Butler - now on the investment map

[sash]

Did you ask who is buying on these suburbs?

Well they are mostly Brits, New Zealanders, and South Africans. Most of them are already used to travelling these distances.

You need to step out of your Australian thinking and put yourself in the shoes from one of these countries or from the East Coast. If there is a train...people would not mind!

No offence but this is what sorts investors from the masses....

perhaps it is a blind spot of mine but i truly cannot understand the appeal of these far flung souless suburbs. eglington is 22km to Joondalup!

for a bit of perspective it is as far from joondalup as cockburn central is to perth cbd.

even to butler it is 10km, imagine having to drive 10km along marmion just to get to butler train station and then having to catch the train in. 10km! that is like someone driving from morley to perth CBD (distance wise) and then catching a train to mandurah. 5.DAYS.A.WEEK. i dont think there is enough local employment to sustain all these people in the joondalup and immediate surrounds, surely a fair % would need to work in CBD etc. it is 48km from perth CBD to eglington, 48km. imagine having to deal with that twice a day just to return to a tiny cottage block. you can almost understand/justify living far away if the return is a larger block but not in this case.

as perth gets more and more congested i can see a lot of people getting burnt in these areas in the future, having a tiny block in the middle of nowhere imo isnt going to appeal.

not in any way saying there isnt money to be made in the meantime of course, just mid to long term imo i truly dont understand it.

 

[sanj]

You clearly haven't read what I said. Ellington is 10km to the train station that will be built. 10km vis what is it a 1 or 2 lane road.that is in order way, shape or for in the immediate vicinity. If we weren't talking in the middle of nowhere backwaters it would be 2 or 3 suburbs away fro train station. There also inevitably won't be enough parking there.

As for the Brits etc, yes that is true but my point is that as the traffic gets worse in Perth as gas been widely documented even they will get sick of it

 

[sanj]

Pls remember also that I'm not disagreeing there may be short term opportunities in the area, I just think long term it is a dud.

Imagine say in 15 years. Perth would have close to a million more people, congestion would undoubtedly be worse as there aren't enough major public transport /road projects planned, like most cheaply built homes they wouldn't have aged very well and would be surrounded by newer ones that look just about the same etc. Imo you are going to have people finding it harder yo justify living there than today.

I could be entirely wrong of course, these is just my opinion.

 

[sash]

Sanj

Have you looked at the infrastructure plans for the area....there will be at least another couple of rail stations in the next few years.

Yes the roads will be crowded ...the WA govt is light years head of Sydney...they are actually addressing the transport issue.

Did you also realise that business area footprint may one day rival Joondalup.

There is a guys named Maha Sinnathamby....he bought some land in middle of woop woop...in Springfield Lakes in Brisbane....guess what happened? It is now one of the fastest growing corridors...and he is 47th Wealthiest person in Australia. People were laughing at him when be bought land in the Southwestern suburbs of Brissie for about $14m with a Perth. Mind you he got his start in Perth.

You clearly haven't read what I said. Ellington is 10km to the train station that will be built. 10km vis what is it a 1 or 2 lane road.that is in order way, shape or for in the immediate vicinity. If we weren't talking in the middle of nowhere backwaters it would be 2 or 3 suburbs away fro train station. There also inevitably won't be enough parking there.

As for the Brits etc, yes that is true but my point is that as the traffic gets worse in Perth as gas been widely documented even they will get sick of it

 

[WesternRat]

Sanj I agree with most of your points there as I am a little snobby myself.

But hey, these are investment properties and if there is 20%+ in it at the end of the day, then all good! Just that "I" couldn't picture myself living up there. It looks like a Sunday drive and packed lunch away.

 

[sanj]

Sash, I'm a planning and development nerd from way back, you may need to update your research. A lot of the items proposed by the govt have been put on the back burner including max. Put it this way, it it is forecast that WA is going to grow in population in next 15 to 20 years equivalent to adding adelaide to the city yet there is nowhere near enough infrastructure planned. I'm not putting all of the blame at wa govt hands either, just stating the fact.

As for your example, he bought large blocks of land with a 20 year time frame and has done very well. Comparing that to bog standard homes of cottage blocks redefines the term "tenuous link"

Again, these are just my opinions

 

[sanj]

Sanj I agree with most of your points there as I am a little snobby myself.

But hey, these are investment properties and if there is 20%+ in it at the end of the day, then all good! Just that "I" couldn't picture myself living up there. It looks like a Sunday drive and packed lunch away.

