Rocky , The next Big Thing ??

Warning . The information in this post is my personal opinion. I have no qualifications as a financial advisor or as real estate agent. Please conduct your own enquiries / due diligence Before you act on any information.

Where I have quoted figures, they are to the best of my knowledge, correct, However there is no warrantee that they are correct.



There has been much debate over regional areas of Queensland ( in particular the lower coastal areas ) over the last month or so . As well, people have been talking about how the market was topping , and how you couldn’t buy anywhere with the expectation of capital growth.

Before we get onto specifics , I need to state that there are lots of different ways to make money in property. I am not stating how I am approaching things is better than other ways, but as a result of my experience over the last few years , it is One Way I am approaching property investing in order to make money in the current climate. ( I am also in the process of getting approval for A dual occ in Sydney’s North ),

I have bought IP's in Rockhampton because they are giving a good yield and I expect them to give good short term capital growth.

What moves Markets

While there can be no denying that underlying fundamentals are important in determining property prices ( in particular in the long term ) , in the shorter term prices cannot be explained purely in terms of changes in the “fundamentals “ of an area. The is no logical explanation for areas like Logan doubling in value in about one year outside the explanation offered by the that of the interaction between demand and supply. Some people raise the spectre of “ southerners buying up big “ and ”Investors driving the market” as a reason for the rapid changes in prices, but the reality is that many areas have undergone similar price changes in the past . There are ( IMHO ) two reasons why some of the cheaper areas are coming under greater scrutiny. One is the awareness of a large group of investors of the attraction of cash flow properties as an attractive investment medium. This has mainly been driven by the success of Authors like Robert Kiyosaki and John Burley. The second is the presence of the Internet, which has made previously remote areas readily accessible to most active investors. Given the preoccupation many people have with wealth creation I think that areas offering high yield will continue to come under ongoing scrutiny. I don’t think this is going to go away over night.

In Mt Druitt in Sydney ( it’s a hole ) , “investors are buying dumps giving yields of five percent , and in Logan the same investors have doubled prices in the last year , so current yields are closer to 6 % ( and they’re still buying )

The reason I started looking at Rockhampton about four months ago was the high yields available there. You can get yields up to 8- 9 % ( up to three weeks ago ) though prices have probably already moved about 5-10 K in the last two months.

Waves
While most people seem to classify properties as either Capital growth or Cash Flow , from my experience over the last few years , most cash flow properties will also undergo significant capital growth at certain times of the market. I have observed that the traditional Capital growth areas start moving first, and as the Wave moves out through various areas . It reaches the traditional Cash flow areas later in the cycle, which ( as most people would agree ) is where we are now.

The out skirts of Brisbane started moving about a year ago, and subsequently the wave has been moving up the Queensland Coast. In humble my opinion the wave is just about to hit Rockhampton. As was discussed in a recent post on Maryborough the initial part of the wave has already gone through there.

Between Brisbane and Rockhampton , I looked at three towns to give me an indication of what might happen in Rockhampton . Gympie, Maryborough and Bundaberg like Rocky , are not on the Coast.

Gympie , which is closest to Brisbane , started moving late last year , Maryborough followed a couple of months later, and more recently Bundaberg started moving. Gladstone, between Bundaberg and Rockhampton does have strong fundamentals, started moving earlier because of the amount of money being invested there.

Gympie , Maryborough and Bundaberg all moved up 30-50 % in a fairly short period of time.

Rockhampton is the next major city up the coast.


Rockhampton

It is a City of some 60,000 people. It is the major city of it’s region. It is on the tropic of Capricornia , and about 30 mins inland from the the Capricornia coast , which has several smaller towns , including Yeppoon and Emu park. Two years ago these areas offered good yields but they have moved significantly since then.

Rockhampton has an airport which is serviced by Qantas and Virgin , with several flights a day. I’m not sure if it has Bunnings , but it does have Office works. It also has a University, and two large regional shopping center’s. It has the area's major hospital and numerous schools , both public and Private.

While it is not attracting the investment that some Q’land Cities have attracted, it is not in the basket case category of places like Mt Morgan ( recently promoted on TV as a place to buy cheap properties). Given the widespread publicity about the Stanwell magnesium project folding , there were few people actually employed there . Given that we are in the middle of a major drought ( Rocky is “the Beef Capital of Australia “ ) and one of the two abbatoirs is currently closed , the first thing I noticed when I started researching IP’s there, was the low vacancy rates. The first two IP’s I bought came without tenants. One had a tenant in place prior to settlement and the other one was rented within two days of settlement.

