- shoooshoo wrote:hi guys i heard that dalby has 200 vacant house & land packages that they cant rent because they flooded the maket, is this true?
Hi Shooshoo,
There is a lot of land on the market in Dalby, as well as 97 advertised rentals on realestate.com.au
Here’s the land sales for the previous years:
2008 = 195
2009 = 176
2010 = 145
2011 = 15 so far recordedthis would suggest that a large amount of new homes could be available, however just not on the market for rent due to this crisis. Im not saying that there are 200 homes available but even 100 homes for a town that size is a lot of properties to be available for rent.
Shooshoo i would be staying out of the Surat Basin. I really don’t think it is all it is cracked up to being. It is situations like this that you mentioned where investors take marketing firms at face value who are only trying to line their own pockets and never wanting repeat or referral business and they then come unstuck as they aren’t telling the purchaser that the only limit to the number of houses they will build in the area is how many they can sell.
I would be sticking to the Bowen basin still, chase stability, and longevity in your investment. Unless you can afford to potentially have a property that fluctuates in value all the time as well as run the risk that it may be empty in 5 years time then keep to some key areas. Places where long term work forces will stay for the lifestyle as well.
You need to think of the family model. If a town can sustain a family model, that is education (including further education), work & lifestyle, then the region will grow and prosper, especially in the next 10-20 years in QLD as south east QLD struggles to provide infrastructure, and a lot of the new jobs and government infrastructure moves to regional QLD. If areas can ONLY provide work, people don’t stay, and that makes for an unhealthy investment be it property or business.
Look for areas where large companies are going which indicates longevity. Companies as in Woolworths, Stocklands & Lend Lease etc. In Emerald there is a $120m woolworths shopping complex being constructed, this is their second supermarket in Emerald. Harvey Norman are going in etc. In Mackay, they are nearly doubling the main shopping complex (Canelands) from 39,000 sqm to 70,000 sqm including Myer. West Gladstone is having a new Woolworths complex being built at the front of a new estate. Amidst such an abysmal retail environment, these companies are investing there money in these areas. They conduct a more in depth due-diligence than any residential property investor ever will in my opinion. These companies don’t make money overnight, it takes them years before some of these stores will see profit, hence they are there for the long term and they are not there on a gamble.
Again, personally, I would not invest in the Surat Basin. Any company that is renting out furnished accommodation on a large scale is not there to stay. I am talking from years of experience investing in mining areas here, I am not saying any of this light heartedly.
What happens if your property all of a sudden sits empty in 4/5 years time, remember your not the only one thinking of investing in these areas. You may have had all the capital growth in the world in the short term but if it goes empty, you wont be able to sell it, your capital gain is gone and you are still paying interest on $400,000. Your leverage to borrow more has just been reduced significantly whilst you burn $30,000 cash every year on a vacant property.
Ultimately the choice is yours, however, I know where I’m putting my money in the years to come.
Portfolio PI wrote:shoooshoo wrote:hi guys i heard that dalby has 200 vacant house & land packages that they cant rent because they flooded the maket, is this true?Hi Shooshoo,
There is a lot of land on the market in Dalby, as well as 97 advertised rentals on realestate.com.au
Here’s the land sales for the previous years:
2008 = 195
2009 = 176
2010 = 145
2011 = 15 so far recordedthis would suggest that a large amount of new homes could be available, however just not on the market for rent due to this crisis. Im not saying that there are 200 homes available but even 100 homes for a town that size is a lot of properties to be available for rent.
Shooshoo i would be staying out of the Surat Basin. I really don’t think it is all it is cracked up to being. It is situations like this that you mentioned where investors take marketing firms at face value who are only trying to line their own pockets and never wanting repeat or referral business and they then come unstuck as they aren’t telling the purchaser that the only limit to the number of houses they will build in the area is how many they can sell.
