South Hedland Property

Lemme get this straight...the agent trying to sell the property is giving you good advice. ..?

Isnt that a bit like a cigarette company paying for research into its own producf?
 
My buffer is cash savings in offset. I try not to go into debt without it (did recently but was short period and too good a deal to pass up, would of just meant tightening of belt for 6months if something was to happen)

Some others would also have a LOC set up from existing equity in property.

Yes all properties have landlord insurance, I would check with your insurer the cover they offer for each specific property.

Sounds very good, but having 6-12 months buffer in the form of savings means I probably have to wait another 2 years before I can think about having an IP..

landlord insurance - yes I am aware of that.. I was bit over ambitious and thought there is an insurance policy that pays rent whilst the property is vacant.. :)
 
Hi mate.. I would love to have a 6-12 months buffer, but out of curiosity how do you guys do it? How does the bank lend you this buffer money? and how did you get back the rent from Insurance, is it the tenants that not paid you the rent due and you claimed on landlord policy?

As mentioned by Brady, tenant insurance. You can have insurance for everything. I would recommend getting as much as you can.

It's hard to explain, but once you get past your first IP up and running, things seem to sort themselves out. I've heard the real magic number is minimum of 5 properties. At 3, I can see how that would happen.

At 1 house, I had to keep borrowing money from friends to pay things off, even though I was earning $2k/week.

I'm on half that now but don't struggle. Dinero just starts rolling in.
 
As mentioned by Brady, tenant insurance. You can have insurance for everything. I would recommend getting as much as you can.

It's hard to explain, but once you get past your first IP up and running, things seem to sort themselves out. I've heard the real magic number is minimum of 5 properties. At 3, I can see how that would happen.

At 1 house, I had to keep borrowing money from friends to pay things off, even though I was earning $2k/week.

I'm on half that now but don't struggle. Dinero just starts rolling in.

Nice stuff mate!! well done... all the best and I am sure you will have soon 5 IPs.. I am on $2k per week income as well, but not sure how you pull off 5 IPs with that level of income let alone I am struggling with trying to finalise 1.. Obviously you have a very healthy financial position otherwise..
 
Sounds very good, but having 6-12 months buffer in the form of savings means I probably have to wait another 2 years before I can think about having an IP..

landlord insurance - yes I am aware of that.. I was bit over ambitious and thought there is an insurance policy that pays rent whilst the property is vacant.. :)

Not if you don't buy an $800k property for your first investment :rolleyes: why not start with something cheaper and manageble that still has decent rent yield (or potential) and possible development (potential)

Or If you're keen on a single expensive property with a high yield why not look at CIP with fixed tenants for 5+ years??? (keys in DAZZ)
 
Nice stuff mate!! well done... all the best and I am sure you will have soon 5 IPs.. I am on $2k per week income as well, but not sure how you pull off 5 IPs with that level of income let alone I am struggling with trying to finalise 1.. Obviously you have a very healthy financial position otherwise..

It's not the number it's the quality. $2k per week you can do more than 5 with ease, but it doesnt' happen overnight. And if not done right you won't get past 1 in some case.
 
Nice stuff mate!! well done... all the best and I am sure you will have soon 5 IPs.. I am on $2k per week income as well, but not sure how you pull off 5 IPs with that level of income let alone I am struggling with trying to finalise 1.. Obviously you have a very healthy financial position otherwise..

It's like climbing a mountain. You can't see that far ahead till you get over the hurdle directly in front of you.

Get to one, you can see two, get to two, you can see 5, get to 5... etc.

Stick around here and you will learn a lot. I call a few forum members friends in my offline life now. They are a really inspirational, informed bunch of crackpots.
 
Lemme get this straight...the agent trying to sell the property is giving you good advice. ..?

Isnt that a bit like a cigarette company paying for research into its own producf?

No mate, seller is in Perth who is doing the land & building deal.. I spoke independently to few agents in Hedland who can potentially manage this property when it is finished.. This agent has been helpful and giving me some useful info.. He mentioned there is less demand but still roughly 3 tenants fighting for 1.. and getting $1,900 to $2,000 a week for a 4 x 2 brand new home in South Hedland is quite possible.. Infact the projects that are on HOLD once kicked off by BHP and the likes, the rental will increase and so will be the capital growth..
 
It's like climbing a mountain. You can't see that far ahead till you get over the hurdle directly in front of you.

Get to one, you can see two, get to two, you can see 5, get to 5... etc.

Stick around here and you will learn a lot. I call a few forum members friends in my offline life now. They are a really inspirational, informed bunch of crackpots.

Very true and valuable advice mate.. thanks..
 
It's like climbing a mountain. You can't see that far ahead till you get over the hurdle directly in front of you.

Get to one, you can see two, get to two, you can see 5, get to 5... etc.

Stick around here and you will learn a lot. I call a few forum members friends in my offline life now. They are a really inspirational, informed bunch of crackpots.

Could not agree more!!! thanks again to everyone for the guidance so far..
 
It's not the number it's the quality. $2k per week you can do more than 5 with ease, but it doesnt' happen overnight. And if not done right you won't get past 1 in some case.

Totally agree.. love chatting with guys like you to have some sanity checks on what I am thinking of doing..
 
Totally agree.. love chatting with guys like you to have some sanity checks on what I am thinking of doing..

As he said.

My income was $2k, but my first investment property was $302k, which I purchased using the money I saved when I worked at Subway. The second $310k and the third $249. Best ROI was the $249k one.

I started 2 years ago with my last purchase 1 year ago. They have minimum rental returns of 8% ROI (manufactured, I didn't buy them that way) on total costs, and have gone up $50-100k in value each.