The thought has occurred to me that it is actually the lack of new house construction that is keeping the vacancies low. There are new houses being built , but these are on the outskirts of the town and cost about 200k min to buy. ( so I’ve been told ) . The IP’s I’ve been targeting are considerably cheaper than this, they are central to schools and shops , and they aint making any more like them ( not sure if that a bad thing or a good thing ) but it does limit the potential of oversupply of cheaper IP’s.

When I first went up to Rockhampton in July, agents were able to show me numerous houses , including some that had been on the market for , in one case up to one year ( this one was on the intersection of two busy roads , in a lesser part of town ). I rang up the agents and asked what had happened to the thirty odd properties I saw on that visit and one week later about 25 % had sold. On our last visit , several properties we had discussed with agents had already sold by the time my wife got up there, and one week later , all of the properties which we thought were of interest had sold. Agents are now complaining of problems getting listing, though they are still seem able to find some at the present. Of the first thirty I saw about half of these would have been very good buys in retrospect

Having seen a lot of houses up there now, I don’t trust the ability of most of the agents to adequately describe a property. One place I was told needed some minor cosmetic work , had strategically placed ventilation holes in the floor of the Bathroom , and each stump at the rear corners, was about six inches lower than the central ones just to name a few things.

While we have just bought one sight unseen ( first time ever) it is not something I would recommend there unless you really know the market.

Parts of Rocky are flood prone. Some investors do target these properties as they offer higher yields. I avoided them. You can get a flood map off the local council for under 10 dollars. This is necessary as ,again , not all agents accurately describe whether a place is flood prone or not . Both myself and another forumite where reassured by one particular agent that one particular property was not flood prone.

In previous cycles , Rockhampton has followed the same trend as Gympie, Mary ‘b and Bundaberg. As I also have an interest in Logan , I compared rocky with Logan , and in previous cycles Logan moved first and subsequently rocky caught up and overtook it.

The somersoft leading indicator

I have mentioned before my belief that we hve a fairly educated group of investors on somersoft, and if you look where we're buying , then the chances are you should look there as well.
When I started to discuss rocky with people on the forum I found that at least four of us had already started buying up there, independently of discussion with other people. The same thing happened in Tasmania and Logan , with forumites buying prior to the herd decending on the areas.

I have included two charts ( fingers crossed ) . These both chart median average prices since 1975. I couldn’t change the bottom axis to the year, but 1 is 75 , with the last year being 2003

The first one compares Gympie, Mary ‘b , Bundy and Rocky . as you can see they basically run parallel to each other. As I stated previously local enquiries indicate the three closer to Brisbane have already moved , and I can see no logical reason why rocky won’t follow them in this cycle.

19in_from_coast_towns.jpg


The second one compares Logan with Rocky . I made this chart about four months ago , when I was first looking at Rocky so the chart of Logan doesn’t catch the sales of the last few months. In this period, prices have moved to the point where there is very little if anything for sale below 160K. When I bought in Logan I was expecting prices to double over the next two years, however it has doubled in one year. In previous cycles ROcky has moved more slowly , but given the interest in High yield properties, and the speed the previously mentioned places have moved, I expect rocky to move 30-50 % in a fairly short period of time. It has already started moving.

19Three_suburbs.jpg


see change
 
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Fantastic post seech......it gets a 5 star rating from me.

Due diligence is so important and your post will help a lot of people understand what they should be looking for.

Thanks. :)

Ruby
 
See_change,
So you have finished buying, your post is similar to a x-tier marketing blurb. It is obviously in your interest to continue to push prices up in the area and encourage interest particularly from the southern sector.
I reckon this thread beongs in the caveart emptor, (moderators ?)buyer beware, area.
I'll counter with realist arguements when I have some more time to spare, coupla days, had relos sell up there 6 mths ago to a NSW investor, maybe you bought their place :D
You cannot compare Logan with Rocky, entirely different dynamics. Maybe you should ditch medicine and go into marketing.
Do your due dilligence folks.........
ab
 
Nah, stuff it I'm sick of this.......

go to rocky and buy buy buy as see_change says......

just remember I said it was a dud in my opinion ....thats all.

ab
 
G'day astroboy,

To be fair, Seechange did start his dissertation with this:-
Warning . The information in this post is my personal opinion. I have no qualifications as a financial advisor or as real estate agent. Please conduct your own enquiries / due diligence Before you act on any information.
Seechange doesn't appear to be offering property for sale, thus moving the thread to CE is (I believe) inappropriate.

His post is to foster discussion, and to disseminate his opinions that could help others. So were some parts of your replies !!!

Nothing wrong with you posting a warning either, even if it's just an opinion.... but let's keep the tone of the discussion positive, even when disagreeing...

Regards,
 
Originally posted by astroboy
I'll counter with realist arguements

Do your due dilligence folks.........
ab

OK astroboy...

