Forum Replies Created
It depends on the other parts of the scenario you have.
If you are earning 35k you can borrow about 200k-ish and get a 300k property of some sort.
If you are earning 65k you can borrow about 350k-ish and get a more substantial property around the 430k mark (stamp duty and transfers starts to get big)
Having been in this scenario with my benefits dependant cousin about 3 years ago .. she just needed to increase her existing asset and income folio so the banks would take her seriously. So she purchased 2 units at a low market value straight out, and then .. cpl months later .. when she had revenue streams and a path of 100% ownership .. she also borrowed money to purchase more units.
She is no longer requiring benefits.
The choice you make will be dependant on your existing situation and your comfort level for attacking the market. If you are new and dont feel secure with a level of risk component .. take it slow and find your happy level of investing .. because at the end of the day .. minus the stress .. is where you will find your investing to be not only fun but profitable.
Again .. as always .. the two important rules … know your market .. know your limits.
Your answer lies in your first sentence.
You’ve got all excited that you’ll be investing in an area where the NRAS is taking place.
HAVE YOU ASKED WHAT NRAS IS AND HOW IT WILL ACTUALLY AFFECT YOUR PURCHASE?
Yes I resorted to caps. Its National Rental Affordability Scheme and that literally means that its subsidy housing to start with.
To look forward to a capital gain and even a possibility of capital gain over inflation you are looking for areas where the demography is going to change in a positive and attractive way for the near future (5-10 years).
If you are surrounded by people who are already one step behind by accepting subsidy housing rather than working towards the possibility of a more attractive future (doesnt mean it wont happen .. just historically its less likely).
The other thing to note that until we hit good times, the government will be finding ways to minimise on creative subsidisation schemes promised in previous governments. Which could mean in a very short time you could be surrounded by empty buildings or lower paying tenancies with less reason to look after the properties.
On a positive note .. the prospects for Brisbane in the near future are looking rosy .. so you may be finding yourself in a bad position .. but still on a positive framework for the next couple of years.
A new fresh site doesnt mean appreciation. Many years ago now .. Caroline Springs was touted as the new place to be .. new style living and fresh new housing. Problem was .. it was in the wrong area of town .. close to the worst areas of Melbourne (St Albans,Sunshine & Deer Park) as its nextdoor neighbours. And thats exactly what its major clientelle is now. The bad neighbours next door.
Due dilligence .. might sound like a continual phrasing of the same word.
But it might just save you in the longer term.
Hi appg2
This is your working years.
This is the time where you can make the difference in your wealth.
And if you have a job allowing a reasonable degree of leverage .. you should definitely take advantage of it.Your time is now.
As I keep saying .. a wealth strategy that you can invoke and that works effectively for you is the only one you want.
You can look forward to your daughter providing much greater bills .. possibly another family member .. maybe a change in job situation for the better or worse and the last thing you want for all these people who you are providing for is to let any of them down by not stepping up to the plate and working out an investment strategy when you could.
The income you get from a property .. unless you sell it .. is additional to your salary and provides an ongoing fallback. The equity you get from your property can be a major help in all sorts of future situations .. you dont HAVE to dip into it .. but if you want to you can.
Timing is every mans worst concern .. and at the moment you are right to be worried about the property market’s long term health at current levels. However .. property is not one single market .. its lots of them .. while one area may be souring .. another may be taking off.
You also supported the idea that maybe there are other ways you can create the saving strategy to ongoing wealth. There are other ways to achieve the end result .. collectibles .. carpets .. coins .. stamps .. stocks .. bonds .. shares. Each of these has its own risks and its own rewards. You’ll have to understand the market you deal in .. and its current position.
There is no set path to an end result. However .. from experience .. I can tell you that focussing and specialising in a couple of markets and only a couple of areas makes you much more of an expert in the areas that count.
Dont take the path most trodden .. take the path that provides enough of a challenge for you to deal with comfortably. And heck .. if it lies outside your comfort zone .. train yourself till you ARE comfortable with it.