Would I have bought my first property knowing what I know now? Definitely not, but you learn with time. It's easier to recover when you have a 'cheapie' with high ROI in a growth area as opposed to an $800k mini-mansion with nothing you can do to add value.

Build up your team as well. When things go wrong or I need advice I can pick up my phone and get answers in minutes. You do okay on your own. You do better with a great team on your side.
 
So what are your thoughts on purchasing in hedland after a bit of advice from the forum sukumar?

I mean it could work out well for you an like ausprop says the surplus cash flow is a good offset for the risk but still I just think that hedland property prices gave been pumped up due to large population from construction projects and little supply. Now the construction projects are mostly turned to production, meaning less workers, coupled with the fact there's lots of development and land being resleased. I can easily see 800k properties losing 10% in value. Is all that extra cash flow worth it if you lose 80k equity.

If your earning 2k a week maybe you can afford to buy a small development site around the 400-500k mark.
Or like Brady said, if your after cash flow maybe researching up on commercial property might be a safer choice.

I'm relatively new to property investing myself but one thing I know for sure is that the most important thing is to get the first ones right if you want to make a decent crack at it.

Cheers
 
I believe the positive cashflow should attack the debt as a risk mitigation (after any consumer/credit card debt that is)

I see this as a flawed strategy, the problem is even if you do this if values are dropping or even if they have hit bottom you are stuck with high entry level property which may not see any growth till the next cycle, could be 10 years away. It makes sense to play in a market which is either rising or where you can add value and sell on or make it cash flow positive in areas which are not higher risk as are all mining towns in Australia at this time in the cycle. That was a mouth full:)
 
The thing with the cost of property up there, there is the base cost to build a new 4x2. With land and build costs and then finishings, you'd be lucky to get away with change out of $850K.

That pretty much sets the market ATM.

Add in some profit, and new 4x2s are on the market for about $900K.

Eventually, the market will begin to settle in at around the $850K for new 4x2s. They can't be going any lower as people will be losing money, the market will determine where this finally come to a rest. Building companies might even start to cut their margins. Something will have to give to go lower.

The rent is a different issue.

The 4x2s were earning up to $2500 to $2800pw (about a 12% yield) in the peak and have now settled in the $1600 to $1900pw range (about a 9-10% yield). I can see this rent decrease even further to about the $1200 to $1400pw range (just look at Karratha), but the Port Hedland area has been historically higher in yield by a few pips compared to Karratha.
 
The thing with the cost of property up there, there is the base cost to build a new 4x2. With land and build costs and then finishings, you'd be lucky to get away with change out of $850K.

That pretty much sets the market ATM.

Add in some profit, and new 4x2s are on the market for about $900K.

Eventually, the market will begin to settle in at around the $850K for new .

But this is where I have to disagree.... prices can most certainly go lower than $850K, we are talking "boom/bust" cycles, no different to what we have witnessed in Perth when the market went bust in 2007. In particular Mandurah, an oversupply of new product investors/developers offloading and losing money.
The point is the base price will be dependent on demand, if there is an oversupply and people are desperate to sell this is where prices can and will continue to drop.

For those who entered this market (mining towns) in the early part of the cycle they should be sitting pretty regardless because they probably purchased at a very low base perhaps $300K+ depending when they jumped in of course. However, anyone who purchased over the last couple of years I expect will be feeling the pain, drop in house prices of 25%+ and similar with rents and oversupply. Try selling in this market, how low can you go.

MTR:)
 
But this is where I have to disagree.... prices can most certainly go lower than $850K, we are talking "boom/bust" cycles, no different to what we have witnessed in Perth when the market went bust in 2007. In particular Mandurah, an oversupply of new product investors/developers offloading and losing money.
The point is the base price will be dependent on demand, if there is an oversupply and people are desperate to sell this is where prices can and will continue to drop.

For those who entered this market (mining towns) in the early part of the cycle they should be sitting pretty regardless because they probably purchased at a very low base perhaps $300K+ depending when they jumped in of course. However, anyone who purchased over the last couple of years I expect will be feeling the pain, drop in house prices of 25%+ and similar with rents and oversupply. Try selling in this market, how low can you go.

MTR:)

I agree with the market possibly going lower. It has now settled in at around the $850K mark based on land costs and building costs ATM. These costs are still at boom levels. The cost of tradies is still diabolical ATM up there.

Once these reduced rents/wages/costs start to wash through the market up there I can can see the support for these high costs fall to below $850K. Building companies will also have to adjust. If they don't they will go out of business or just stop building up there. If they stop building up there, then rents may stabilise.

It's probably at that point now. Something will give way soon one way or the other.
 
fly up here for a weekend. see firsthand the amount of housing that is being built.
there will be more oversupply soon with companies winding back their housing payments and putting employees into their accomodation. (no longer paying for private rentals)
 
fly up here for a weekend. see firsthand the amount of housing that is being built.
there will be more oversupply soon with companies winding back their housing payments and putting employees into their accomodation. (no longer paying for private rentals)

Completely agree. Sukumar IMO you should still go have a look, it sure is a worthwhile exercise/

There is a major shift from construction to production. The miners are well and truly into cost cutting mode. Wages are on the way down, efficiency is key. Rio tinto is trying to automate if successful soon we might have remote operators in Mumbai. It is efficient, welcome to the borg. I can't help but think the high rents at some point in time will come under pressure from cost cutting measures.

There is still some upside such as Roy hill, FMG Iron Bridge and Atlas Iron, however with the industry slowdown there is no longer the need for outlandish wages and the employer is setting the conditions not the employee.

Now not saying that the Pilbara is all bad but for someone who will go bankrupt if there are periods of vacancy and reductions in capital value well.......

IMO the worst thing you can be doing at this point in time is buying new off the plan. Be very careful, looking around there seems to be some development projects that have run out of money.
 
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