Brisbane-Gold Coast Corridor Investment

[Dashio65]

Hi all. Self confessed Newbie here, so sorry if some of the terminology is a bit ambient.

We're a middle aged couple taking our first tentative steps into an IP. We've employed the services of a Property Services Company, who have a system in place for building a RE portfolio. I'm erring on the side of caution going into this, although I have a personal friend who is a client of theirs & is happy enough with what they have in place for him. On top of that, I haven't been able to find any confirmed negative issues with this Company on the net.

What is raising my eyebrows however is their choice for our IP; a brand new House & Land Package at Ormeau Ridge. At first I wasn't too concerned, but the more I research the more I hear the same stories being repeated; very little proposed CG, over-supply of rental properties in the Gold Coast region, and property prices in that area exceeding rental returns (there's actually a thread on Ormeau Ridge in this forum as well).


My question is: is this Company clued into something I'm not aware of, or are they making an extremely unwise decision as to the location of our first IP? It's a long term investment so I can live with slow growth on the property if need be, but the GC rental oversupply is what really has me concerned (especially as Ormeau Ridge isn't exactly Metropolitan!).
Like I said, we're new at this game, and to be honest we're just on the borderline of being able to do it at all, so having this property vacant for any extended period of time has the potential to really put a strain on things.

Anyway, would love to hear some opinions from those who are lot more savy about this than we are!
Cheers all.

 

[capitalist]

My question is: is this Company clued into something I'm not aware of, or are they making an extremely unwise decision as to the location of our first IP?

What's the name of the company? Maybe someone who has dealt with them can provide feedback based on their experiences. To answer your question, i think the company are choosing propertys which give them the biggest kickback from the seller/developer. I would do it independently and i'd also avoid Ormeau Ridge. If you follow my vague advice you'll thank me in the future.

 

[agent007]

Hi all. Self confessed Newbie here, so sorry if some of the terminology is a bit ambient.

We're a middle aged couple taking our first tentative steps into an IP. We've employed the services of a Property Services Company, who have a system in place for building a RE portfolio. I'm erring on the side of caution going into this, although I have a personal friend who is a client of theirs & is happy enough with what they have in place for him. On top of that, I haven't been able to find any confirmed negative issues with this Company on the net.

What is raising my eyebrows however is their choice for our IP; a brand new House & Land Package at Ormeau Ridge. At first I wasn't too concerned, but the more I research the more I hear the same stories being repeated; very little proposed CG, over-supply of rental properties in the Gold Coast region, and property prices in that area exceeding rental returns (there's actually a thread on Ormeau Ridge in this forum as well).


My question is: is this Company clued into something I'm not aware of, or are they making an extremely unwise decision as to the location of our first IP? It's a long term investment so I can live with slow growth on the property if need be, but the GC rental oversupply is what really has me concerned (especially as Ormeau Ridge isn't exactly Metropolitan!).
Like I said, we're new at this game, and to be honest we're just on the borderline of being able to do it at all, so having this property vacant for any extended period of time has the potential to really put a strain on things.

Anyway, would love to hear some opinions from those who are lot more savy about this than we are!
Cheers all.

Did they tell you to invest in any particular home and land package in the area you mentioned or have they chosen the home and land package for you? In case they have selected it for you the questions to ask are why? and what's the difference if you go your own way? In my opinion, you will find that it would be less expensive to purchase something already built in the area you mentioned. However, most probably it won't be that profitable for the firm you are outsourcing your business.
I believe that SE QLD currently is a great place to invest but, at the right price. And that price is not any where near the price paid in 2007.

 

[knightm]

Nothing wrong with the corridor, could be something wrong with the deal.

How much more are you paying than something like this which for another 10k could be reno'ed and rented for im guessing a better yield.

 

[wylie]

I know nothing about the area you are buying in, but I know I would not personally buy there, or that style of house. I believe you could be paying a premium to this company.

If you are going to pay someone to source a good property, why not pay one of the buyers' agents from the forum who will charge you a fee, but have no vested interest in buying from a particular builder.

I do know that some tenants a couple of years back rented their own very upmarket home at Ormeau with fantastic views, in a prestige area whilst they rented in Coorparoo so their children could attend uni. They tried for over a year to sell it, but no luck. They moved back in, but have contacted me twice in the past year wanting to know if the house they rented is available, or if we have anything of similar quality (we don't) that will be vacant soon.

 

[Rolf Latham]

Hi Dash


Welcome

Dunno bout the actual corridor or the investment itself, however the fact that you are HERE having a scout around suggests that you have some concerns.

The Investment per se may be ok, depending on what you are trying to achieve.