I have bought quite a few dumps in my time, there is no snobbery attached. Please read the points I raised again. I coastal is always a good option bit coastal 22km from joondalup and 48km from cbd combined with tiny blocks is, Imo not a good thing. To put in to perspective, it similar distance to drive from Perth city to joondalup, turn around and return to the city as it is to go from Perth city to Eglinton. Clarkson etc I can understand but Eglinton no


Re 20% I absolutely agree but I'm referring to medium/long term and not short term gains. Sash has obviously done well in the area but I'm not referring to that

 

[sash]

OK...it is all about affordability.

According to an article published by API on the current trajectory...I ready the following by 2023 the medians will be as per below:

Sydney 1.1m
Perth 1.02m
Melb 820k
Brissie 810K
Adelaide 595k

The primary reasons for strong growth for Perth is it has one of the highest population growth in the country...is is over 2.5%..more than some developing countries...the other factor is 80% of Perth lives within 20 klms of the Indian Ocean.

As for infrastructure....they have already added a city the size of Adelaide into greater Sydney since 1990k. It is still coping okay.

Sash, I'm a planning and development nerd from way back, you may need to update your research. A lot of the items proposed by the govt have been put on the back burner including max. Put it this way, it it is forecast that WA is going to grow in population in next 15 to 20 years equivalent to adding adelaide to the city yet there is nowhere near enough infrastructure planned. I'm not putting all of the blame at wa govt hands either, just stating the fact.

As for your example, he bought large blocks of land with a 20 year time frame and has done very well. Comparing that to bog standard homes of cottage blocks redefines the term "tenuous link"

Again, these are just my opinions

 

[HiEquity]

I totally agree with sanj. You can find a 20% development margin anywhere if that's what floats your boat. And the example I posted earlier in this thread shows that something around 50%+ looks to be achievable in this neck of the woods too, just like it is in the CBD.

But developing is a different game to investing. I've tried it but preferred my job as a way of making money, so just get my exposure in the market through passive investing.

If you're looking for a buy and hold long term passive investment, I would be looking elsewhere. If it must be resi and it must be cheap, then the other end of that train line looks better value to me.

 

[MIW]

I agree. Of course long term passive investing would differ in criteria with profit margin on developing. Obviously we must choose what we know and feel comfortable with.

 

[spanna]

Im with you sanj..... Just look at the $/sqm in Butler!!!!!! Some want almost $1000/sqm
You can buy land in some of Perth's best suburbs for that price

 

[sash]

Have you looked at the 50% margin and worked through the real margin with all costs considered? I and a few others have picked up some inconsistencies...

Also it is also not always possible to deals at 50% margins..unless you move with the market around Australia. For example on my Butler single developement including interest cost $357k...today's price at Butler is $460k conservative. The margin on the development is 23% as it is but and hold it is pure profit.

I totally agree with sanj. You can find a 20% development margin anywhere if that's what floats your boat. And the example I posted earlier in this thread shows that something around 50%+ looks to be achievable in this neck of the woods too, just like it is in the CBD.

But developing is a different game to investing. I've tried it but preferred my job as a way of making money, so just get my exposure in the market through passive investing.

If you're looking for a buy and hold long term passive investment, I would be looking elsewhere. If it must be resi and it must be cheap, then the other end of that train line looks better value to me.

Yes agree. I like to use both.....use the margin as equity. The interesting thing is a lot of people overestimate how much a product will sell at completion. This is where a lot of developers come undone....poor timing in the market can end up in banruptcy.

I agree. Of course long term passive investing would differ in criteria with profit margin on developing. Obviously we must choose what we know and feel comfortable with.

 

[sash]

Ditto....money is money..I figure if I can take 80-100k in profit with every development. That leaves me with about 50k in equity every deal and 65-70%LVR on reval.

Do 3 of these a year that is 240-300k....add to that say portfolio growth of 400k (4-5% growth) conservatively...that is 600-700k in equity without trying.

This is where people go wrong they chase single large risky deals ...some come off ..some don't...the ones which go wrong...watch out.

Sanj I agree with most of your points there as I am a little snobby myself.

But hey, these are investment properties and if there is 20%+ in it at the end of the day, then all good! Just that "I" couldn't picture myself living up there. It looks like a Sunday drive and packed lunch away.

 

[sash]

Agree that is now...when I bought it was $475/sqm. The block I bought was 385sqm and was priced at $178k.

