Investing in Port Hedland/South Hedland WA

[Aaron Sice]

from contract value up to 80% LVR - contract will be around $650k ($207k land + $425k house + stamps), final value will be $950k so around the $110k-ish mark.

that way, there's fat in the deal for the purchaser. they *should* be able to purchase with just the land deposit and TRHomes $3k deposit - rest is income history.

 

[Fudge]

we all need to keep an each way bet tho, the latest thought is the US could have a big correction on their stock market soon. if China implodes then the resources hyper boom will be cut down at the knees

Have a look at the following thread. It seems china is throwing a wildcard??

http://www.miningweekly.com/article.php?a_id=182754

Cheers,

F

 

[mattnz]

Getting on the list

land $180k say, house $370k approx. val approx $1 - 1.1m. cant get the land unfortunately and i am not sure there will be any available this year, even if you are high on the list

How do you get on the list to buy property in the area?

 

[Ausprop]

hi Mattnz - you use to be able to call one of the landcorp preferred builders and get on their list, but when their lists blew out to about 200 names I think they stopped taking details

 

[wobbycarly]

As I mentioned in another thread, serviceability is holding us back. So I "got motivated" (thanks to contributors!) and started looking CF+. This thread came along... and I started looking up there.

I'd seen the Crawford Realty ads in API, but hadn't really paid much attention, but RE.com seems to confirm the sales and rental prices.

And lo and behold, this month's API has a write-up on Port/South Hedland!!

I'd love to hear from anyone who HAS property up there already; what's the vacancy rate like, are repairs expensive, how much are council rates (can't find a calculator on the council website), etc.? Issues unique to the area?

What I find interesting is, if the cash flow is so great (b/w 10-11% gross), and the growth history is strong (avg 16% pa for last 10 yrs) why isn't "everyone" buying up there?

My thoughts on this are the following:

• High barrier to entry (needs big deposit)
• Discomfort with buying remotely
• Expensive to visit to inspect (~$1000 from Melbourne)

As they say in the classics - "Please explain"

 

[Ausprop]

people consider it risky... the facts don't matter. the growth record needs to be matched to the resources boom - if it ended the prices would cool considerably. then again australia as a whole would suffer anyway.

one unique consideration is air cons... they need to be a good brand (actually they just need to be Daikin) and in good condition. Also tradies up there charge a fortune and PMs are more exxy

 

[wobbycarly]

Thanks Ausprop. I understand that it's really only the resources that there's even a town there! (OK, slight exaggeration! ) And agree with your assessment that if the boom ended, it's probably not only my (potential) IP in Hedland that I'd need to worry about!

 

[The Chaser]

Finally got back to this thread and have found the discussion very interesting. Like Rob I have been having a serious look at this area. Whilst the yields are impressive I'm wondering whether the majority of the CG has occurred in this area already and that CG will be much more conservative going forward? I know CG is forecast to be high (15-20%) but being based on historical figures I wonder if this rate of CG is still sustainable now that the area is well and truly established.

I'd love to hear from anyone who HAS property up there already; what's the vacancy rate like, are repairs expensive, how much are council rates (can't find a calculator on the council website), etc.? Issues unique to the area?

I second this. Also what areas should be avoided or targetted when investing within Port Hedland and South Hedland? Can anyone recommend a good local contact for assistance with sourcing a property? Likewise who are the good PM's up there or who should I avoid? Any feedback (here or via PM) would be great.

Finally can anyone recommend the most reputable websites for learning more about the resources sector in this area? ie. who the key players are, current projects, future projects etc...

Thanks
Angela

 

[wobbycarly]

Hi Chaser,
I have found this website useful to find out where mines ARE. I'm also going down this track...

• Property Manager
• Building Inspector
• Pest Inspector
• Quantity Surveyor
• Handyman
• etc...

According to yellowpages, B&P seem to be Geraldton; QS Kununnura. I don't really feel like paying these people 2 days travel for a 1-2 hr job!! But them's the breaks, I guess!

I haven't actually spoken to anyone yet... broker is first cab off the rank tomorrow!

If you think we can maybe pool resources, PM me.

 

[The Chaser]

Hi Rob. We have been researching as much as we can on PH and are considering doing a trip up there in the coming weeks to check the place out first hand. Given its potential risk profile we thought this one might be worth a personal visit to get familiar.

There won't be much happening for the next week or so due to conflicting committments but after that we will be full steam ahead. Will happily share any resources or information gained. I'll PM you in due course, or feel free to do the same.

Hopefully we get some more replies to our posts above from any experienced PH investors. I'm sure we would both greatly appreciate the feedback.

Angela

 

[wobbycarly]

Thanks Angela.

Awaiting the MB feedback, and work has a need to send someone (from Geelong) to Perth, so I might be in on that (at least half of the expense funded)! Then I'll also shoot up there. Plan on speaking to PMs tonight. Happy to share findings.

 

[wobbycarly]

MB got back to us - not good news.

While our equity position is OK, we still won't fit the banks serviceability equations, even with the new projected (OK, OK, I know it's not guaranteed - can't "take it to the bank") strong positive cashflow.

Most lo-docs aren't really an option as we don't have enough (any) trading statements on our recently set up ABN and we won't manage on 60% LVR. It'll take something realllly creative to get this going, and the IR will probably be so much higher than the SVR that our +CF becomes -CF! Sort of defeats the purpose!!