A little also depends on what your current resources and risk tolerance are like.

Many people do much better using an independent buyers agent such as

Andrew Allen who posts here
www.allenrealestate.com.au


Not all property marketing groups are sharks, there are some good ones out there with moderate margins and ok stock. Many times one can do better, but MANY wont make the first step.



ta
rolf

 

[james start]

I wouldn’t be so quick to write off Ormeau ridge, a residex report have plugged it with having very strong growth there over the next 8 years, in fact it came in at number 2 out of a list of 50
I have spent a lot of time researching this corridor and have recently purchased near there and can assure you there are some great buys at the moment

 

[Dashio65]

Thanks for the replies everyone; much appreciated.

It's looking like I should have spent less time researching the Company in the initial stages, & spent more time researching the area!

Rolf, you're right; I am starting to have concerns. For some reason I seemed to pull up nothing but positive comments about the area when I was first looking into it, but further probing eventually brought up a plethora of comments such as the ones listed in my OP (some of which have been reflected by other members in this thread).

To answer a couple of questions, the cost of the property is a bit over $400K. I found other house/land packages in the area for similar (albeit cheaper) prices; however I haven't been able to find any statistics on rental costs in the area.
To be honest, I was OK with the idea of the PM Company skimming some costs off the top, as they offer an ongoing service with regard to reinvesting, tax breaks, rental guarantee, ect; they effectively do a good deal of it for you (at least in theory...). However looking around at other existing properties, such as the one Knightm referenced, I can't help wondering if the yield generated from something a bit cheaper & closer to the CBD would get us into the next property a bit quicker; especially as we don't really have a heap of headroom financially.
Capitalist, I haven't had a chance to completely go through the forum rules; am I allowed to mention the company's name here? (especially if it's their services that are being questioned)

Anyway, thanks again for the responses; this is unfamiliar water for us & we've probably dived in a bit sooner that we should have; but here we are anyway. Thanks everyone.


BTW; just out of interest, what are your opinions on how the 2018 Games will affect the GC market?

 

[marg4000]

There are a huge number of houses in the Coomera/Ormeo areas that have been sold to investors and are therefore up for rent.

Look where the jobs are - after all, you want your tenants to be employed. Most people who live in these areas will have to travel to Brisbane or to the Gold Coast.

For that reason alone I would suggest you look for an IP in either of those two metropolitan areas close to public transport.

If you are happy with your choice of those areas, why not look for a house around 12-24 months old where you can see exactly what you are getting and usually located in a more established neighbourhood, and often cheaper than the packages with their brand new shiny appeal (which wears off once the first tenant moves in).
Marg

 

[YPG]

Whatsup Dash - Here are a few of my thoughts, hope they can help, if not feel free to ignore haha! No doubt some people will disagree with me, which is fine but this is just what I think. I probably won't set this response out in a good way but here we go.

First of all:

I would be asking this company why they chose the area, what criteria did they use and what are they trying to achieve? Because I don't see the area having particularly large capital growth or above average rental yield in the next 5-10 years. Surely if you are paying money for a "company" to find properties and build a port folio surely they should create some sort of report with outlines goals, etc. If they aren't offering this level of comprehensive service then give them the flick because you can easily find yourself a good prospective IP. Also question yourselves about your friends who have used them? Just because they own an IP might not necessarily mean they are good property investors. They may not entirely understand all the little factors - I know for sure that I don't, I learn more every day and I get shown up by experienced SS users all the time. All part of learning though.

I live very close by in Hope Island and I have gone for a look out there a few times.

Background:
Ormeau Ridge is a Stockland master planned community which has only recently been released. On a side note they have some very impressive display homes there - probably about 25 (not that his matters to you). Stockland is planning multiple stages of release over the coming years of over 800 lots. As mentioned above this will result in a constant supply on the market in the short to medium term. Which will lead to competition for your investment property in the rental market and if you went to sell it. Some positives for the estate include that all surrounding new houses will have modern design and the houses surrounding yours will all be quality. You will get depreciation on a new build. Sign before Jan 31 to get 10k QLD Building Boost, you will have access to open spaces in the master planned estate inc: tennis courts, walk ways, parks, bbq areas, etc. However it should be noted that these come at a compromise. Many of Australian's leading developers have significantly reduced their lot size by around 25% or more. This is done both for maximizing land parcels for more lots and trying to provide for more affordable land for customers (eg. 400sqm block cheaper than 700sqm). Ormeau Ridge has lots as small as 350 sqm and I would say the average would be somewhere between 450-600 (not entirely sure though). They can do this as GCCC has eased on housing requirements like set backs and building garages on the boundaries, etc.