You will make money by taking risks that other people wont .. based on knowledge gleaned that will lead to future prosperity.
And best of all .. you can do it now.
There are three sets of people you are going to need to speak to when getting the right advice re: developing a site.
Selling/Listing Agent – Can give you ‘presales’ advice that does not check out with reality on the ground. But can also provide realistic details based on experience. Ask how he derives his knowledge and what he bases it upon. Cite recent WORKING examples.
Local Council Land Management – These are the guys who will say YES or NO to any potential ideas you may have. And they usually have fixed guidelines as to what is acceptable and where. You’ll need to do your homework here before heading into any development or you can find yourself with a 75% complete development and no certification of occupancy. And that has happened.
Other Developers you may know – or will get to know. These are the guys who have actually worked in the area or have completed a develoment within similar areas nearby. They are sometimes a good stopping point if you have purchased and have an idea for creativity.
NOTE : DO NOT APPROACH A DEVELOPER PRE-PURCHASE – you think you are the only person who may be interested?
I think its important to have the failiures listed so you can be aware of what to expect.
Most of them are things that should have been little that got a lot bigger because they were left alone (poor property management)
The tenant who left and decided not to take his 4 cats with him .. locking them in a cupboard. Decomposing cats anyone? Not nice.
The leftover food once the tenant left attracted a COUPLE of cockroaches before it was found .. ok we lie .. can you think 30,000?
The ideal tenants who threw apples around in the back yard to break things .. and had mushrooms growing in their couch.
The property manager is told about gutters that need to be cleaned .. no action. Eighteen months later .. an inspection notice points out the fact that the gutters are now rotting and need replacement .. extended costing of 12k (it was multiple units so it wasnt THAT bad, but still expensive)
We installed a switch for outdoor lighting with a pop-out timer button. The tenants couldnt work within the timeframe .. so they stick matchsticks into the button to keep it on .. totally ruining the timer button.
Apparently the tenant left a non-functioning tap .. which was still leaking when he moved out. Received the bill on an empty flat for 4 swimming pools worth of water usage (about $600). NOTE : Make sure taps are off after tenant has left property.
Negative gearing is often used to cite a class war .. in other words the rich MUST be getting richer from all this negative gearing benefit and the poor must be paying too much for their rental outcomes from rich greedy landlords.
Its a nice way of saying I CANT COUNT AND I AM NOT PREPARED TO COUNT TO VALIDATE MY STATEMENT.
You can graph it you can cite various biased studies .. but what you eventually find out is the system as it stands isnt too bad.
Usually you would find that in a stable economy with reasonable incentives .. when the opportunity arises .. the money would be delisted (realised) from the property asset and recompiled into other ventures that may benefit the wider community such as small business .. stock investment or just a capital spending.
However in an unstable economy people tighten up because there isnt any direction to push their money into that would be of greater benefit. So no small biz .. no stock dividends and no money spent flirtatiously on a new spring clothing
It means that there is a lot of property with a lot of ‘stastistical’ wealth just sitting on the sidelines waiting for that moment of activity to take place.And if I was the ATO .. I would be more worried about why over the last 30 years .. its been piling into property and not much else.
And if I was a property owner .. i would also be realising that the ATO and govt is now looking at the ‘statistical’ property wealth and rubbing their hands together in anticipation.
Something to consider.
Lets read the article as it actually stands.
The issue is that housing is not FAIR to low income tenancies and disadvantaged households.
Yes .. i can tell you from an earlier part of my existance .. when you aint got it .. it sucks paying rent and trying to make ends meet when you only have a pittance left over.
However you have to confront the issues that are outstanding in the market.
First one is actually very simple .. you have a market of limited supply proportionate to demand .. hence the reason for increased pricing.
The concern raised by the ATO recommendations is that the system is not being FAIR.Actually the problem is more concise .. the problem is that the system is being VERY fair.