Youve made mention of your disdain with see_changes previous references to Rockhampton ... and have quoted statistics which seem to make sense (unemployment, demographics, population movement etc...)

See_change has posted a very in depth report of his activities in the region, and his reasons for buying there... and he makes a persuasive point for understanding HIS rationale...

You seem to disagree... and promise to tell the rest of us why... but then seem to renege on your promise and instead resort to childish taunts implying people should follow his advice at their peril...

I for one have always appreciated your advice (and have told you so myself in the chatroom...) I am hoping you can abide by the spirit of your original post in this thread and illuminate our members as to why an experienced investor like yourself believes this thread is not worthy of your time... And why the region see_change refers to is not the right place to invest...

I for one welcome your reply...

Best wishes,

Jamie :p
 
Hi all,

See_change, I'll agree with Ruby, that is a 5 star post and thank you for spending the time and effort in putting those details together.

Astro, SC presented facts and figures, you obviously didn't look at them very well. Do you spend any time referring to the facts before you attack??? If you think SC is wrong then a few numbers to help prove your point would be more insightful.
Of course everyone would be advised to do their own due diligence before making any purchase as you suggest, but that also holds for not doing anything by listening to the doomsayers.

bye
 
Hi Astroboy

I have finished buying, having exchanged on the last one about one week ago, Seven in total . Four are yet to settle. If I hadn't finished buying , I'd still be looking . If I was still looking I wouldn't have made this post. I am yet to met anyone on this forum who has gone out and said "buy in xxxx " when they haven't finished buying in the area them selves.

In reality I have been discussing Rocky with many people in the chat room over the last weeks, prior to completing my purchases.

As I said in my Post

there are lots of different ways to make money in property. I am not stating how I am approaching things is better than other ways, but as a result of my experience over the last few years , it is One Way I am approaching property investing in order to make money in the current climate

Considering the number of posts that go along the lines of
''Hey guys I think Cairns is a great place to buy " but then fail to provide any backup for their claims , I thought it would be a worthwhile exercise to provide my rational for why I was buying in an area, which you have previously indicated ( if my memory serves me correct ) that you don't think is an area you would invest in.

Everyone is entitled to their own opinions. I am . You are. Just because you disagree with mine , does that mean I can't give mine.

I made a serious attempt to provide justification for my purchases. All you have done is resort to sarcasm.

Yes . Logan is very different from Rockhampton . It is within 15 mins of a major city centre and if I could buy cash flow positive properties there now, I would be buying them there in preference to Rockhampton. But there arn't any left there now. They all went at least six to nine months ago. Three years ago you could get yields of 15 % in logan and there were hundreds of houses for sale.

I could sit on my hands and do nothing for the rest of the cycle, but I am still interested in making more money in the current cycle.

I have no doubt there are places in australia that offer better opportunities than rockhampton at the moment , but if I had to spend the time looking to find " The Best Place " , I would probably never end up doing anything. I am still looking for other places to buy at the moment.

see change
 
BTW Astroboy

I did discuss the ethics of making this post with several people ( including moderators) prior to posting , knowing that some people could interpret it ( with possible justification ) as me attempting to hype up an area that I have bought in .

Unlike one high profile person , I am not selling at the same time I am recommending people buy. I am not attempting to sell property to other people in the guise of providing "education" .

I am not about to launch a seminar or in anyway benifit from property investing except through the profits I hope to make through properties I buy.

I have benifited significantly as a result of information / education people have provided me on this forum . I look forward to you future contributions.

See change
 
I agree that Rocky will provide capital gains over the next few years. See my recent post Rockhampton, Mackay, Proserpine Cairns. I recently made a purchase in Rocky, 3 x 2 bed 2 storey brick townhouses for $246,000. Yeilds of btw 7% and 8%. My brother who lives in Rocky and has been investing in property for some years, but not in Rocky, recently started investing in Rocky. Thats a good sign, although one investor does not make a market.

Where else can you get good yeilds in a medium to large town. Southern investors, such as me, have little choice when chasing yeilds but to go to places such as Rocky.

Of course all this is academic to anyone who is simply after yeilds. After the purchase, any unrealised capital gain is only a paper bonus and irrelevant.

I also bought at an Auction in Mackay last Saturday. There were 6 southern investors bidding by telephone. I was told they all located then property over the internet. I strongly believe that the high yeilding properties in north QLD will be gone in 12 months. Capital gain must follow. It is all about supply and demand.

Thats my 2 cents.
 
