G'day fellow property investors,
I am looking at couple of opportunities in Capella, QLD. Basically its a small town in outback QLD and is booming due to local mines. The properties are cash flow positive.
Any comments/insights?If its cf+ go for it…but just remember, mining companies come and go….look at history….and also look if there are some other industries/businesses that will support the town in the future…
Check out my criteria also…
http://members.optushome.com.au/~andrewkiss88/criteria.htmHaving lived in Capella many years ago, I would offer the following for consideration. Yes it is actually a nice little town and i have fond memories of it, but I wouldn't invest in it. Water supply has always been a problem. Several booms have come and gone with rents at sky high prices for rent and then years of low rents and stagnation. Most of the boom times are related to the construction phase of the mine , not the operation of the mine. Most miners (from Gregory and Gordonstone) prefered to live in Emerald which is about 35 min drive to Gregory. Check out Emeralds skyhigh prices. Peak Downs Shire Council has done an unbelievably good job promoting the town and building excellent facilities (eg pool is fantastic and` was used by an overseas country to train athletes prior to Sydney Olympic). I would also wait to see the outcome of the forced council amalgamations by Beattie. If that goes ahead, Capella and many towns like it may wither on the vine. If you are in Capella, speak to the local newsagent (Harold) and a few locals at the bowls club. They might have some local gosip on future developments. Gordonstone mine was talked about for at least 20 years from drilling investigation to commencement. The only thing under the ground out there is coal and that is getting unpopular in the current greenhouse debate/panic/hysteria.
Hi jtw,
I always considered this to be a risky investment option but your comments have provided more input into my decision making.Capella is one of the more stable mining towns in the central highlands (like emerald) as it has the agricultural industry supporting it aswell but unless your buying brand new you might find it hard to rent out in quieter times as there is a bit of development going on because of this latest boom. Water is now piped 30km from tieri which has 2 mines supporting it and a minimum of 30 yrs of coal left. (Tieri is completely owned by the mine- first town to go) The experts (dont take my word for it) predict this latest mining boom to last another 10 yrs, which to me means theres probably not much more capital growth left but should at least hold its value for this period. Personally i would only invest there if i was cashed up enough to have it paid off in 10 yrs or less for peace of mind as it is a mining town afterall
I agree with Queenslander 07's comments. I wasn't aware of the water from Tieri being piped in, I can't think of any major water resource out that way? The idea of piping from Fairburn Dam (Emerald) had been floated for many years.
In my humble opinion CF+ deals are not what they are cracked up to be IF you don't get real reliable capital gains. The investment of a life time can become the biggest Albatros around you neck. Bank are still going to see the debt, The capital gain prospects for Capella aren't great so the bank is unlikely to lend much against them in percentage terms(LVR). If you get higher rent returns, usually there is a reason like low capital gain prospects. I always go for capital growth in my assets, rents are 'nickel & dime' in comparision. Sometimes you can buy a property in a major capital or regional centres with great capital growth potential, reasonable rent returns. You may have to put in a small sum to subsidize the holding costs (tax deductable anyway) but in a couple of years you will see increased rents kick in, but most importantly the capital gain will have moved along nicely.
Worst case scenario : Imagine in 5 years the economy hit a major pothole, It becomes hard to rent out the house at Capella because they have mothballed a mine (Happens!) and the only other industry farming is hit by a drought. You lose your job orhave reduced income. If you have to sell in Capella it could be a real small pool of buyers. The CF+ can suddenly look like a dead ender and I bet you wished you had chosen Brisbane for example, still underpinned by population growth. Think it through. Mining towns and similar can look exotic and at times become flavour of the month.
Plain vanilla is my favourite investment flavour. Major cities, residential, high land content.JTW
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