If you have money .. and you are anyone (be it black white hispanic japanese jew bahai hindi) .. you can invest in property and get something out of it in the longer term .. whether negatively geared or not.Negative Gearing not only benefits the tax outcome for the affluent person concerned .. but for the renter who gets a great deal at up to 5% of the assessed property value. As I have stated previously .. the historic rent/asset ratio is closer to 10% of property price. I bet if the rents were raised to those levels .. renters would be panicky !
No .. the real issue that isnt being raised here is the one that should be mentioned frequently .. that its the lack of supply that is driving up rental demand and as such .. property prices.
Nice and easy summary : We dont have enough properties because we dont have proper incentives to get real developers into this country to produce large scale projects to satisfy longer term demand and future effective growth plans.
To verify my point .. the top end of Toorak prices caps off nicely at around the 20 million mark. If this was a town with more affluence in it .. those prices could be as high as 45 million for exactly the same properties.
We wont be building stratospherically .. we will be countermatching demand with value and area attractiveness.
To produce FAIR housing .. you’ll end up with dirty neglected property (no gearing incentive for maintainence) outcomes in areas basically no-one wants to live in. In other words .. SLUMS.
So next time someone produces a document saying how fair housing should be .. just show them this paragraph and let them understand what social outcomes are going to be at play.
You wont end up with better property .. better deals .. or safer neighbourhoods as a result.
You will get precisely the opposite.To make my point .. google the TOWER OF DAVID in Venezuela .. where everything is fair and shutup if its not.
Hello Mike .. you’ve chosen the right forum to post in !
I am actually a fan of country property for the high returns that it has.
I have made a stackload of money by purchasing out in areas that most people consider too far and/or undesirable and then manipulating either the use of the property or just raising the rents to the average market level to make the investment powerful and worthy of my investment.
Some of my investments were purchased at 8% returns and are now 14% or more (depending on what period i purchased them at)
Can you imagine how quickly they reimburse themselves and become cash cows in that position?
HOWEVER THERE IS A REAL DOWNSIDE.
Most of them wont EVER be spectacularly desirable to most city dwellers. They’ll be desirable to locals .. sure .. but when you have a town of only 60k+ locals .. how many people are out there with hard cash or leverage to purchase property at an increased level?
So your regional country town purchase may sound incredibly cheap based on your understanding of what you’d be prepared to pay in a large urban centre such as any Capital City, but then for added realism .. the intense demand you have for property just isnt there.
Sure … your properties will move like everyone elses .. in parity with inflation and a discount to replacement building costs. But outside of that it will always be allocated to the succinct local demand and maybe a handful of smart investors (like guess who?).
Take a valuation you get from a bank as what THEY are prepared to value your property as. You can dispute it if you want .. but then you’d better have actual sales figures or justifications to back it up. Thats what the valuers are prepared to do (and actually HAVE to do) to justify the valuation that they have given you as an accurate figure for the banks to represent.
Capital growth is usually not fabulous out in the sticks .. but if you are aware of that and you take that on as the situation .. and UNDERSTAND that to be the situation .. like any market .. you can still make money in it.
In one of my other postings on here (hopefully STILL on here) I explained about grading an investment as A B and C. As you might guess .. an investment that the banks will actually still lend on is still a grade A investment because the banks will lend on it and accept it as collateral. By the time you get to a Grade B investment there will be hestiation by the banks .. and maybe they will offer you a substantial discounted risk based assessment (again what THEY are prepared to accept). Or they will do more than one valuation and accept the LESSER of the two valuations. In other words the investment isnt attractive enough for them to consider it valued collateral.
If it gives you any comfort .. by the time it gets to a Grade C investment the answer is usually just a quick NO.
The best answer I can give to your current issue is treat the valuation as what it is .. and use the valuation to bring back equity to a place where you will experience more capital growth like a Capital city or similar. On the upside .. when you are in a place where there isnt much capital growth .. (and steady population) there also isnt much of a downside either. It does tend to hold its value reasonably well.
Ronnie,
OFPs are always statistically dangerous because there is no property to begin with.
If you are genuinely looking for investment from an apartment complex .. buy within the first year of 'exchange'
Typically .. up to 40% of a block of apartments will exchange within the first year due to 'regrets' with the investment choice, financial difficulty in servicing the investment or realisation due to lack of needs requirements.