Ok fine,
You feel the graphs were so compelling I need to back up my feelings. Ok no probs, you'll have to give me a couple days as I said originally.
I am very busy, a little out of my comfort zone and not property related but I have (to me ) a big deal happening ands thats why I haven't the time to backup here and now.
See_change what can I say ? Very slick, very calculated. If that dosent ring bells what will ? This wasn't a simple, I did this & I think its worth a look post.
I have a good experience with the area,Rocky,having spent quite a bit of time there over the last 3 or so years, working with ppl who grew up there and having relos with investment interests there.
S_E you should have made more of the fact that this is *really* a long term buy and hold proposition. Be expected to see your valuations go backward and be expected to see possible long vacancies.
Who do you think are selling now ? Locals who wish to stay in the area and have to pay top dollar to upgrade ? Or investors (local or otherwise) who can *finally* afford to offload properties that where purchased in the last round and subsequently couldn't be offloaded without realising significant losses.
If those *sigh* who questioned my original post could be bothered to do the research themselves then maybe I wouldn't have to waste time here justifying my position.
For those that commented did I look at the figures, did you *reseach* the figures before replying ??????
astroboy.
 
Staying or moving on, while the timing is good, Rolf? I think there is a bit of strike while the iron is hot mentality at the moment.
Do we have any contributors from the area that want to chip in?
ab
 
Astroboy

I'm sorry if I made my Post too slick for you . All I did was summarise some of the due dilligance that I did prior to buying up there. Having worked as a professional for the last twenty years, when I look into something I try to do a good job of it.

I seem to remember when I've previously mentioned Rocky you've knocked it. I'm sure if I had posted a "have a look at rocky post , guys " you would have done the same as you have with this.

As the charts show Rocky has gone backwards at times, but so have many other places, including so called capital growth areas.
For me this only stresses the importance of timing , and not just time in the market.

Outside accusations of ramping I have only had positive feedback about my post, with some people commenting they'd like to see more posts like this.

I was always under the impression that ramping ( usually applied to shares ) was telling peole to go out and buy some where / thing without providing back up information. That was one of the reasons I did provide back up information. I sorry if I provided to much. Obviously it makes your job of knocking me harder.

I have previously commented in other posts that all the locals think the southern investors are a little bit crazy for buying up there. First time I went up there, all the agents asked me why I wanted to buy in rocky .

They have seen the place do nothing for the past ten years. but so have many other places done nothing for the similar periods of time in the current cycle. Will it continue to do nothing ?

If it does it will be one of the few places in Australia that does.

Many people talk about "doing your Due dilligance " without going into specifics. Well this is an example of what I do during my due dilligence process.

What do you do ?

see change
 
huge *sigh*,, what data were your graphs backed up with see_change, ? ABS stats ? REIQ data ? Historical interest in the area ?
I don't know, your only reference is chatting to agents. I didn't question your ability as a professional, merely commented that it aided you in providing a compelling arguement.
Sorry, you have provided none of the due dilligence that you feel I must provide to refute your claims apart from a couple of graphs (and your chosen scaling can't but help them look good).
Jeez, I know management types that love that stuff, check Dilbert....
What do I do ? I go in on the ground and talk to peeople who live there, I talk to investors that have an interest, I look at the economic prospects and see how the QLD government and other major players view the area, at the very least I look at ABS stats and REIQ data and historic sales data.
What do you do see_change ? You seem to have omitted that fact.
I am also guessing you have the ability to hold long term, there are many others here who want yield but whether they realise it now or not without liquidity they may find themselves in real trouble.
astroboy !!
 
our feelings on rocky.

We spent a week searching for real estate in rocky about 6 weeks ago... I have spent many more hours looking over the internet previously. Unfortunately, our finance didn't come through when we needed it to, so we haven't purchased anything yet. I first looked at properties there on the net in about February, when it seemed to have the best yield in Australia. So, I've been keeping a close eye on it since then. I felt a bit uneasy about buying there, though when i went there. There are a lot of areas where it's quite "unsavoury" to buy. Fortunately, we have relatives there, who have told us areas to avoid. Also, there does seem to be lots of interest from investors and lots of people buying sight unseen. The owners of property are taking things off the market and putting them on again a few weeks later for $20K higher. So, the market seemed a bit "hot" for me. Most of the duplexes and flats have been sold already. I would have been happy to buy anything there earlier in the year. Now, I would stick to houses, so I had access to both the investor and owner occupier markets. My brother owns his own business there and says that most businesses (apart from real estate!!) are struggling, and he expects higher unemployment rates in the near future. (but he also expects a tsunami to hit any day!! So, maybe a bit negative!!). My feeling is that the smart investors have already made their move into Rocky.... and now all the rest are coming in, but it's a few months too late. After spending months looking, we are turning our sights in other directions.
Penny
 
that we can do s_c, but you still haven't told us what your data is based on... how about posting the metrics ? or do I need to do that ? Like I have time at the moment .....this evenings posting is a luxury.
ab
 
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