I visited Sale, did some research, inspected the unit (from outside only), did some number crunching and came to the conclusion that unless it can be had for appreciably lower than $60k, it would not be a good investment for me.
But it might be OK for someone else.
ABOUT SALE
- Pop about 13 000. Slowly declining and predicted to fall further.
- Demographic challenges: ageing population, not much for young people
- Main street: well-presented, busy, business seems OK
- Main industries: RAAF, Bass St oil, farming. Service centre for surrounding.
- Future opportunities: Port of Sale?
- Threats: Status of local hospital (risk of downgrade)
- Socio-economic status of pop: OK - about same as Traralgon, better than Moe & Morwell.
- Relativity to other centres: Bairnsdale & Traralgon growing faster. Traralgon is the major town, more central to Latrobe Valley and closer to Melbourne.
- As a town I liked it a lot (not that this is relevant to investment decisions!)
UNIT ITSELF
- Walkable to town (25 min), lake (15 min), hospital (5 min) and local shop (end of street).
- No steep steps, nearby ambulance station and community bus stop not far away makes it idea for seniors
- In quiet complex with low annual body corp fees
- Fantastic architecture. Very good use of natural light. A small reno would do wonders and create a funky modern pad.
- Good sized yard (which could be made lockable), enough room for a cat and outdoor living area.
- Good size kitchen, seperate laundry, hall and side door (off rear of carport) makes it one of the best 1br units I've seen.
- Neighbour reports quiet complex
RENTABILITY AND COMPETITION
- Appears to be a complex of 54(!) small units opposite hospital. Also 16 in this block.
- Property manager says 2br units rent better than 1br units.
- My observation is this 1br villa unit could have many features that the cheaper 2br flats in York & Stawell Sts don't and it could still be a good renter.
- 1br units rent for $80pw upwards (compare to $65pw for Moe). 2br units around $100pw. $100 could possibly be obtainable for this one given its quality. Some furnished units to let for around $130pw.
- A 2br unit is currently advertised for sale for about $74k. Past sales data is sketchy, so this one is hard to value.
REPAIRS NEEDED
- Mainenance has clearly been lacking, with water damage conspicuously evident (it helped that last weekend was extremely wet!).
- Some windows had cracked glass and rot in timber. Need repair/replacement.
- New downpipes needed
- Guttering and flashing almost certainly need replacement
- Ceilings in lounge in good condition, not sure about other rooms
- High risk of dampness in wall cavity and plaster (given skirting board and carpet had been removed in lounge and there was water on floor near wall)
- Some cracking in concrete slab (but probably OK)
- Kitchen & laundry looked fine. Don't know about bathroom or bedroom.
- Status of HWS, stove and gas heater unknown
INVESTMENT WORTHINESS
- Even with a slim allowance for maintenance, holding costs would easily approach 40% of gross rental income (ie $2000 out of $5000). And unlike mortgage payments (that will fall in real terms) you can expect these costs to rise at the same rate as CPI (and rent).
- Due to Sale's demographics and high costs it might not necessarily be a good buy and hold as cashflow isn't great and neither is growth potential. There are also issues of control that you don't have with a seperate house.
- However if procured for a cheap price (say $45k), and $10k was spent on renovation and it could be resold for (say) $80-90k then it could be a viable investment for the doer-upper. But if it went for $60k the margin could be too small for anyone but someone who is able to do it all themselves.
- It could however be an excellent choice for an owner occupier who is prepared to do some work and wants to own rather than rent. They would probably find their mortgage costs little more than rent, with the FHOG providing the entire 10% deposit.
Rgds, Peter
