.

Bruce
Mooloolaba, Qld

Hi Captain,

Re Banyo, that’s a suburb I know very well. IMHO, today’s asking prices are equivalent or a little softer than November 2003. Which means values have fallen around 5% in real terms in less than 2 years. i.e. this house
http://www.realestate.com.au/cgi-bin/rsearch?a=o&s=qld&c=73700178&tm=1126225484&id=102535118&f=0&p=30&t=res&ty=&snf=rbs&ag=&cu=&fmt=&header=
was up for sale in 2003 for more than what the current vendor is asking. (I signed a contract on it in Nov 2003 but pulled out after post building inspection haggling.)

Re your 2 bedder purchase, I note you may be out of pocket 199k+9k(for in costs)+12k(reno) = $220K.

If you get rent of $220 a week
(http://www.realestate.com.au/cgi-bin/rsearch?a=s&cu=&s=qld&ss=&ag=&t=ren&snf=rbs&tb=banyo&u=BANYO&is=1&pm=&px=&pme=any&pxe=any&minbed=&cat=House&p=30&o=p)
for this 2 bedder, that’s a gross ROI of 5%. For you to make money on the house, you’ll have to find a buyer who is happy to take it for much less than 5% yield. IMHO, that won’t be easy, as 5% yields are very easy to find all over Brisbane. I actually don’t look at anything with less potential than 7%. But then you might find a wood duck out there.

Personally, I wouldn’t rely on UCVs to decide what’s a good deal. UCVs are contingent on the market, and can go backwards.

It is much more realistic to set value based on yields and market sentiment. Currently we are in a flat market, with no sign of that changing for some time. And shares and managed funds are easy to get >15% pa after tax returns when leveraged, and shares don’t have the high in and out costs.

NEvertheless, the one upside I see to your purchase is that you can get in and do your reno, then potentially get a bit of extra equity (if the valuer sees it), and the market doesn’t stay flat or soften, which is a real risk currently.

Good Luck

Bruce
Mooloolaba, Qld

Kay, It’s funny because the ABC pride themselves on being the most politically correct unbiased organization in Australia. This is despite there being no one on Radio National whose right wing views are as extreme as Philip Adams’ are left, let alone 5 days a week every week. Nor do the ABC have anyone with right wing associations as intimate with the left as are Maxine McKew’s, Kerry O’Brien’s, and Tony Jones’. Further, ABC tv’s appreciation of private commerce amounts to Alan Kohler’s 45 second quirky quips in the nightly news bulletin.

Therefore Kay, the humour lies in the paradox of the ABC’s philosophy of avoiding imbalance and unPC stereotypes and their decision to choose two females as victims of poor financial management, let alone flights of delusion. That’s difficult for me to reconcile, how about you?

However, it’s possible that due to the budget constraints the ABC works under, maybe they run out of time trying to find a male victim of surrendered financial responsibility in the time that it took them to find two female victims. Or maybe it was easier to find two female victims because females complain more to various agencies than males do.

Further, if you have an issue with your sex’s capacity to responsibly manage financially, I am sure your efforts would not go unnoticed wherever there is a poker machine. You could also approach Westfield and Coles Myer about the gross imbalance between floor space devoted to retailing of men’s apparel versus women’s. After all, if the shops weren’t there, then women wouldn’t spend so much on clothes, would they?

And I am not saying men don’t p*ss money up against the wall either. It’s just that they generally don’t go off blaming someone else when they do it.

Bruce
Mooloolaba, Qld

I’ll have to get Dolf’s book out again. Off the top of my head, I remember the first of his 101 tips were adding a carport if there was no under cover storage, and turning an existing carport into a garage.

Bruce
Mooloolaba, Qld

Acey, I meant to say nice strategy with your kids at the supermarket. Giving them that goal would certainly preoccupy their minds as they wheeled past the coke cookies and confectionary.
And I also try to stick to fruit and vege and avoid processed foods myself.

I think childrens’ minds probably provide a more powerful analogy of the value of goal setting. I can think of so many occasions where a child, without anything to occupy their time and attention, run amok. Give them a task, and they focus and feel a great sense of accomplishment and self confidence after completing it. I am sure the same applies to adults.

nevertheless, I resonate with Kay and others that life should be spontaneous as well. It is all a matter of getting a healthy considered balance for each various personality within their circumstances. Seems the pendulum has swung too far away from serious preparation for the future these days for many of us. Hence the high household debt and consumerist mindset. This newsgroup is a welcome relief in that it is an opportunity to exchange ideas with those who are trying to plan for the future.

Bruce
Mooloolaba, Qld

Thanks Sibo,

I agree with you on the culture thing too. I often ask myself about the saying “to stand for everything is to stand for nothing”. I like to walk a middle ground between being tolerant, but aware of the benefits of a well considered morality. To me, there are many loud voices pushing open slather, extreme lefties often condemn traditional morality and values, and extreme righties want less intervention of govt to protect consumers.

I think of road rage, tailgaters, speeders, people not using indicators, people going slow in the inside lane, etc. I think of service industry staff who just don’t understand service. I think of how parents let their kids get away with bad behaviour in public places, and I know that is the sort of culture I don’t want to be a part of.

It would be good for Australia to have more open public debate about how to foster desirable values and culture.

Bruce
Mooloolaba, Qld

There’s an old saying”
“equity is the most expensive form of capital”.

Applying this here means Fish is better borrowing against the land and using debt to finance new ventures; rather then selling equity to finance new ventures.

Nevertheless, all old sayings aren’t applicable all the time, esp after considering recent tax changes.

Personally, I feel he should improve the land with a leaseable structure. Unless one increases yields, capital gains aren’t going to be that great over the next 2 years, esp in NSW. But this is my opinion.

Bruce
Mooloolaba, Qld

thanks Simon.

Elspeth, I would also add that I don’t expect capital growth will be that strong in the next 5 years.

I also assumed being 19, your IP tax deductions may not be that solid, based on you not having a gigantic income.

Remember, the interest you pay out on an IP has to be recompensed via CG.

You might want to run a spreadsheet with varying levels of cg to compare PPOR and IP.

My advice would be to buy something you can value add to. This is probably the smartest thing to do when the market is flat and uncertain.

Bruce
Mooloolaba, Qld