Shortland IP.. Wha'dya think..

[c9806103]

Keen to hear Alan's (Propertunity) thoughts on this one and anyone else:

http://www.domain.com.au/Property/For-Sale/House/NSW/Shortland/?adid=2008404111

- 950m block (possibility for later subdivision)
- ~300k purchase price
- already earning 400/wk rent
- close to Newcastle uni
- Front yard looks like a dump and would be VERY easy to clean up and improve the from-street appearance dramatically.

Any thoughts as an IP?

Shortland has shown 9pc average growth over the past 10 years, but little growth within the past 3 or so years, indicating it has stalled a bit lately and perhaps a good time to get in while the rest of Newcastle seems quite bloody expensive.

Cheers

 

[Propertunity]

Hi c9806103,

PROs:
Price @ $309K
Ability to add-value to with a clean up
Walking distance to the back of Uni (over the overpass near the golf club)

CONs:
Only 3brm 1bath. At $400pw (or $133 per room per week) this only represents a 6.7% yield for which you have to provide an internet connection, cleaning every fortnight, furnished etc. This yield is too low. The last one I purchased in Shortland for student accom. was a 5brm 2bath. This was more money @ $345K but showed almost 11% yield based on a better property attracting $150 per room per week).

BTW, Shortland's CG (and Birmingham Gardens for that matter) has not 'stalled' in reality. You have to look more closely at the numbers. Yes, the median price has fallen in the last 12 months from $285K to $280K (a whole $5K ) but the sales volume is down in Shortland: down from 139 last year to only 49 this year. So all you can read into that is that people are holding & not selling (and why would you not hold for that sort of yield?). Even if you are holding property in Shortland, you'd hardly be suffering mortgage stress either on a 'normal' resi rent (as opposed to student rent-by-the-room).

 

[c9806103]

Thanks Propertunity, very helpful.

All makes sense, I have noted a few of the stronger 4/5 bedroom places where the yield is better. So for a bit more buy-in price, definitely worth it then. And I will factor in the expenses such as cleaning and internet in future calculations as I was a little unclear as to whether the landlord definitely funds all of these - thx for clearing that up.

What do you reckon owning a uni house is like in reality? I.e. tenants constantly moving in and out, i.e. lots of turbulent periods without the full yield coming through the door?

 

[Simon]

Shortland is not a middle class area. Not a blue chip suburb at all.

I'd suggest that if you examine that growth you will find a lot of it was the major booms - Rising tide lifts all boats.

All things being equal I would prefer to buy on the Eastern side of the Uni.

Student places are great for some folks and a nightmare for others. I am in the former category and I am thinking of another one once my current project is finalised. They are certainly more hands on than a standard 12 month lease. You will learn a lot from your first and your second will be easier as your systems will be up and running.

I'd buy them as part of an investment plan not just because the idea caught your eye one day.

If you decide on a student place up here then I'd be looking at:

North Lambton,
Birmingham Gardens,
Jesmond, and even perhaps
Waratah West

before Shortland.

 

[Simon]

CONs:
Only 3brm 1bath. At $400pw (or $133 per room per week) this only represents a 6.7% yield for which you have to provide an internet connection, cleaning every fortnight, furnished etc. This yield is too low. The last one I purchased in Shortland for student accom. was a 5brm 2bath. This was more money @ $345K but showed almost 11% yield based on a better property attracting $150 per room per week).

If renting by the room to students you shouldn't consider getting the $400pw for the full 12 months. Many landlords rent for the academic year then short term over the summer. This is demanding and you will need to be close or have an agent as you will be back and forth a lot during the summer holidays. Also a good time for maintenance and a heavy clean.

 

[Propertunity]

If you decide on a student place up here then I'd be looking at:
North Lambton,
Birmingham Gardens,
Jesmond, and even perhaps
Waratah West

Yes, and even the Jesmond bits of Wallsend too.

 

[Propertunity]

If renting by the room to students you shouldn't consider getting the $400pw for the full 12 months...... Also a good time for maintenance and a heavy clean.

Yes, absolutely agree. My initial point was that even with 100% occupancy, the yield was nothing fantastic at 6.7% and the OP should be looking for much better.