Infrastructure:
The Ormeau-Coomera area has been outlined by council as the major growth area in the next 20 years. Council is encouraging development of these greenfield sites. If you want to have a read of the South East Queensland Regional Plan 2009-2031 you can read more of what they have outlined for the area. Coomera town Centre is going to be huge. Biggest westfield in Australia, hospital, commercial centre, education, many government departments to move there, etc.

Employment:
As far as I am aware of there are very limited employment opportunities around the Ormeau area. But this is the case for the Gold Coast in general. In my opinion (and is just that) the biggest factors why the Gold Coast has been performing poorly recently is because of the lack of jobs, poor tourism because of the high Australian dollar and lack of infrastructure and development.

Transport:
Sure Ormeau has a train station - it is however on the other side of the high way so you still need to drive to the station. And being someone that catches the Coomera/Helensvale train to Brisbane Central 5 days a week I can safely say that if you get on the train at Ormeau in the morning from 6:30-8:30 you probably have less than a 2% chance of getting a seat, resulting in you standing for the 50 minute trip. It is always packed and generally uncomfortable. I remember reading recently in the mx paper they hand out in the city that the gold coast line is the busiest line and in a recent survey customer comfort on trains is decreasing significantly. But hey it still has a train station - I am just saying don't think this is better than it really is.

Location:
To be honest - Ormeau Ridge is in the absolute middle of no where. Sure they call it a growth corridor and there is planned infrastructure, growth, etc. but at the moment it really is in the middle of no where and the reality is you still have a 50+ minute trip to Brisbane. I live in Hope Island and it probably only takes another 10-15 minutes for me to get to work but at least I am already in an established area. I do want to confirm that many sales reps claim the GC is only 40min from Brisbane and 20 min to beaches. In reality a train trip from your house to Brisbane central is going to be over 60 minutes and if you drive in off peak you may get there in 45min and if you are lucky but if you drive when it is even a little busy it will take 60-90mins.

I feel a lot of people choose Ormeau Ridge because it offers a brand new house in a new estate that is quite affordable. When you can get a brand new house for 350-400k families might prefer this than paying that much for 30 year old house that isn't modern and doesn't look as good. I think Ormeau Ridge is better suited to young families that are owner occupiers. There are however a number of high quality schools around both private and public. I actually attended two of them in the Coomera area for both primary and high school and being around 5 years since I have been there if I ever drive past for one reason or another I am amazed at the improvements/funding such as pools, multi-purpose buildings, gyms, performing arts centres, etc.

I also think that Ormeau is much better than Coomera in regards to socio-economic conditions and crime, etc.

I am sure there is much more I could ramble on about but that is most of it off the top of my head.

Cheers Mate,
All the best
YPG

 

[A'PEXi]

Great post by YPG and I pretty much agree with what's said. Back in the day when I was catching the train from Robina to Brisbane it was pretty much full by Helensvale, I dare say it would be similar now if not worse with Varsity opening up. May as well head further south and see what other options are available before making any decisions.

 

[Dashio65]

Thanks for the replies everyone; we've been on holidays, so this response is a bit delayed!

Some very insightful information given here, which is very much appreciated.
I really wish I'd managed to come across this sort of info earlier on. By the time I'd started finding conflicting comments about the area, we'd already paid a deposit on the land to get the ball rolling. Finance is still subject to approval (which may not even happen yet; believe me, it will be close!!) & the Christmas period has bought us a bit of time, so I'm still furiously collecting as much info as I can; but the general consensus seems to be written on the wall.


When the Company comes back online from the break, I'll quiz them as to their rationale for investing in the Ormeau area. It'll be interesting to hear their response; I'm remaining relatively open until then, although I do have to admit to rapidly losing confidence in both the investment & the Company itself.

Anyway, thanks again everyone; this information has been invaluable!!

 

[YPG]

Happy new year Dash and I trust you and your family had a good holiday.

Don't stress, just look at the good points.

If this is an investment for the long term than it should be fine, someone once said to me on this forum that residential property is very forgiving if you are willing to give it time.

Dont be too hard on yourself, you could have chosen a lesser option. I think Ormeau will come good.

As I was saying at least it will benefit from the planned infrastructure in Coomera without the attached lower socio-economic, crime and bad stigma. Coomera is a big spot for drugs and other crime. And at the risk of being slammed as racist - a lot of these factors come from the high kiwi and islander population in the area.

And with you being located in Brisbane at least it is close by for you to keep an eye on.

At least it is in a good estate surrounded by quality homes and you will probably get a good family that will enjoy and take better care of your investment.

All the best with it. Let us know how it all turns out.

YPG

 

[Andrew_A]

Thanks for the replies everyone; much appreciated.