That means you will have an existing apartment to view .. and an idea of how good or bad the apartment is.
And dont listen to other people's basis for risk averse judgements. Make your own informed decisions and make the right choice based on that. I cannot tell you how many times I have had people adverse to an area I have chosen and I have been proven correct in my judgement long-term.
Make an educated judgement .. make the right call based on that judgement. And stop listening to the naysayers, they just get in the way of your success.
If you are worrying about stamp duty savings … and thats your only reason for investing in an OFP apartment .. then you are probably in the investment for the wrong reasons.
Hello Ronnie,
You can explain to people a hundred times over that the conditions and the rules for property dont change .. and they'll assume you're talking out your backside.
There are really only three major things you need to worry about in a purchase.
Rarity – Demand – Initial Purchase Price
And three regarding the property itself
Condition, Flexibility, and Market Requirement.
Outside of that you are looking at CONSUMER and FINANCIAL variables. Yes thats what you are guessing .. but realistically how accurate can you be?
Can you predict that the car industry in Geelong packs up and heads overseas .. leaving a large empty gap in the local workforce and rental requirements?
Can you predict that the Victorian Government picks up VicRoads and decides to shuttle 400 municipal jobs to Ballarat? A boon to Ballarat but for how long?
No, obviously you cant predict things that are outside your actual control. But what you can do is make sure that your pick is close enough to right to start with so that regardless of the intrinsic variables that change the value of your property .. your property will hold and potentially increase in value.
Lets point out where the student properties go wrong based on the above requirements. They start off in fabulous condition but have literally no flexibility on tenancy due to being student-only by design. And once that temporary market requirement dissolves … who will you be catering to?
The inner cities buzz keeps growing as the cities gets more tourism .. more quality restaurants and free transport.
But they have a hell of a lot of property catering to this market with actually a stackload more on the way.
If I was a government printing hundred dollar bills like confetti .. how long would you be holding onto your dollar bills based on their purchasing power?
You'd probably be discarding them rapidy and heading for an asset which would hold the value of your money as long as possible.
Property is the same. In the late 80s there were enormous office space booms based on the 'potential' for the area. Then the computer revolution took hold in a major way and a lot of this existing office space was classed as redundant. Up and down areas like St Kilda Rd there was only demand for either A class property (at a reduced rate) or property that was literally brand new. All the rest of the property remained either largely empty or at a significantly reduced rate.
The only thing that kept the properties from rusting away altogether was a change in council planning allowing for residential conversions and land usage modifications.
You wont be a commercial investor. But on the same basis you can take the above and realise that the idea of a continually ever growing residential property market without limitations is a human fantasy.
Property has its feasible limits based on reasonable guidelines. Outside of reasonable guidelines … you place your trust in the risk component never affecting you.
I think overall Johann might be onto a good thing with what I have witnessed in the Greater Dandenong area.
The govt has already spent over a billion to get a new section in town .. revamp a couple of major thoroughfares, the rail station and basically create a new town centre.
If that happens in Geelong … DESPITE the current outflow from the auto sector and manufacturing … you'll be looking at a different clientelle within 10-12 years.
And Johann's money will have been well spent.
As discussed in the context of the 'market comparison' that you sent .. the property was DISCOUNTED by 200k before being sold at the price of 330k-340k (eventual sale price undisclosed)
**************************************************************************************************
17 Knight Street Willaston
UNDER INSTRUCTIONS FROM MORTGAGEE! $330,000-$340,000
UNDER CONTRACT
MASSIVE 200K REDUCTION!
This is your one and only chance to purchase prime residential land in heart of Willaston…Located on a magnificent street on a huge 6,640sqm allotment is this vacant parcel of land waiting to be developed!!!
* All sub-division is at Council Consent
* 6,640sqm
* Zoned Residential
* Hop onto the Northern Expressway
* GST EXCLUSIVE
* Minutes to schools, shops, transport and all that Gawler's Main Street offers
**************************************************************************************************
It was a one-off mortgagee sale and the discount of 200k on any price is very unusual without good reason.
the property remains a poor market comparison for the property you've sought out.
