Risks of Regional Towns - pop<10,0000

[Blair007]

Regional towns with populations under 10000....yields are very attractive though - broken hill NSW for example.

Whats everyones thoughts on investing in a town with such a low population,

has anyone got investments in similar areas and can share there experiences?

i get the impression long periods of vaccany would not be uncommon...

 

[D.T.]

The main risk is employment related. In majority of towns sub 30K people, there's 1 company or industry where majority of the people work.

If that company or industry was to close down or move somewhere else, then so do those people. Then the people employed in other areas get affected due to their being less people in town and its a downward cycle from there. Maryborough in Queensland for example, the sugar is no longer there and its on a decline. Similarly if Kalgoorlie WA was to run out of gold, there'd be not much else keeping people there.

 

[HotRod]

The main risk is employment related. In majority of towns sub 30K people, there's 1 company or industry where majority of the people work.

If that company or industry was to close down or move somewhere else, then so do those people. Then the people employed in other areas get affected due to their being less people in town and its a downward cycle from there. Maryborough in Queensland for example, the sugar is no longer there and its on a decline. Similarly if Kalgoorlie WA was to run out of gold, there'd be not much else keeping people there.

That's a bit like the sun not rising.

 

[D.T.]

That's a bit like the sun not rising.

Just an example

But everything is finite...

 

[House Hunter]

dtraeger2k I am curious why you made an example of Maryborough and the demise of its sugar industry? Based on the amount of cane being grown around here and the Maryborough Mill production data things are pretty consistent. The number of growers has dropped but that's like the entire agricultural sector with the economies of scale required to stay profitable. I do agree though that the risk lies in towns with a large portion of their population working in the one industry. Funnily enough, most of the regional towns are based on agriculture which fluctuates with the weather and commodity prices.

 

[Blair007]

dtraeger2k I am curious why you made an example of Maryborough and the demise of its sugar industry? Based on the amount of cane being grown around here and the Maryborough Mill production data things are pretty consistent. The number of growers has dropped but that's like the entire agricultural sector with the economies of scale required to stay profitable. I do agree though that the risk lies in towns with a large portion of their population working in the one industry. Funnily enough, most of the regional towns are based on agriculture which fluctuates with the weather and commodity prices.

The main risk is employment related. In majority of towns sub 30K people, there's 1 company or industry where majority of the people work.

If that company or industry was to close down or move somewhere else, then so do those people. Then the people employed in other areas get affected due to their being less people in town and its a downward cycle from there. Maryborough in Queensland for example, the sugar is no longer there and its on a decline. Similarly if Kalgoorlie WA was to run out of gold, there'd be not much else keeping people there.

I understand what you are saying about regional towns being reliant on one industry but both these towns are a lot bigger than the ones i was considering.

For example Coonamble just had a quick look at some properties there and there are houses for 75000 renting for 170, 110000 renting for 250. the yields there are pretty good and your not investing huge amounts of capital if things did turn pear shaped.

 

[Blair007]

http://www.realestate.com.au/property-residential+land-nsw-broken+hill-200554831

Something like that most people would spew at but i see a lot of potential for there...at current interest repayments a 45000 loan is just over 200 per month.
you could drive there and spend a whole weekend slapping on some paint and doing a bit of tidying up. cost for that would be next to none and i think it could be made very rentable.
So rental income would be anywhere between 100-150 pw. thats some nice cash-flow. It may be a risky investment but for the capital required i think the rewards out weigh the risks....thoughts?

 

[D.T.]

I understand what you are saying about regional towns being reliant on one industry but both these towns are a lot bigger than the ones i was considering.

For example Coonamble just had a quick look at some properties there and there are houses for 75000 renting for 170, 110000 renting for 250. the yields there are pretty good and your not investing huge amounts of capital if things did turn pear shaped.

One of my favorite quotes is "dont buy a property, buy progress instead". Whats your end game? If that property facilitates that, then so be it

 

[lizzie]

It does make you wonder why people pay $170/wk if they could buy for $75,000 and have lower repayments?

What is the population makeup? Is it a transitional populous? Or low income?

Do be careful - a friend has a few rentals in a small mining town, the mine laid off a portion of their workforce (as they do at times like this) - rental income is not 25% of what it was 6 months ago and values has dropped around $250,000 (although for them they had previously risen $250k so they are merely back to square one).

They are fine as bought when prices were cheap - but they had retired and were relying on that income so now it's back to looking for work

 

[zinc]

Driving to Coonamble from Perth would def. take a few days i spose?

IP figures look good though.

Popn: just over 2500 at 2006 census - wikipedia.

Industies: Agri (wheat) AND Livestock (cattle and sheep)