It's looking like I should have spent less time researching the Company in the initial stages, & spent more time researching the area!

Rolf, you're right; I am starting to have concerns. For some reason I seemed to pull up nothing but positive comments about the area when I was first looking into it, but further probing eventually brought up a plethora of comments such as the ones listed in my OP (some of which have been reflected by other members in this thread).

To answer a couple of questions, the cost of the property is a bit over $400K. I found other house/land packages in the area for similar (albeit cheaper) prices; however I haven't been able to find any statistics on rental costs in the area.
To be honest, I was OK with the idea of the PM Company skimming some costs off the top, as they offer an ongoing service with regard to reinvesting, tax breaks, rental guarantee, ect; they effectively do a good deal of it for you (at least in theory...). However looking around at other existing properties, such as the one Knightm referenced, I can't help wondering if the yield generated from something a bit cheaper & closer to the CBD would get us into the next property a bit quicker; especially as we don't really have a heap of headroom financially.
Capitalist, I haven't had a chance to completely go through the forum rules; am I allowed to mention the company's name here? (especially if it's their services that are being questioned)

Anyway, thanks again for the responses; this is unfamiliar water for us & we've probably dived in a bit sooner that we should have; but here we are anyway. Thanks everyone.


BTW; just out of interest, what are your opinions on how the 2018 Games will affect the GC market?

Highlighted text in Bold. It's the most important takeaway I believe from this whole thread.

Often you are looking in the region of 30-50k, sometimes up to 100k, commissions of 6.6% etc buried in the costs by marketing companies who are really just selling developers stock, which is a margin placed on top of the developers profit to begin with, so at some point the skimming should be classified as gouging. No reason it can't be done ethically but it almost always isn't in my experience, mostly done legally though.

I talk with plenty of newer investors and it's my belief that they focus far too much on the suburb location rather than the specifics of the deal such as land size, price!, land value, build costs, yield benchmarks, supply of similar stock and so on. One of the marketers golden psychology weapons is to build that focus on the area and lifestyle and make it a centre point of the investment focus whereas in reality you will do better buying well pretty much in any location as opposed to paying well over the mark and buying into the marketing copy for a suburb.

 

[Rolf Latham]

Happy new year Dash and I trust you and your family had a good holiday.

Don't stress, just look at the good points.

If this is an investment for the long term than it should be fine, someone once said to me on this forum that residential property is very forgiving if you are willing to give it time.

Dont be too hard on yourself, you could have chosen a lesser option. I think Ormeau will come good.

As I was saying at least it will benefit from the planned infrastructure in Coomera without the attached lower socio-economic, crime and bad stigma. Coomera is a big spot for drugs and other crime. And at the risk of being slammed as racist - a lot of these factors come from the high kiwi and islander population in the area.

And with you being located in Brisbane at least it is close by for you to keep an eye on.

At least it is in a good estate surrounded by quality homes and you will probably get a good family that will enjoy and take better care of your investment.

All the best with it. Let us know how it all turns out.

YPG

Hey YPG

do you have a source for the local crime stats of Coomera Vs Ormeau ?


ta
rolf

 

[wylie]

I really wish I'd managed to come across this sort of info earlier on. By the time I'd started finding conflicting comments about the area, we'd already paid a deposit on the land to get the ball rolling. Finance is still subject to approval (which may not even happen yet; believe me, it will be close!!) & the Christmas period has bought us a bit of time, so I'm still furiously collecting as much info as I can; but the general consensus seems to be written on the wall.

If you want to get out of buying, I wonder if you go with a broker, if you could have a chance of applying to a bank that will NOT approve your loan.

Why not approach one of the brokers here, or perhaps they can comment?

 

[Rolf Latham]

If you want to get out of buying, I wonder if you go with a broker, if you could have a chance of applying to a bank that will NOT approve your loan.

Why not approach one of the brokers here, or perhaps they can comment?

Hi Wylie

If its a truly dodgy deal, in this age of the Internet and Social Media, only a stooopid marketer would push a deal like that through for the one off comm where repercussions are unknown.

Encouraged in the right direction and with the right tools most markters will lay down arms" and find another, less noisy client.

ta

rolf

 

[Aaron_C]

If you want to get out of buying, I wonder if you go with a broker, if you could have a chance of applying to a bank that will NOT approve your loan.

Why not approach one of the brokers here, or perhaps they can comment?

Yes it happens all the time. Off the record of course.

 

[wylie]

Yes it happens all the time. Off the record of course.

That's what I was meaning... nudge, nudge, wink, wink

 

[A'PEXi]

I'm still keen to hear what the company has to say about this area