G'day all,
I have just sold out an IP we owned in Wandoan (future mining town), and made over $110,000K in 20 months.
This was achieved by following and sticking to our plan to enter, manage then exit the property in a predetirmined time frame.
Now that I have some valid experience and solid runs on the board, I am looking to pursue more projects in these areas, but incorporating a shorter time of over 4-8 months, aiming for achieveable profits of $40,000 to $80,000 per project.
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Cheers
Peter
Hi Peter,
Sorry to hijack your post but wanted to say that's a very impressive profit considering the small population of Wandoan (<500?). I know your strategy isn't buy and hold but out of curiosity, I'm wondering why you sold a property that is in the area of what you know is soon to be one of the largest coal mines this side of the world? Would it not be preferable to have kept the property and extract the equity gained and use that to fund future purchases instead?
Regards,
DerekHi Derek,
Thanks for the accolade.
The thought to keep it did cross my mind at one stage, and yes you are right about the site of one of the biggest coal mines this side of world, but we had a plan and decided to stick with it.
Yes it was very positive geared and rented at about $1,000 pw and since the landcourt decision of late March 2012 the final green light has been given, which I figured would happen and most likely, give a boost to property prices which it will.The secret for me before purchasing was actually jumping on a plane and then hiring a car and driving 100's of km checking out towns like Moura (which has active mines there already) and others like Wandoan, Miles, Chinchilla etc to actually get a feel for whats happening out there. Its not a matter of just doing research on a computer screen. This is just proves the point about not just what you pay but the thoroughness of your research and dont believe anyone, not even the friendly REA.
If we had "extracted the equity", then I would have most likely gone into another mining area and did not and do not want all my eggs in one basket (like the guy that bought my place who has 4 properties in mining towns….. that very high risk IMO) also the banks were/are only valuing properties up there around $50K less than contract prices, and that will continue in the foreseeable future as they are concerned about their general exposure to property prices nowadays.
IMHO I believe too many people have believed that property only goes up, unfortunately it doesnt (90/91 for example). Then they see places like Moranbah for example which unfortunately is a bubble waiting to pop and want to jump on board before the train leaves the station. Well same is happening to Wandoan so time to move on and take the profit.
It will not take much to stop most mining companies down tools if China catches even a slight cold, thats the main reason for selling.I would prefer to move my money through a number of places, buying, then adding value then selling for a profit, I will leave the risk of buy and holding (or folding) to someone else, who usually doesnt have a plan to exit. If this means that leaving a small amount of money in it for the next person, thats great as long I am making a profit along the way.
sorry about ramble mate.
Peter
China's need for coal wont stop if their economy slows.
They dont have enough of their own and what they dont take will go to India.
If you had been in Wandoan a bit more than 12 months you would have seen that coal is the smallest part of the towns growth.
The missing link railway, coal seam gas, gas pipelines to gladstone, these are all providing the manpower more than Xstrata.
We identified this when we did our research and bought in Wandoan 7 years ago and this is why we are still holding there.
Wandoan will become the next Port Hedland within 15 yearsHi Peter and scedd
Peter I think I bought your property in Wandoan ( 2 Lawton ST ) and I'm still puzzled why you sold it when you did.
Prices for houses and rents have risen since then and I have that much confidence in Wandoan that I bought one of the new blocks of land that went up for auction early this month.
I will be building a 5×2 executive style brick veneer that will accommodate preferably mine managers first or mine company employees second.
Once this property is built I will be going through the process of subdividing Lawton ST ( 933 sqm ).
The council should allow this as it's a corner block with 2 street frontages.
I agree with scedd that Wandoan is going to boom but I would compare it more to Moranbah than Port Headland with the mines so close to town.
Cheers Zed
Hi Scedd,
Sorry, but China has coal.
http://en.wikipedia.org/wiki/Coal_in_China
As of the end of 2006, China had 62 billion tons of anthracite and 52 billion tons of lignite quality coal. This ranks China third in the world in terms of total coal reserves behind the United States and Russia
Hi Zed, you'll do very well there,
Cheers
Clint
Hi Zed and others….. regarding why I sold when I did.
Well about 5 days ago Glencore Xstrata confirmed they will be putting the Wandoan project on ice for some time if not forever. Thats why I sold the property in Wandoan when I did. I noticed the price of the coal heading south and after some research realised the project would probably not be viable at current rates. Based on that there will be NO railway either and they were the two biggest projects. Yes the coal gas will continue and most likely the pipeline but once that is done in a few years that will be it. The reason for the property spike was the mine which was to have a 30 year plus timeframe which is no more.
I suspect that we could see quite a few property owners there head for the exits over the next 12 months once reality of this sets in. Bit similar to when the Labor party had the mining tax issue and a raft of properties went on the market. We stuck that out as it was obvious that it was a blimp on scale and would be in some way sorted over time.
This will not be the only resource project that ends up being suspended, dumped etc. QLD and WA will bear the brunt of this.