I would be sticking to the Bowen basin still, chase stability, and longevity in your investment. Unless you can afford to potentially have a property that fluctuates in value all the time as well as run the risk that it may be empty in 5 years time then keep to some key areas. Places where long term work forces will stay for the lifestyle as well.
You need to think of the family model. If a town can sustain a family model, that is education (including further education), work & lifestyle, then the region will grow and prosper, especially in the next 10-20 years in QLD as south east QLD struggles to provide infrastructure, and a lot of the new jobs and government infrastructure moves to regional QLD. If areas can ONLY provide work, people don’t stay, and that makes for an unhealthy investment be it property or business.
Look for areas where large companies are going which indicates longevity. Companies as in Woolworths, Stocklands & Lend Lease etc. In Emerald there is a $120m woolworths shopping complex being constructed, this is their second supermarket in Emerald. Harvey Norman are going in etc. In Mackay, they are nearly doubling the main shopping complex (Canelands) from 39,000 sqm to 70,000 sqm including Myer. West Gladstone is having a new Woolworths complex being built at the front of a new estate. Amidst such an abysmal retail environment, these companies are investing there money in these areas. They conduct a more in depth due-diligence than any residential property investor ever will in my opinion. These companies don’t make money overnight, it takes them years before some of these stores will see profit, hence they are there for the long term and they are not there on a gamble.
Again, personally, I would not invest in the Surat Basin. Any company that is renting out furnished accommodation on a large scale is not there to stay. I am talking from years of experience investing in mining areas here, I am not saying any of this light heartedly.
What happens if your property all of a sudden sits empty in 4/5 years time, remember your not the only one thinking of investing in these areas. You may have had all the capital growth in the world in the short term but if it goes empty, you wont be able to sell it, your capital gain is gone and you are still paying interest on $400,000. Your leverage to borrow more has just been reduced significantly whilst you burn $30,000 cash every year on a vacant property.
Ultimately the choice is yours, however, I know where I’m putting my money in the years to come.
hi Josh,
thanks for your response, very appreciated. However, i dont see much difference between the surat basin towns like Chinchilla, and Emerald in the Galilee Basin. Except Emerald has about 10,000 extra population. Chinchilla is also getting a Woolsworth, McDonald’s, etc. How do you know both these towns wont have over supply in the coming years after construction is done on the developments?
hi Josh,
thanks for your response, very appreciated. However, i dont see much difference between the surat basin towns like Chinchilla, and Emerald in the Galilee Basin. Except Emerald has about 10,000 extra population. Chinchilla is also getting a Woolsworth, McDonald’s, etc. How do you know both these towns wont have over supply in the coming years after construction is done on the developments?
[/quote]Hi Shooshoo,
In relation to long term operations, coal mining is a lot more labour intensive than Coal Seam Gas industries. Once the plants are operational the workforce that is needed is minimal, also the sub contracting companies and suppliers and services are a lot less than coal mining. With coal mining, they are using machines that breakdown and need new parts etc on a large scale.
This has an impact on these areas long term I believe
Josh
hi Josh,
very interesting, yes i see your point now about that. Although the mines going up are in Alpha, which is 160km away from Emerald, and the mining companies are only going to allow the miners to be stationed 100km from the mine, for safety reasons.
shoooshoo wrote:hi Josh,very interesting, yes i see your point now about that. Although the mines going up are in Alpha, which is 160km away from Emerald, and the mining companies are only going to allow the miners to be stationed 100km from the mine, for safety reasons.
Hi Shooshoo,
The location of employees for the mines in alfa has never been of concern for me, I would assume that they will go into camps out there with fly in fly out.
However that is for direct employees. Maintenance contractors, services, supplies etc are all based in Emerald along with the main mining companies (hasting deerings, Cat etc) are all based in Emerald and Mackay. By the demand on these companies alone with the alpha mines and mines locally that are currently operating and expanding in many aspects, I see a lot of growth occurring in Emerald.
If the mine chooses to use emerald as a base for employees, which it won’t to a large extent I believe, than that is just a bonus! But for me, Emerald is a solid, steady, secure performer.