The idea would be to try to find out what is the agent's realistic value of the land, or another agent's idea of what the land value represents.
There is no reason why you cant try to purchase a property advertised at a listed price at a discount from the vendor .. just think as to your approach and negotiations to achieve your discount.
I have no idea why you are approaching the idea of a five unit mini-retirement village on this block of land.
Firstly the specs for a retirement unit these days are usually first class anyway .. and you wont end up with a nice package for the amount you ask.
Secondly any retirement unit worth its salt has facilities on-call or standby so that any genuinely retired person needing assistance has a competant nurse or handyperson available should they be required.
Finally the obvious … why would you be looking at a bunch of gated units behind a fence? A retiree wants security sociability and safety in his/her retirement lodge. By just having a gated fence you are actually doing the opposite and isolating the retiree.
I work with 4000sqm of land all the time and you cannot possibly be approaching it from the right perspective. 4040sqm is an acre .. so you are working with a sizeable block of land. I manage to get 24 units into a block that size .. with underground parking facilities and even commercial shopfronts.
The answer is really simple .. you are producing way too few structures on the land at the moment to validate and justify your purchase RELATIVE TO PRICE PAID. For some reason you are creating your own market rather than actually looking at what the site value per unit and the OUTCOME per unit will be.
A developer isnt usually a fool. A developer is out there to make money and do that through working the best deal out of the land.
I've built on 200sqm with the aid of an architect .. and built 18 townhouses on a 5000sqm non rectangular block.
So with what you've got .. the problem isnt the price of the land (which probably already takes in the existing price per unit block site and just multiplies it for the total land area) but the way you are about to utilise it with what your designs are on top of it.
Answer is .. land is worth a million. You have to use it better to justify that million to your further use.
Development is a risky game. You may overguess the market's needs and end up with a fabulous product that people will still only pay the standard unit price for regardless of quality. I have done that once or twice .. and you learn from that quickly.
Your block you have suggested is big enough to produce more than you can currently financially manage. Instead of restricting what is a large block to your budget .. why not STAGGER your development with a larger project in stages? That way you can condition the purchaser to the idea of the site having multiple units on it .. you can supply a plan that covers a larger body of units .. and then represent the current stage only !! Your budget covers the current stage with room to move .. and from the profits you can build the other stages as they come to hand.
A retirement unit site works best when you have lots of people who you can interact and relate with. Having a large amount of units on the site tends to keep the overall expenses required by the retirees to a minimum as the costs are shared over a larger group.
The other thing is .. having come across lovely little 5 or 6 unit sites like you are talking about creating .. they were usually achieved on the purchase of young blocks (in other words fresh subdivisions with new housing and cheap land). So it is possible to do what you are thinking .. just on a 400k acre .. rather than a million dollar one.
I'm not going to answer your question Robbie.
YOU are going to answer your question.
I'm going to fill you in on what you look for in an investment that is different from what you look at as a consumer. OR IS IT DIFFERENT?
As a purchaser of a unit or house for usage you look for the requirement of facilities of utility value within easy reach.
You know … schools .. shopping thats worthwhile .. maybe a nice restaurant or two .. hospitals .. transport .. places to see .. things to do.
and thats basically your list of requirements. It has to be liveable for you .. and you have to like it.
As an investor you are actually looking for the property to move in value (preferably sooner rather than later) either in capital growth .. or in rental returns (both make the initial investment worthwhile).
So what is going to make that movement in prices happen?
DEMAND, SCARCITY, TIME
DEMAND – There has to be someone wanting to either purchase or rent your property after your initial purchase AT A BETTER PRICE THAN YOUR INITIAL PURCHASE WAS to validate your purchase. There has to be someone willing to pick your property. So having a property that someone else will also want later is a first consideration in considering anything an investment.
