Karratha WA
- Thread starter phil
- Start date
well mines... and burrup fertiliser and the massive LNG fields and dampier salt etc. Houses here are selling at or below replacement. The DHA ones were a rip so not sure why they sold so fast - plenty of stock on the open market to choose from
Hi Ian, I am new to this site, also live in Karratha and have property in Tassie. Where in Karratha are you? Love this site very informative cheers tams
Well, we just settled on a three year old 4x2 in Karratha. 11% gross yield plus depreciation should give us a bit of breathing space... I see that as a fair return for the risk.
Went down to the wire though with the finance - one bank approved the finance but then couldn't get their act together to get the docs to us in time despite a 60 day settlement period! Slower than a wet week!
Good thing we had another bank lined up as backup plan number one... Wasn't ideal in the end for the deposit finance but overall happy to get the deal settled as it was a cash offer and we would otherwise have been just swinging in the wind!
And just to complicate things, in the middle of the settlement period the corporate tenant issued notice half way through their lease - they are still on the hook for another year or so by which time the new (lower rental - old tenant funds the difference) tenant will be pretty much back up to that rental with the escalation provisions in our lease...
Might have a sip of port tonight to celebrate!
Went down to the wire though with the finance - one bank approved the finance but then couldn't get their act together to get the docs to us in time despite a 60 day settlement period! Slower than a wet week!
Good thing we had another bank lined up as backup plan number one... Wasn't ideal in the end for the deposit finance but overall happy to get the deal settled as it was a cash offer and we would otherwise have been just swinging in the wind!And just to complicate things, in the middle of the settlement period the corporate tenant issued notice half way through their lease - they are still on the hook for another year or so by which time the new (lower rental - old tenant funds the difference) tenant will be pretty much back up to that rental with the escalation provisions in our lease...
Might have a sip of port tonight to celebrate!
Karratha is a strange place, resi yields are higher than comm yields. we hold a comm property there tho and it's a real star, Dazz you would love it. 4000sqm+ of CF+ dirt with a shed on it. All financed correctly and outgoings paid by tenant. GFCs can come and go in this situation. I just wish my whole portfolio looked like this.
resi up there is still ok tho. with the sorts of leases on offer they are a sort of hybrid resi/comm style investment anyway
resi up there is still ok tho. with the sorts of leases on offer they are a sort of hybrid resi/comm style investment anyway
Thanks Dazz!
Regarding the nett yield - I wish I knew!
Obviously this is a calculation incorporating the knowns (rates, insurance, prop mgt etc) plus the unknowns (tenants, maintenance etc.). Normally for our RIPs I would just take 25% of the rent off the top and call that nett as a rule of thumb for calculations. I typically get pleasantly surprised doing this but I like being conservative. However, in this case that represents a very significant sum of money... Much more than the total rent for a run of the mill IP in a capital city!
Going back to first principles I can only see about a 1.5% drop in yield from the predictable stuff. Insurance is a lot more expensive (cyclones) and rates aren't cheap. We shall see about the quality of property mgt as I have heard horror stories in this neck of the woods... however the cost is reasonable and we have lived in the area and been on the receiving end of this property manager b4 so we know they were doing quality work then. I sometimes didn't keep the garden quite as tidy as I could have and they were straight onto it with a breach notice that I deserved!
So I reckon with a budget of 9.5% nett we should be pretty safe even with Karratha extortionate pricing, unless rents drop from their stratospheric levels, which while certainly possible would require a fair amount of supply to be built in an environment of "difficult" finance... the gyrations of Pluto and other developments are always a risk of course!
Anyway, if you were to say that nett yields in this range aren't all that different to prime office space ATM then I would agree with you...(8.5%?) Hence we are still wanting to get into that space. The vagaries of Mr ASX have nearly given us the deposit for this one so we are pretty much in the same place we were a few months ago regarding equity for getting into CIPs. I am very mindful of the market taking back what it gives and would like to put it all into a nice juicy CIP with a good cashflow as soon as I can find one!
So why do this? Two reasons - the cost of funds is about 2.5% lower than CIP rates from what I can tell right now and the leverage, at 80% LVR (full doc - I think credit like the job more than the assets...), is about twice as much as we can get for a CIP at the moment (60%?). So, together with the depreciation, it was a compelling proposition. We don't want to have too much of our portfolio up there though as we know the risks in the area... One of the benefits of getting a bit bigger is that deals like this don't feel as risky to our overall position as they used to.