Still some growth....but profit is more like $50k. People told me the same thing about Wellard and Lakelands.....well lets see in 6 months. Will publish the figures.......once complete.

Little bit of info....the house in front of my Wellard block is a double story house is on 274sqm block and is being sold. They want $500k plus. My total estimate to complete is $325k (land, build, stamps, interest, etc). I reckon there is about $100k in this one also when complete. The block was bought for $140k and is 264sqm so it is $530/sqm. New $300sqm lots sell for $230k or $766/sqm.

Can you please let know in which top suburbs you can get just land for $1000/sqm? Let use Murdoch an old house on 500sqm will sell for $700k plus....that is $1400/sqm. Plus you have to pay another 20k odd just to knock down....

Im with you sanj..... Just look at the $/sqm in Butler!!!!!! Some want almost $1000/sqm
You can buy land in some of Perth's best suburbs for that price

 

[sanj]

Sash, you keep going through your devvy sums, no one here us disagreeing with them. We are talking about long term viability of cottage block homes 49km from Perth cbd.

I'm also not sure why you're asking for examples of top suburbs at 1000/sqm, Butler, wellard etc are in no way, shape or form top suburbs

 

[spanna]

You can find them.... 18 Clevedon Karrinyup?
46 Teakwood av Woodlands?... I could keep going! what you payed seems sensible $/sqm for the area. And Im also not denying people have and will continue to make money through single developments out there But current prices are unsustainable! Don?t know how people buying the end product don?t see they are getting ripped off!

 

[spanna]

Do the $/sqm on Lot 4 Dayrell Road Nowergup! That?s not even land value!!!! Comes with an income producing business

AND alot closer to Joondalup than butler lol

 

[sash]

Agree....but the cottage block is here to stay. Apparently...talking to rental agents most tenants want the cottage block so long as the house on it is well designed. The issue here is tenants do not want maintenance or pay a lot for reticulated water.

The other change which is happening is that a lot of cottage blocks are being sold to an older demographic. The reason for this is less maintenance, freeing up of cash for retirement , and new properties with more mod cons. The developers are now putting out this product and larger lots of land are staying on the market longer.

Once a suburb gets expensive it moves sideways for many years. Affordability drives growth more these days. But to growth in for an outer suburb is infrastructure.

Sash, you keep going through your devvy sums, no one here us disagreeing with them. We are talking about long term viability of cottage block homes 49km from Perth cbd.

I'm also not sure why you're asking for examples of top suburbs at 1000/sqm, Butler, wellard etc are in no way, shape or form top suburbs

Yes agreed....at some point the developments will be more unaffordable. For example....I am seeing Villas in the better parts of Perth sell similar to the price of tired home the same suburb. That is warning sign....

You can find them.... 18 Clevedon Karrinyup?
46 Teakwood av Woodlands?... I could keep going! what you payed seems sensible $/sqm for the area. And Im also not denying people have and will continue to make money through single developments out there But current prices are unsustainable! Don?t know how people buying the end product don?t see they are getting ripped off!

 

[sash]

Looked at 18 Clevedon Karrinyup..it is under contract for $780k (maybe less). It is $1050/sqm.

As the land is 728sqm and assuming subdivision and putting 2 houses in it. Assuming 364sqm lot each...let say land cost including holding and subdivsion is $420k plus the cost of demolishing and building a 3x2x2 is 230k. Let say sales cost is 20k.

That means the cost of each home is $620k...to make a profit similar to Butler you will need to sell each of these homes for $815k minimum. There are newer homes on larger blocks selling for less....

This is why Butler looks more attractive as the price of the home once built seems more in line with what is selling.

The Butler numbers are 230 land + 200k house (fully finished and about 130 of living and includes interest, stamps). The finished product is probably worth about $450-470k

Sash, you keep going through your devvy sums, no one here us disagreeing with them. We are talking about long term viability of cottage block homes 49km from Perth cbd.

I'm also not sure why you're asking for examples of top suburbs at 1000/sqm, Butler, wellard etc are in no way, shape or form top suburbs

You can find them.... 18 Clevedon Karrinyup?
46 Teakwood av Woodlands?... I could keep going! what you payed seems sensible $/sqm for the area. And Im also not denying people have and will continue to make money through single developments out there But current prices are unsustainable! Don?t know how people buying the end product don?t see they are getting ripped off!

 

[sanj]

Pls tell me you aren't actually comparing karrinyup to bloody Butler. I must surely be reading that wrong.