So looks like it's consolidation phase for a while, let the rents creep up, continue to research and get ready for another reno next year.

 

[Fudge]

MB got back to us - not good news.

It'll take something realllly creative to get this going, and the IR will probably be so much higher than the SVR that our +CF becomes -CF! Sort of defeats the purpose!!

Why not look at a JV to minimise costs / outlay?

F

 

[Ausprop]

While our equity position is OK, we still won't fit the banks serviceability equations, even with the new projected (OK, OK, I know it's not guaranteed - can't "take it to the bank") strong positive cashflow.

can't you buy one with a 4 or 5 year lease on it?

 

[wobbycarly]

Why not look at a JV to minimise costs / outlay?

F

Will consider this one - have a like-minded colleague who will be OK on the cashflow front but low on equity.

can't you buy one with a 4 or 5 year lease on it?

The banks apparently want to see us to be able to service the loan WITHOUT the new rent. Don't think I'll write this off completely just yet - was still a bit "emotional" last night!

Thanks for the ideas.

 

[Aaron Sice]

there's some one bedders coming up up there - with their own exclusive portion of land.

will keep everyone posted.

 

[Asashoryu]

I settle on my South Hedland purchase next Friday, went the whole hog and financed 100% plus costs with Comm Bank. That was my biggest pain, switching my PPOR across to them since I was very happy with Heritage.
I bought sight unseen barring a dozen or so pictures and "only" a 9.6% gross return as the vendor was self managing since the company its leased to is owned by a friend of his. Still, 1200 per week until a review in August when it will jump to more than likely 1400-1500.
I almost crashed the deal due to a few things but in the end decided it was a worthwhile choice. Then the agent says the vendor would have just relisted at 50k more than Im paying and he would have sold it easily anyways. To me, that says I just made some money on the deal already.......
If I could do it, I would jump in and get another there straight away. My DD tells me Hedland isnt going to go sour anytime soon, but thats only my call.

 

[Bon]

Just wondering what the latest thoughts are on investing in Port Hedland or South Hedland? I couldn't find any relatively recent threads discussing this area and just wondered how it is viewed post-GFC.

Like a typical mining cycle IMO... boom-bust-boom-bust-boom-bust...

 

[Fudge]

Looking at cost involved for such a deal in PH, as all my props are on the eastern seaboard.

Received management agreement from an agent up there, and they are charging 8.5% Management fee....thats no probs. But, this fee must cover general processing and administrative tasks only, as additional requirements like inspections, bond inspection, inventory reports and property condition reports (which state these must be included), are all extra. This new cost works out to 14%.(This includes lease fees) (This is based on a property returning $1000 / week)

Lease renewal fees and letting fees are pretty exe as well.

Or how about this...... for a property being rented out for $2000/week, the total management cost for the year works out to about $14,000 (This includes lease fees). You need yields like 10% if you have to take management rates like this into account.

I can remember someone posting saying that management fees are expensive, but didn't think it would be this expensive.

This was first quote, but will look into a number of other agencies to get a feel for it.

On top of that, I have been told rates and water is about $2,500 per annum and insurance would be about $1,000.

Can anyone out their vouch for these numbers.

Anyone recommend a management company??

Cheers,

F

 

[Asashoryu]

Got to agree with you Fudge, PM fees in Hedland are exhorbitant. Im pricing them up there now to manage my place and even though I am buying thru the agent they give a discount on PM. Drops from 8.5% plus GST down a whole 0.5% to 8% plus GST. Heres the rundown on their fees;

1. LETTING FEE Six month lease or under: 2 WEEKS RENT PLUS GST
Twelve months or over: 3 WEEKS RENT PLUS GST
No fee charged for renewal by existing tenant.
2. MANAGEMENT FEE 8.5% OF GROSS COLLECTION PLUS GST
(8% PLUS GST if the property is purchased through JFRE)
3. PROPERTY CONDITION REPORT $160 plus GST = $176.00
4. INVENTORY REPORT $80.00 plus GST = $88.00
5. FINAL BOND REPORT $80.00 plus GST = $88.00
6. INSPECTIONS $50 plus GST = $55.00
7. POSTAGE AND PETTIES $8 plus GST = $8.80 per month
8. ATTENDANCE AT MEETINGS $65.00 per hour plus GST
9. ANNUAL SUMMARY $20 plus GST = $22.00
10. ADVERTISING $50.00 Internet Advertising (up to) $24.00 Print Media (up to)
11. TITLE SEARCH $20.00 plus GST = $22.00
12. TENANT ENQUIRY FEE $20 plus GST = $22.00
13. COURT ATTENDANCES $65.00 p/hr plus GST to a maximum of = $325.00
14. CYCLONE DAMAGE REPORT $65 plus GST = $71.50
15. FOR LEASE SIGN $25.00 plus GST = $27.50
16. INSURANCE CLAIMS $65.00 p/hr plus GST to a maximum of = $286.00

Add all that up and it comes to a pretty hefty sum of money for managing. Im still contemplating self managing since the cost looks like being about 7k per year for my IP.
Insurance is another kettle of fish, I am chasing that up now but building insurance is going to be pretty dear as Hedland is in cyclone prone country.