Shooshoo, are you after rental yields, Capital Growth or longevity? I know that most people would want all three, however this isn’t always possible. What time span are you wanting to invest in regional QLD for? Is it important that you are cash flow positive to a large extent or are you happy for added security and being cash flow neutral for the first year?
Cheers,
shooshoo…
here is an exert from the alpha coal projects EIS…
The Project will accommodate the majority of the construction and operational workforce in an on-site accommodation village within the Project boundary. The workforce is anticipated to be predominantly fly in, fly out (FIFO) due to the location and distances to population centres capable of accommodating such a large workforce. The Project will also have drive in, drive out (DIDO) opportunities for some local residents, and bus in, bus out (BIBO) opportunities from key regional centres. FIFO workers will be collected from key regional centres throughout Queensland based on workforce sourcing realities at the time, and flown to Alpha aerodrome for their work rotations. FIFO workers will be bussed to site from the aerodrome and back to the aerodrome after their work rotation. Hancock Prospecting Pty Ltd (HPPL) (the Proponent), prefers to hire locally and regionally but has designed a mainly FIFO project with on-site accommodation in anticipation of the high likelihood workers will need to be sourced outside the region.
they estimate 15% of the workforce will be drive in drive out or bus in bus out from emerald
I only have negative geared property , so I’m running out of cash flow, so need at least neutral geared. But the bank always assess your DRS with an extra 2% interest on the current rate, so positive is better. I’m flexible about the kind of return I want. If I get a property with positive cash-flow that doesn’t grow, that is fine, because in Melbourne I have the properties that are going to grow in capital. The other option would be to get. Neutral geared property that would grow. So as a long term plan, buy one positive geared, and one negative/neutral geared, to balance each other, and keep repeating the process for the folio to grow. Unless I wait years and years, or get a massive wage increase, I cant seem to think on how I can build my property port folio quickly, without cash-flow positive geared property. So as an example buy one in Dysart, then on in capital city, or larger regional centers, What do you think?
shoooshoo wrote:I only have negative geared property , so I’m running out of cash flow, so need at least neutral geared. But the bank always assess your DRS with an extra 2% interest on the current rate, so positive is better. I’m flexible about the kind of return I want. If I get a property with positive cash-flow that doesn’t grow, that is fine, because in Melbourne I have the properties that are going to grow in capital. The other option would be to get. Neutral geared property that would grow. So as a long term plan, buy one positive geared, and one negative/neutral geared, to balance each other, and keep repeating the process for the folio to grow. Unless I wait years and years, or get a massive wage increase, I cant seem to think on how I can build my property port folio quickly, without cash-flow positive geared property. So as an example buy one in Dysart, then on in capital city, or larger regional centers, What do you think?Neutrally geared properties (after tax) are easy to come by in Qld. Do you have any tax that you can claim depreciation etc or is your tax already offset with your other properties. The neutrally geared properties usually convert over to well and truly positively geared within a couple of years in regional Qld with rental increases.
In Dysart for example, if you start at a 10.5% return gross, you come down to approximately 9% net return before interest. Assuming current rates @ 7%, leaves you with 2% return before tax on that property. ($10,000 CF+ on a $500,000 property). you may assume some rental rises etc, so you may be better off in the long run, this is just a scenario on what seems to be going at the moment with leases in place. Its a good result, that tops the bank up by $10,000 for the other properties which are costing you, however, I would look more strategically if you can afford a little less rent to start with as you will find CF+/neutral properties in QLD that will grow in capital also. Creating the best of both worlds for you at once, without having the headache of buying two properties to produce essentially 1 result.
