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Property, Realestate, property investment, home loans>
Resource boom fuels property demand
February 24, 2006
FREE PROPERTYHELP NEWSLETTER: Issue 1
Disclaimer: This information is not meant to be taken as
financial advice. It is meant to provide you with an
educational starting point and I strongly advise that you
undertake your own due diligence (thorough research) before
purchasing properties in these areas or any other.
*The resource boom in Australia has created a flow on
effect in the property market. High paying jobs in areas
where there are lots of mining jobs usually translates to
high demand, low supply, low vacancy rates and excellent
rental returns.
If you are looking for cashflow positive properties here
are a couple of areas that you could consider:
*Moranbah (QLD)- One of the main areas to boom
significantly in QLD. This is a town which has a
population of about 7000.
It is still possible to snap up houses for about $300,000
that return around $550 to $600 per week rent. The Residex
Predicted Growth Areas report will tell you if places like
this have capital growth prospects as well.
*Cloncurry (QLD)- This mining town has a population of
only 2700 but rental demand is high and properties are
receiving exceptional rent returns. You have to be quick to
snap something up here because the cash flow investment
gurus are ready to pounce whenever something promising hits
the market. Word has it that new mines will be opening in
the not too distant future.
*Kalgoorlie (WA)- This is my personal favourite because it
is a larger regional city that has a population of about
30,000+. You can still find cashflow positive deals there
if you look hard enough.
I bought a Kalgoorlie unit in 2005 for $145,000. The
tenant is on a 2 year lease with a 2 year option. The
property has a NET rent return of $210pw ie: We don't have
any costs apart from the interest only loan. Rent gets
paid direct to my account and there is no need to use a
property manager. The property is reasonably new and has
good depreciation benefits which gives us a healthy tax
return.
Note: Please, please, please look into getting a
depreciation schedule done if you get an investment
property because over several years it can return tens of
thousands of dollars to you in tax benefits. It is amazing
how many investors do not take advantage of this.
Go to www.realestate.com.au and do a search to see what is
available. You can also click on the rental tab and search
for rentals in these areas to see how much supply there is
and also check what current rent returns are.
Here are some pros and cons for investing in mining areas:
PROS:
-Low price high rent (if you get in early)
-Usually difficult to build so supply stays low
-Miners get paid well and can afford high rents
-Miners don't want to travel too far to work
-Support industries are needed to service miners
CONS:
-Reduction or loss of rent if mines have a short life
-Harder to get loan when population is under 10,000
-Competition from other investors when a rush is on
Some suggestions before investing-
1. Research, research, research.
2. Find out how many mines are in the area.
3. Find out how long the mines are expected to stay
operational.
4. Find out if there are other industries that will
continue if the mine/mines shut down.
5. Call realestate agents to ask questions and cross check
the information that they give you.
6. Call a shopkeeper or someone independant, strike up a
friendship and ask for some local knowledge.
7. Call the local council or look up there website to get
more information on the town.
8. If you get to building inspection level- Get a local
inspector and ask him extra questions about the town and
its prospects.
9. Don't over-capitalise- I do not like to exceed the $300K
purchase price.
10. Try and get a property with a long term fixed lease.
11. Use internet maps, Google earth, ABS, local Council
sites to find out more about the area.
12. Don't buy anything that you will make you stay awake at
night worrying.
Well that's enough for this first newsletter. Remember to
email me with requests if you have any topics that you
would like me to cover in future newsletters.
Happy investing
Todd Burns
toddb@tpg.com.au
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