SCARCITY – If you have a purchased property .. in a place where your property is the only one available and in high demand you can ask what you want for rent .. and for its resale price. IF ONLY PROPERTIES LIKE THIS EXISTED. Most of the time you'll find yourself in a group of properties where there is a large trading arena and reasonable demand. Unless you head out to low demand areas (country towns .. mining villages). TO ESTABLISH VALUE IN YOUR PROPERTY THERE MUST BE ENOUGH SCARCITY TO JUSTIFY ONGOING DEMAND.
TIME – Eventually .. despite the worst of purchases .. in the worst of areas .. and the lowest level of tenancy possible .. most properties will eventually accumulate anyway due to inflation over time. Its the longest wait .. if your property is relying on this factor only .. for its major format of ongoing growth. Every property will do it .. it just helps if you have both SCARCITY and DEMAND driving your property value too.
See how all three overlap? Thats because for any property you are going to need all three to be relying on a winner for the longer term.
Now .. I've just given you the feedback.
Its time for you to go out there and work out Robbie .. whether your property you are investigating .. will match the three conditions it needs to justify it as part of your ongoing wealth strategy.
P.S. Note i did not mention renovation or subdivision as part of the strategy. Thats actually just changing the DEMAND of the property and so .. its already covered above.
Hi Engelo .. long time no see .. thought I would add my two cents to that bit of wisdom.
You have to work with the whole bundle.
There is no point jetting into a burb with no experience and assuming you can rule the roost within a week.
You have to know .. the lay of the land .. the markets and customs of the people .. the laws of the land .. and the methods of doing business.
Knowing your market value for a place allows you to understand whether the property is being treated at proper market value .. or sub par pricing.
Knowing what you are able to do with the property and how quickly you can achieve your desired result is the next thing.
And your knowledge about recognising a good team as part of your support structure .. its something I always mention .. and yes .. its just as important as having a good property to begin with. If you cant service an area due to distance or time restrictions, EMPLOY SOMEONE WHO CAN.
And yes .. the numbers in the deal are what you should use to predict the value .. NOT AN OUTCOME. An outcome is what you achieve minus your cost structure to verify your purchase. Your deal is made when you purchase right .. and when you change the structure to meet your new market by adding value.
I have made money in Poland .. and I will be making money in Greece and Spain as they come back online. The real estate market is totally different .. but the same governing rules apply. Understand your legal structure .. your laws and customs .. and your pricing vs outcomes. And you can make money anywhere.
The final thing I will add to any property investment is to make sure you are in either virtual control (through voting or governing rights) or actual control .. of the invesment. Once you start having to delegate your decisions to a crowd or you lose control of a property .. then you have no means of driving the invesment in the direction you want .. or the way that will be profitable long term.
Elizabeth .. you are striking out to achieve something that your parents could only have hoped you'd achieve .. and they would have dreamt about.
My incentive has been an orange box. A wooden orange box (try finding one these days .. its harder than you think). I actively sought one out and purchased it as a reminder.
My father came to England from Europe .. and his first piece of furniture he ever used was a rented table and a wooden orange box.
I found one and keep it as a reminder of how far I can fall back to where I could be.
The rules for property will change around you, and they always do. As such .. you are going to have to delegate what your exposure to property is .. and how much risk you are prepared to take. A strict strategy of negative gearing is actually already a losing position, as you are starting out with a loss (granted at the time an allowed deduction) and reasonable gearing to achieve results. The same can be said about overgearing .. as your leverage relies on several degrees of rate stability just to hold the property let alone make a profit on it.
As a high earner .. the banks are much more willing to lend with a reasonable degree of gearing and even to a higher level than you can probably as you represent a lesser risk to them for repayment. A high salary at anytime should be treated as a temporary measure no matter how permanent you think it is. Utilise your capabilities with borrowing .. but also setup your property portfolio to start paying its own way sooner rather than later.
The true key to successful property investment for someone who has never invested before is to aim at a risk situation you'll be satisfied with .. and graduate to a supplementary income from at least one of your properties as soon as possible.
