Would U buy this of the plan?

Hi Grant,

At the end of the day the decision has to be yours.

For me I would ensure that the property fits your plans and not some sales pitch that convinced you that this was the property for you. What is your plan?

Secondly – I would be worried that the Bunbury market has peaked (or is close to peaking) and that the property is going to hold its value going forward to expected completion date. Eighteen months at this stage of the cycle is a long time.

Wil you be able to get back your money if you are required to sell.

Thirdly – Can you afford this property?

Your rent return is less than 3% and as such you will be considerably out of pocket. Even allowing for interest only loans, depreciation, etc the outgoings could hold you back for some time.

if you like I am more than happy to crunch some numbers for you – no strings attached.

Fourthly – check your contract closely.

There are a number of investors who purchased something similar with a development in Mandurah. Included in the contract was a ‘sunset’ clause which said that the deal was off if the project wasn’t completed within a given timeframe. Deposits were taken and all the investors got back when the ‘contracts’ were made null and void was their money. No recognition for lost interest or opportunity.

For me the critical details is what are your plans – don’t become an investors ‘cos everyone is’ – now is the time to be prudent and not to rush headlong in because the papers are full of good news stories.

Derek
[email protected]
The Investors Club http://www.monopoly.tic.com.au
0409 882 958
Skype – derekjones2113

Hello Grant.

I’m a former WA native now residing in NSW and while I’m nowhere near being an expert in the Bunbury area I did investigate the Peel scene recently.

Firstly, I concur with both Simon and Derek’s points entirely and encourage you to take them under serious consideration. If you aren’t au fait with any aspects then read up, research and by all means ask questions of the forum and of industry players. Also, take Derek up on the number crunching offer (sorry for pushing extra work on you, Derek :*>). The reason I say this is when you’re looking at an IP the most important aspects are the numbers and the ‘fine print’ (meaning doing your HOMEWORK). If they both check out then all there is left is the final decision to push the ‘GO’ button.

Secondly, on the whole Bunbury-specific prospect you have to consider the following:

1) Perth is at or nearing its peak. There may be a year left in the strong growth, there may be 6 months…maybe 18 months? Even after the boom there may even be a little bit of single digit growth as things settle down so if you buy now you may have let’s say, for the sake of argument, 2 years of growth before a slowdown/retreat. However, with the Mandurah rail punching through and the freeway soon to follow there likely has/will soon be an additional little spike in value around the Peel region which may filter through to Bunbury and the South West a couple months after.

2) In my opinion (and this is only my opinion) the SW will continue to be a draw card for cashed up sea changing Baby Boomers for the coming decade. However, soon they will be getting to the stage where they don’t want to climb stairs (ie. beware of double storey places if this is your age market) and soon after that (like in 10-15 years) will fall off the perch or look to downsize (ie. a possible glut of large 3-4 bedroom places).

3) Having said all this, the freeway will conect to south of Mandurah by 2009 (Salter Point area from memory) and Bunbury will become that much closer to the city meaning that new retirees will be able to enjoy the Bunbury/wine region/sea change lifestyle and be less than 2 hours from the city. To me (again, don’t take that as anyting more) this means long term growth potential.

4) Perth’s current boom is off the back of a resource bonanza which will, because the resource is non-renewable, eventually come to an end. Some say this will gut the WA market and I’m tempted to agree. However, as long as there is the lure of the sea there will likely always be grey haired freedom seekers with leisure boats stuffed full of fresh whitebait and a ballast of cash. That’s assuming a rise in sea levels doesn’t make Bunbury akin to Atlantis.[whistle]

So there’s a pile of somewhat contradictory thoughts to take into account. For the record, the reason I didn’t end up buying into Mandurah was that my target area went up almost 8% in 4 weeks and, with my portfolio, made my numbers unworkable (as I said, numbers are the key). I ended up casting my eye further afield and bought into a seaside city on the East coast for over 100K less than the Mandurah average and have been happy with the results. Remember: The DEAL OF THE DECADE comes along once a week. Don’t believe the hype, do your homework and don’t borrow more than you could reasonably service through two years of rainy days.

Best of luck,
Art

‘Great spirits have always encountered violent opposition from mediocre minds.’ – Albert Einstein

i think you are mad even considering paying too much for something at the top of the market , yield reflects a lag in rental movement and it would be a major cashflow burden and will restrcit your ability to continue investing. Offer $400K otherwise forget it . You should wait 12mths and then you will experience what sydney and melbourne have been thru , and then someone might just accept that $400K offer.

Offer low ball offers in Sydney or Melbourne , the yields are much better and there are real opportunities to pick up bargains