If it was me buying in Dysart and or Moranbah, I would be cautious of the market, I am not saying it is going anywhere, in fact I will assume is will remain quite strong, it is however a bit more volatile as it relies solely on mining. Mining as a whole will be great and prosperous for Australia’s future. However when you are in towns like these you need to be aware that a change in direction or plan from just one company can have a significant negative or positive impact on the housing market. I would be looking at properties in these towns with the possibility of value adding immediately (subdividing, renovating etc). Unfortunately every man and his dog have already thought of this so you will pay a premium for properties that you can do this to. If you are time poor than this may be hard also.
Before I go further, do you have tax that you can offset or has this been done already for you with your current properties?
Portfolio PI wrote:shoooshoo wrote:I only have negative geared proper…….Before I go further, do you have tax that you can offset or has this been done already for you with your current properties?
hi Josh,
thanks for the info, as for your question, i have calculated the tax already. As for your remarks on Dysart and Moranbah, yes they have only the mining to depend on, but from what i can see this is something that the government is backing heavily, as coal attributes to 25% of australia’s commodities export, i heard that there are mines opening up in dysart as well, but need further information. as for Emerald, i’m not yet convinced that its going to benefit much from the mines happening near alpha, specially now that you told me those numbers on the work force.
Hi shooshoo
I will get you the information for Dysart as soon as I have completed my analysis. In essence what I showed you was proof that Emerald will be the service hub for 4 potential mines which will all individually be nearly the largest coal mines in the world. It provides lifestyle and services that the smaller towns don’t. It may not be for you which is fine.
Dysart is attracting some really great rents, There’s not a lot for sale there as it is small and things all throughout Central QLD are moving fast so keep an eye out for what it is you want and when you see it jump on the opportunity as quickly as you can in those areas.
There are 2 feasibility / pre-feasibility studies underway plus a concept plan for new mines near dysart along with 1 expansion pre-feasibility study underway for lake vermont mine all to the north of Dysart.
To the South there is a $200m new coal mine from middlemount coal with an EIS for the $100m stage 2 expansion. Also Anglo-American are conducting a pre-feasibility study for a new mine in the south.
I haven’t got to their publications yet however if time is of the essence for you check out the following companies:
1. anglocoal.com.au
2. jellinbah.com.au
3. macarthurcoal.com.au
4. bhpbilliton.com.au (saraji mine)I’ll have all my research done on this shortly (I didn’t make it to Dysart on my Mackay trip however I will be heading there from Emerald shortly) I have been to Dysart numerous times so I do know the area. Everything has been very busy especially dealing with Central QLD markets so I will do my best to have as much information for you as possible as soon as I can.
hi Josh
thanks again for your information. I havent ruled out Emerald, just not yet convinced about it, where are the four mines, are they all in Alpha, and do you know the amount of people who are going to work their on an ongoing basis?
Also i just read your entire blog about the Surat Basin and Gladstone, very good stuff. You dont have the work force graphs for the surat basin regions as well as emerald do you ?
shoooshoo wrote:hi Joshthanks again for your information. I havent ruled out Emerald, just not yet convinced about it, where are the four mines, are they all in Alpha, and do you know the amount of people who are going to work their on an ongoing basis?
Also i just read your entire blog about the Surat Basin and Gladstone, very good stuff. You dont have the work force graphs for the surat basin regions as well as emerald do you ?
Hi Shooshoo,
yes there are 4 planned for Alpha. they are all planned to be the same size so that makes approximately 9000 – 1000 people approximately should all the mines go ahead. That’s just direct employees, contracting/service companies in Emerald would expand significantly also, providing a long term flow on affect throughout the town/region. I am working on similar information that I posted for Gladstone for people now. It is a bit harder for these areas as there are more projects to research compared to Gladstone.
GLADSTONE UPDATE
It seems the Gladstone council and QLD State government have come to terms with the social and economic impact of the LNG boom and have accepted the fact that GLNG will house 48% of its total workforce in Gladstone itself, not on Curtis Island as originally planned. I would assume that other companies will follow suit here.
This advancement significantly reduces the risk that was apparent in the local property market with the initial EIS proposal for accommodation.