 

[c9806103]

Thanks Simon, that was a good insight into the realities. It does sound like quite a bit of work involved, which doesn't scare me away. But yes, I imagined that the reality would be pretty much like that. Constant/chasing and cleaning etc.

Yes I love North Lambton and Birmingham Gardens too and would actually consider living there. Both great sleeper suburbs.

 

[Propertunity]

What do you reckon owning a uni house is like in reality?

Fortunately Simon owns some and can share his experiences.

I.e. tenants constantly moving in and out, i.e. lots of turbulent periods without the full yield coming through the door?

There are some things you can do to mitigate the risk. Some PMs in the area have it all down pat and do leases by the room and licences for the common areas. That way they can terminate a lease on a room by room basis if they get a troublesome student or other conflicts.

Some do 12 month leases so that the holiday period is covered. Some lease to a master tenant on a full 12 month basis who then sub-lets by the room.

There are lots of options. At the end of the day, it depends on how well it is run and cleaned etc. IMO you need to start with a 'fantastic' yield that will come down to just a 'great' yield after expenses.

 

[Simon]

Thanks Simon, that was a good insight into the realities. It does sound like quite a bit of work involved, which doesn't scare me away. But yes, I imagined that the reality would be pretty much like that. Constant/chasing and cleaning etc.

Yes I love North Lambton and Birmingham Gardens too and would actually consider living there. Both great sleeper suburbs.

I have had some students stay for 4+ years - one even stayed 2 years after graduation as he was a young doctor on shift and couldn't be bothered setting up a flat.

Others have been asked to leave for unusual lifestyle practices.

Repairs have been reasonable and nothing out of the ordinary expectation of fair wear and tear. I saw a broken window the other week and I asked the nearest tenant about it. He broke it while practising hockey and was quick to tell me he had already arranged repair.

80% of my students are the loveliest kids and I would have them in my house. Unfortunately the other 20% cause 80% of the work.

If you are OS then I'd have it managed. There are several agents who are willing to take these on.

I have a lady clean each Feb before semester one and I get the carpets done. The students vary in their standards but I don't live there so I am never to fussed. I usually try for 3 girls and 2 boys as I find the girls organise the rosters etc. I have the lawns done monthly for $35.

I am retired and quite enjoy running my place. Hence thinking about another as it would only be slightly more work - not twice as much, now my systems are in place and I am well past the learning curve.

 

[c9806103]

IMO you need to start with a 'fantastic' yield that will come down to just a 'great' yield after expenses.

Great advice, cheers.

 

[c9806103]

I have had some students stay for 4+ years - one even stayed 2 years after graduation as he was a young doctor on shift and couldn't be bothered setting up a flat.

Others have been asked to leave for unusual lifestyle practices.

Repairs have been reasonable and nothing out of the ordinary expectation of fair wear and tear. I saw a broken window the other week and I asked the nearest tenant about it. He broke it while practising hockey and was quick to tell me he had already arranged repair.

80% of my students are the loveliest kids and I would have them in my house. Unfortunately the other 20% cause 80% of the work.

If you are OS then I'd have it managed. There are several agents who are willing to take these on.

I have a lady clean each Feb before semester one and I get the carpets done. The students vary in their standards but I don't live there so I am never to fussed. I usually try for 3 girls and 2 boys as I find the girls organise the rosters etc. I have the lawns done monthly for $35.

I am retired and quite enjoy running my place. Hence thinking about another as it would only be slightly more work - not twice as much, now my systems are in place and I am well past the learning curve.

That was a great read Simon - many thanks and appreciated.

I think even if I was locally based, I am busy building a business and would prefer to have it managed anyway.

 

[ritchie77]

Interested to hear Simon's and others thoughts on these Newcastle student accommodation..... Have seen a few of interest currently on the mkt (not sure if this is just because it is end of semester or there are always quite a few for sale??)

Anyways, Simon - did you end up getting another? Are there always long vacancies during the summer? (and is this therefore the reason why a number of ll are selling now - I suspect so,,,,) but good to get others thoughts from this post a cpl of years ago....

Ritch