It makes the worrying and stress of holding a tenancy or paying for a property less painful .. and you can get on with living like you are actually earning well and not living like a pauper on the potential of becoming rich one day.
Considering his track record .. and you can google that .. his record for forecasting accuracy leaves a lot to be desired.
I wouldnt trust Harry Dent with any accuracy let alone what he thinks he is capable of.
The Age Newspaper is notorious for putting articles out on a near weekly basis criticising either the value of housing .. the lack of affordability .. or the possibility of a severe downturn.
I have successfully invested against THE AGE's recommendations now … about 23 times. Each time I have kept a copy of the article that inflamed me .. and what I did .. and what the end result was. NOTE: This actually included an investment in APPL shares when they were at 3.80 a share ! (yes that was a very successful one) and an investment in a company that produced HTML page design software. (made just under 2 million on that from a starter bank of 80k !)
The list is numerous .. and just pathetic on THE AGE's behalf. To be proven wrong once is a measure of inaccuracy .. to be proven wrong regularly is just comedy.
Google -> Harry Dent Track Record.
Thats all you need to know.
The list of your mistakes is numerous.
(1) Lowballing on a property pre-auction without defining his pricerange accurately. Since most agencies provide a range of interest that is lower than achievable price you have people who STILL lowball that price thinking they can go even lower.
He's got high expectations pre-auction and until he has tested his market .. only an offer near his price or topping it will secure a final contract pre-auction.
(2) If you genuinely want the property you should have done your sales comparison homework to give a reasonable idea of what the achievable price range is.
(3) You are letting the agent take control of your offer. Therefore the agent is doing all your negotiation too.
(4) You have a property here which is nearly 1200m2 on an irregular courtside block. Even allowing for the fact its an irregular block .. thats enough space to squeeze four units onto it without even trying ! And at a developer site cost close enough to 100k per unit (outer Bendigo may vary but not much) you are offering WHAT price??? People may be dumb on price .. but they arent usually THAT dumb.
(5) You are displaying a property that hasnt been sold yet on a site where there are a plethora of property investors and developers looking for fresh value investment properties. If you really wanted competition for that property … you've probably got it now.
I went to investigate the whole Cairns/Port Douglas/Palm Cove/Kewarrah Beach in April 2013.
As you might guess .. I also had seen the properties going for pennies in the dollar and wondered what it was all about.
How low? At one stage I could have picked up SIX apartments for a little over 130k
At one stage the apartements got as low as 15k
So you may ask WHY?
Well .. the first thing is the obvious one. Cairns has lost its tourist biz in a major way. Somewhere between alienating the local population through expensive schemes and building to incredible levels in an area which just didnt have that kind of demand .. has caused major issues with supply .. demand .. and profitability.
I ended up staying in Port Douglas. And my overall view as a tourist? Give it a week .. then you've done it all in Port Douglas.
The Cairns council has implemented restrictions on the local property apartments which restrict usage to holiday only, non residential. Result being .. instead of having a lot of places which you could have had surviving off local trade .. they are dying because they now RELY on the tourist dollar.
As business in the area has been declining .. the Cairns council has been supplementing the deficit by raising the rates for utilites and water in the area.
So because business is declining badly .. instead of stoking the fires with appropriate schemes and a relaxation of the legal status of the holiday units .. they have actually got TOUGHER on the people who are using holiday accomodation as living rental.
Cairns council is stuffing things up in a major way and blaming other people for the fact its doing NOTHING right to approach what is a crisis in value tourism with commonsense ideas.
As an investor .. i've been there and my gut is .. wait until you have someone in charge who knows how to run the joint.
With bad management in place .. even the best investment strategies can be turned into pulp.
To give you an idea of the difference in rates and management, my local 2BR units in melbourne average 2300-3000pa as rates/expenses. That jutts out to 7500-9000pa in rates/holiday management/expenses in Port Douglas and 6800-8500pa in Cairns.
As anyone who is trying to invest .. the basics are .. you want to get back a pieceable return with the possibility of capital gain at the end of it. And when the calculations dont add up and the properties become a major expense … you'll find everyone wanting to offload their properties and no-one willing to invest.
