Tips to buy properties in mining towns

[seano4ever]

Hi everyone,

I am considering expanding my portfolio to include properties in mining towns.

I have found many cashflow positive properties in these areas but I have a couple of questions for people who have done this before so I can avoid the same mistakes.

1) What are some tips for identifying a good mining town?

2) How do you know how long a mining town will last (do they close up sometimes)?

3) What would be considered a good return on investment for a mining town area? 12%? 15%?

4) How do I find which companies are mining in the area (eg. BHP? RIO? etc)

5) Feel free to provide input =D

 

[Rolf Latham]

Hi Sean

Long term positions backed by lots of gov infrastructure

NW WA is a good example, but a bit exxy for most.

A core concern is to make sure that the digging will continue for a long time,otherwise you could end up with an empty property that still needs a loan and rates paid on

There are some "buyers agency" type providers that specialise in "providing" this sort of stock.

ta
rolf

 

[jrc]

Often when a mine is started there will be information on its expected life

Look at the mining economy, ie in a boom mines that are more expensive to operate per unit of ore become economically viable. These are the first to go when the boom ceases.

Large mining companies make decisions based on their global interests eg BHP Ravensworth mine, Hopetoun WA

If mining is the sole industry even if there are a couple of separate operators, you can be at the mercy of the exchange rates, poor hedging decisions

Are they proving more reserves, are they actively exploring

I invest a portion of my investments in a small mining town. To me most investments in that town are overpriced for the risk involved.

 

[nhb74]

Apart from finding the right mining town and concentrating on the areas the above posters mentioned I took a bit longer to find properties that already had long term leases signed to a mining company. eg 5yrs+

This certainly helped me sleep at night during the slump last year when rental vacancies surged in the bowen basin. I still had rent coming in despite the property being vacant.

Andrew