I thought I would update my findings for you all. I am in negotiations with a few builders here so I will let you know of my outcome to see what investment opportunities come up. Rents are going strong here. For a 4 x 2 x 2 house fully furnished you will achieve $1000 per week easily, with increases every 6 months! That’s a good 10% return pretty much with some strong capital growth in the coming years. None the less, I still believe it is a market that should be watched closely should you decide to invest there.
Josh
Thanks Josh, just read your blog entry on Gladstone on your webpage blog.
shoooshoo wrote:Thanks Josh, just read your blog entry on Gladstone on your webpage blog.I was just thinking that this might be a good option for you, I still recommend to watch the market there closely, however if you are comfortable with it then it is worth exploring. I am working with a builder where we can provide really good quality H&L’s at approximately $500,000, furnish them and achieve $1000 per week rent. After costs this could be approximately $9000 CF+ before depreciation is taken into account.
Is this the type of cash flow you were after?
Yes, Yes, Beautiful cashflow!!! flowing like honey in a river!
, much better than the purchase of 550k and getting $420 a week in rent, down here in melbourne…hahaha what a joke!…then again i bought that without knowing all this beautiful positive geared properties you can buy!! I increased the rent by $20, to $440, and the tenant thought it was too much and left, haha, we got tenants straight away thought, on the 14th the current tenants are leaving, the 15th, they are cleaning the house, and the $16th the new tenants coming in.shooshoo
that’s amazing! a high turnover of tenants by the sound of it. In regional QLD you shouldn’t have those types of issues in most places. If you would like more info on what we are going to release just send me an email and I can send all the information through to you as soon as I have it packaged together tomorrow. I am very excited about the builder that we are using as he does a great house and his price is really really good!
Regards,
I can get a house and land package in chinchilla for about 430k and get rent return of $750 a week. but Gladstone is more safe investment , but you are investing more as well 500k is more than 400k. I’m not yet convinced about chinchilla with the amount of work force. I think it will be good for the next 5 years, after that not sure, it’s the councils job to keep the tab on not over releasing property. What do think the median property price is going to be in these towns in 5 years?
Hi Josh and everyone
Have not been on the Forum for a while – Josh Interesting that you have undertaken this trip – I did a similar one mid July travelling thru Toowoomba, Dalby, Chinchilla, Miles, Wondoan, Blackwater, Emerald, Capella, Clermont, Moranban, Nebo, Dysart and Middlemount. I did not get a chance to stop in Mackay, Rockhampton or Gladstone perhaps on my next trip. I have to say you have provided great info Josh although I don't totally agree with all your comments but that's the beauty of being individuals and having differing opinions.
When it comes to the Bowen Basin – Moranbah and Dysart appear to be the epicenter of activity – both rents and prices have jumped dramatically in the last 6 to 8 mths so I am wary of the market right now – ( I have watched this market for the last 12 months and I am in the process of having a duplex built in Moranbah on a block that I purchased in Feb 2011 – it has worked out to be a great investment, I have a great builder up there – Total cost $800k with a rental return of $3500 per week for both units)
I am wary of Emerald – just based on Supply and demand of current accommodation and distance from the mines particularly if a time or distance constraint is put in place on workers – Eg DIDO or BIBO no more that 100 kms or 1 hr drive from the mine site.
Also workers currently seem to be based in Motel accomodation – almost impossible to get a room when I was up there I was so lucky to get a room on a last minute cancellation – Thought I was going to end up sleeping in my emergency tent or the car at one stage.
My personal opinion is that Chinchilla and Miles are worth watching in the Surat Basin particularly when a couple of the new mega mines start in the area – I feel that Blackwater is a better prospect than Emerald for cashflow positive properties with the International coal centre being then plus more infrastructure coming into the town (what is your opinion and what does your research show?)
All in all its an interesting part of the country and I will be adding a couple more properties to my portfolio up there over the next few years but I will be proceeding with caution.
Cheers – keep up the good work
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