What I have learnt from buying and selling property over the last 20 years is to have a plan to buy, but also to have a plan to exit and to ensure your reasons for exiting are valid. Most people can buy, but most dont do research but they go with the crowd, but most dont know when to get out and most of them get burnt in the process.
GFC 2 is yet to happen, and Bernanke has just made sure of that yesterday and once this does happen, hold on to your hats everything will get hit pretty bad.
One of the reasons for investing in property or anything else is to make a profit and/or income. Most of us do this to fund our retirement, living expenses, end up with no debt etc. In our case we used it wisely and now own our home outright, and have no debt whatsoever. That was part of our plan, which has paid off.
Look I wish you guys well there, but I would be careful not to throw all your eggs in one basket, cause if one comes unstuck the whole pack of cards will come down. It may be prudent to take stock of your assets in these towns and pare back somewhat just in case. I have been down that track as well some years ago, and through some very prudent management avoided bankruptcy.
cheers
HarryPotter
PS re the subdivision of 2 Lawton, I looked into that and thoroughly checked the council LEP and phoned them. It doesnt fit the Western Downs regional planning guidlines. Another reason I sold, I doubt they have changed it. Its all about thorough research.
HarryPotter wrote:is to have a plan to buy, but also to have a plan to exit and to ensure your reasons for exiting are valid. Most people can buy, but most dont do research but they go with the crowd, but most don't know when to get out and most of them get burnt in the process.cheers
HarryPotter
While I agree with your statement to a degree, I have to say; by buying in mining towns you have lost most of what little control a property investor has over the product he or she invests in; TIMING
Mining towns are one of those special places that live in a "virtual reality". By that I mean one company (or the person running it) or the government (or the person running it) can wipe the land values over night without warning.
Playing that game will work perfectly right up to the moment it doesn't and if you are like most investors, who like to play double up, you will get burnt. Getting burnt with $10,000 worth of apples and no one to buy them is one thing, but getting stuck with $???,000 capital loss and mortgage is deal breaker. Doing it once did take some nerve (+1), doing it twice would be somewhat unwise (-100).
Another thing: most people do do research. They just don't know how to do the right research.
The older I get, the more I know how much I don't know.
Modernity Investing
Email MeHarryPotter wrote:I would prefer to move my money through a number of places, buying, then adding value then selling for a profit, I will leave the risk of buy and holding (or folding) to someone else, who usually doesnt have a plan to exit. If this means that leaving a small amount of money in it for the next person, thats great as long I am making a profit along the way.It sounds like "day trading" in property to me, which I think has the highest risks of all property strategies. With property trading you ether have to do a tremendous amount of quality research on each site or you do none and just trade on a hunch.
This strategy requires you to double guess world commodity prices, multi national mining company management, state & federal government policy and potential policy changes, WOW.
How long have you worked with this strategy? 5, 10, 20 transactions? If you want an investor/partner to come onboard there needs to be a strong history of this type of trading, with well documented research and market analysis to offset future property trading risk, if you know what I mean?
Wealth in property is created and maintained by a very simple process:
- Spend less then you earn (profitability)
- Make a margin on your gearing (interest spread & capital growth)
- Balance your risk and your returns between:
- Capital growth
- Rental demand/growth
- Tax credits
So when one of the above three goes soft for a period, the other two offset the risk.
HarryPotter wrote:If this means that leaving a small amount of money in it for the next person, thats great as long I am making a profit along the way.No investor leaves money on the table for the next person, show me an invest that says to a purchaser: "Thank for your offer of $250,000, just give me $240,000 and I will be happy. As the buyer, you need the $10,000 more than I do".
What is actually meant by that saying or concept: By selling now I reduce my risk by getting out now, even though the market has some way to run. Thereby leaving some money on the table for the next guy. Where as you are saying here, you could see a major correction coming and you exited as quickly as practical?
Modernity Investing
Email MeI wouldn't exclude mining towns. What you have to avoid is towns with only one mine or one industry. BHP and Hopetoun is something you want to avoid.
Arnoldus wrote:I'm a bit bearish on Rocky at the moment, there's lots of supply coming online and heaps more in the pipeline, and the council de-amalgamation and ridiculous rates rises for IP holders on top of the mining downturn in CQ, it's hard to see much growth in rents or prices unless there's a big change in fundamentals.Regardless of the number of mines or other commercial drivers, mining adds way too much to a city's economic future for a down turn not to have a major effect. If you take your eyes of the market in question and miss the "STOP" sign, it may take 20 years to regain the lost equity. In my opinion, it's not worth the risk.
Mosqui wrote:I wouldn't exclude mining towns. What you have to avoid is towns with only one mine or one industry. BHP and Hopetoun is something you want to avoid.Take Mudgee in NSW, as an example. I have an interest in 11 rentals there, bought 9 years ago, They have done well, but this year the vacancy rate started to soar, and with it, the days on market will follow as investors pile out. What happened? one of the mines started to let some staff go. Not a lot, but enough to upset the balance. There is no way you could say Mudgee was a mining town when we bought, now things are different.
Modernity Investing
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