Its Cairn Council's fault. There is no-one else to blame and no-one else who has done nothing to set the situation right for years.
This happened before the 2008 crash and the current malaise just adds to the existing situation.
Stay away until things change.
Think i'm making this up? Check the businesses for sale sections and look at how many OWNER OPERATORS are selling their management rights and trying to flee the place.
And how many resorts have moved into receivership in the past 2 years.
Its not a pretty picture.
When things do pick up .. IF they pick up .. there will be a large amount of stock to soak up .. and probably a lot that will need repairs after being neglected for years.
There is a time to invest in Cairns .. and its not now.
Ok here is where logic and strategy feed into the situation.
When I was a 14yo kid (many years ago) the developers started paying 150k for a 700m2 block in Ormond when we knew it was realisticly only about 110k to market. Yes I know these figures now will seem like the right reason to jump into a DeLorean with timetravel features and zoom back to the year 19XX, but the price paid is not really the point.
You see .. the developers knew two things that we didnt as regular non-strategic run-of-the-mill investors. The council was about to introduce a schema that finally freed up a block of land with a house on it for medium density single level development (now practically known as villa units). The land had been under restrictive building covenants since the late 1970s due to the overflow of apartment building in the area. So for about 8-10 years .. not much land redevelopment took place.
The result? (please take these figures in context as they are now so archaic its painful)
The average price for a full sized block of land rose to nearly 200k !!! As the utility value of the land had changed, so had the market. Up to 100k per unit site was now achieveable.
Well, to bring this back to whats happening now. In this month (Jan 2014) we have seen the market in both Sydney and Melbourne start to take off since the midway point of last year (June 2013). Sydney prices moved with high auction sales results (80%) .. Melbourne prices recovered a lot of the ground of what they had lost in the previous 3 years, and QLD went from stagnation into overdrive.
I apologise for not having enough Perth information but my portfolio only extends as far as South Australia and as far north as Cairns.
Being within the region .. YOU will be the best person to define whether a movement in WA is going to happen, and the reason for its movement.
Is there going to be a change in client in the market?
Will the forces that led the market through the mining boom still be prevalent in 2014?
What is going on in the Eastern States that might be moving the market in the sudden push that is visible now? Is it a good move or a warning of things to come?
I see a period of inflation that I've been predicting, and I'm sure if you have been shopping recently you'll have been seeing movement in regular items that you are familiar with. The query is, how that will feed across into the Perth market .. and whether the mining downturn has longer to play out in the Perth markets.
You have to learn to ask the right questions with the people who know the areas you wish to invest in. Locals and Real Estate Agents will be the first to pickup on the 'buzz' when it happens, and the first to tell you if the market's needs and requirements have slowed.
There is no such thing as a dead market totally. There is a quiet market .. and a live market. And usually where one is quiet .. another may just be coming onboard with some live action.
With rapid inflation .. ALL markets turn quickly as everything comes into demand at once. The low interest rate environment we have been in will breach .. and all of a sudden all the people who have been sitting on the sidelines waiting for something to happen will PANIC … and basically rush in to get whatever they can get their hands on.
As a result .. there will be very little actually available to market. People who have an asset will be holding onto it, and people with deflating cash will be willing to pay more to get their hands on what they need.
I can almost guarantee .. barring an absolute failiure of the stockmarkets (still a distinct possibility) that you should profit well on anything you purchase in the first half of this year .. or the previous year. Make sure your loans are fixed and greater than 3 years. Historically a period of high inflation takes a little over 3-4 years to wean itself out.
Bringing it back to Warren Buffet .. by the time Warren Buffet makes his strategic investment he has done his homework on the company .. knows what his market timing is like .. and has a rough idea of expectations and outcome REGARDLESS OF MARKET SENTIMENT.
This is a guy who still uses plain paper and pen to work out the figures he needs (he doesn't use a computer in his office)
If you know your market and its demands and timing, you can make money in any market. Never quite the same way .. but there is always a way to do it.