And BTW, our tenant for this one is now the State of Western Australia. You were right - it does feel good for them to be paying us for a change, covering the mortgage plus a bit for our trouble!
That's very strong logic and hard to fault. You've got me on the calculator doing some numbers.
The difficulty is finding a big ressy place to park your funds in that will produce a decent yield. You've obviously found something appropriate. You have me thinking now !!
Have a surf and do some calcs. You might find that the yields max out around median...and there's also some crazy institutions still willing to fund at 95% for these regionals if you're willing to tip them. Should be a suburb or 2 there for you!!
Only down side so far is having a corporate tenant on a RTA. Apart from that it rains cash for very little down.
Hi Ausp, agree with your sentiments re: diversity of industry, not convinced about the houses selling at or below replacement?? Unless you're talking about old stock, the 30 year old Hammersley places are selling for what it costs for what it costs to build a new 4*2, house and land.
Prices up a little again this quarter, rents have stabilised. I see there's a house in our street for rent for $1900/week, we have a five year lease with the govenment from December @ $1600/week (for an identical house).
Put an offer in on a house up the road in Port Hedland for a ten year old house for $1.35m, vendor came back last week demanding we pay the $40K for agent's fees as well! We've been paying $2500/week for rent for almost two months now and he won't give us the keys!! I did go and stand on the driveway last night, but given that's all I've got for the $20K rent payed so far it's not great value...
The other house we were going to buy in Port - polystyrene house for $1.25K - the vendor decided two weeks ago that he wasn't going to include landscaping, driveway or pretty much anything else - take it or leave it.
K-town not quite as effervescent as Port, but I think things are still pretty shiny here - long may it continue! Am deciding at the moment whether to build another one - would prefer to do so in PH rather than K, but land can't be had there at the moment for love or money unfortunately.
Overall - my feeling is that everyone got a bit freaked out by the GFC last November, put their wallets away but have now realised they need a house for their employees to live in. So the market seems to be starting to move a little bit upwards again.
re: supply and demand - Does anyone know if there's any more land developments coming on line after Baynton West? I'm not aware of Landcorp having any near-term plans, I know I've seen the land out past Bulgarra as being slated for future development some time but I was kind of wondering if the very large supply of land released onto the market is going to be coming to an end soon.
We shall see about the quality of property mgt as I have heard horror stories in this neck of the woods... however the cost is reasonable and we have lived in the area and been on the receiving end of this property manager b4 so we know they were doing quality work then. I sometimes didn't keep the garden quite as tidy as I could have and they were straight onto it with a breach notice that I deserved!
Hi HE... who is the PM please? just wonderign who is good to use up there
For Sale
Hi to all.
Just joined about half hour ago. So bit new to this posting process.
Been reading whats been said about Karratha and wanted to let you know that I'm about to sell a property I have up there.
I lived up there for 37 years before moving to Perth where I've been for the past 2 years.
The house is a 4 bedroom 1.5 bathroom with office, patio front back and pool all sitting on a 800sqm + block. It's rented out to great tenents at $1600pw and is signed up for the next 3 years.
Will be putting $799 000 ono on it and see how I go.
If anybody out there is interested drop me a line. I'll be calling the agents up there on Monday so if want to know anything about it please feel free to ask a question.
Well hope this is my first of many entries and I get to talk to you all again.
Cheers
Hi to all.
Just joined about half hour ago. So bit new to this posting process.
Been reading whats been said about Karratha and wanted to let you know that I'm about to sell a property I have up there.
I lived up there for 37 years before moving to Perth where I've been for the past 2 years.
The house is a 4 bedroom 1.5 bathroom with office, patio front back and pool all sitting on a 800sqm + block. It's rented out to great tenents at $1600pw and is signed up for the next 3 years.
Will be putting $799 000 ono on it and see how I go.
If anybody out there is interested drop me a line. I'll be calling the agents up there on Monday so if want to know anything about it please feel free to ask a question.
Well hope this is my first of many entries and I get to talk to you all again.
Cheers
