WA Recovery for Investment Potential?

[sparky23]

HI Kenneth

It is so good to hear from you and I am sure we all pass on our sympathies to you and your family.

I had noticed that your blocks at Haywards Bay have been advertised for auction which I am really sorry about, I have no doubt that the duplex block will deliver the goods for you if it turns out that you can hang on to it, sadly I have had to put my townhouses on the market the link is:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=59460458&s=nsw&tm=1221808200

As you can see they have turned out very well and I am not happy that we have to part with them!

Have you been in contact with Richard to see whether he can help you?

I agree with your optimism regarding the WA property market and if I can sell these NSW townhouses I will immediately withdraw the Rockingham/Shoalwater houses, I think $399,000 is a ridiculous price to have to let them go for when the land on the estate is from around $215,000 - there is no way that houses like these could be built, landscaped and finished for $185,000! Its very odd though that they are not being snapped up.

Does anyone know if 46 Grove st belongs to Prakman? There doesn't seem to be an auction date on realestate.com

Take care Kenneth and let us know what happens at the auction next week.

 

[Prakman]

Hey Sparky,

I can confirm that I don't own 46 Grove, I own 32 + 54 Grove. I spoke to the agent for 46 grove and he said that it was likely to go for 360-380K. Apparently the owner is "very keen" for a sale. Damn the prices seem to keep dropping.

I too am surprised that your two proprties havent been snapped up to date!

Have a great day.

Prak

 

[Prakman]

On a different note, I have noticed that properties in our office for sale are now starting to get snapped up at good prices (our office is in Maylands 5 km from the CBD).

We are a medium sized office so hopefully this will start filtering through the outer suburbs.

 

[Kennethkohsg]

On a different note, I have noticed that properties in our office for sale are now starting to get snapped up at good prices (our office is in Maylands 5 km from the CBD).

We are a medium sized office so hopefully this will start filtering through the outer suburbs.

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Dear Prakman,

Can you and your good Office or/and the other RE members, help to confirm and provide the relevant sale evidence details for the recent house sales at the Anchorage Estate, please? This is requested as per the discussion thread under the "Anchorage Thread Closed?" please.

Thank you.

Cheers,
Kenneth KOH

 

[Sharpy]

Yield Calculation

Hi <KS>,

A 4.5% yield is starting to look pretty good. That is in line with where most of Sydney is at now. But it did take a $200K drop in prices on that house to achieve it... Wouldn't want to have bought it at $600K to see it at $400K today. And 4.5% still isn't that sharp, but it is starting to feel like a floor level yield.

My IP in Mona Vale is about the same yield. $690K purchase price + $20K stamps at $650pw rent = 4.8% yield.

As rents keep rising these yields keep improving. If we add inflation level capital growth at 3% and another 1.2% for capital gain returns (30% of the 4% servicing gap to 8.8% mortgage rate) then the total return is 9%pa (4.8% + 3% + 1.2%). A total return of 9% beats the prevailing cost of capital so makes it a viable investment. I can't see properties tanking too much further with yields approaching 5%.

But I'm an investor, most buyers probably don't consider total returns and yields when figuring out what's good buying or not. At least I hope that's the case so I can load up with great yielding properties over the next 3 years!

Cheers,
Michael

Hi Michael, I am new to property investment and can't get my head around your capital growth yield calc...whats 1.2% for capital gain returns?

 

[stumunro]

Hi Michael, I am new to property investment and can't get my head around your capital growth yield calc...whats 1.2% for capital gain returns?

Michael is breaking down the return on investment into 3 things

Rental Return (or yield) at 4.8%
Capital Gain
via inflation at 3.0%
real price growth at 1.2%

Rental return is self explanatory, how much rent you are getting compared to the value of the property.

Capital gain is the increase in price of your assett. Which is broken into two parts, increase of price due to inflation, and increase of price due to market growth (john wants to pay X this year, more then u paid a year ago)

And all of those things added up will be your gross yielding return on the property which versus the interest rate you are paying. In this case 9% beats 8.8%(mortgage)

P.s the percentages Michael has used will differ depending on the property and the market. I.e some properties get better rent, and other properties will get more growth. These numbers are fairly conservative, which is a reflection of todays market.

 

[Ausprop]

i just flogged a place down that way (still subject to finance) that would yield around 5%. with the way building costs are going and finance availability and housing demand and prices falling, i reckon we could see yields of 7+ before too long

 

[TheBacon]

i just flogged a place down that way (still subject to finance) that would yield around 5%. with the way building costs are going and finance availability and housing demand and prices falling, i reckon we could see yields of 7+ before too long

I find getting realiable rental figures for a property to be a bit difficult, anyone able to find a source of this info?

7% yield sounds great! Would only need to be a little bit cretive to make something neutral or positive...

 

[Kennethkohsg]

i just flogged a place down that way (still subject to finance) that would yield around 5%. with the way building costs are going and finance availability and housing demand and prices falling, i reckon we could see yields of 7+ before too long

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Dear Ausprop,

1. Do you know how much exactly have the building costs for a Double-Storey House within the Perth Metropolitian Region, further increases between July 2006 period and now?

2. Where can we find these official costruction costs increases or/ad yearly construction costs data/indexes specifically for the Perth Metropolitan Region, please?

3. According to one of the Hegney Porperty Valuers, apparently Perception Homes is still able to build the same 359m2 Double-Storey House at Lot 2012, 26 Eldon Street, Shoalwater, WA 6169 , to the same house building specifications, at about the same/identical building costs price, at around A$350,000 under today market conditions as it has previously cost them to build for me, way back during 2006.

4. Personally, I find it hard to believe that I know that despite the recent market slow-down within WA, the overall house construction and building costs within the Perth Metropolitan Region, has continued to further increases unabated since 2006 period.

5. It has been suggested to me by one of the local owner-builders that to build the same 359m2 Double-Storey House at Lot 2012, the total house contruction costs will easily amount to A$500,000 under today's context.

6. Do you agree/disagree? Why?

7. Looking forward to learning from your informed views and enriched grond working experiences, please.

8. Thank you.

Cheers,
Kenneth KOH

 

[Ausprop]

HI Kenneth,

exact is a tough standard to meet! Hegneys are dreaming. You may or may not know that I am part owner of a construction company and I can assure you that construction costs have risen dramatically, even over the last year. To think you can build a 2 storey house at $1000sqm is fantasy land. Then again I am constantly amazed at the prices some project builders can build at... it's all achieved by cross subsidisation from their manufacturing arms. Simplest thing to do is ring Perceptions and ask them what it would cost to build again. Your sales rep should be able to help you.

 

[Aaron Sice]

How about you call me and i direct to more value friendly metro builders - recently had a 7 unit development quoted with a 6000 postcode for 129sqm total, 31c ceilings, stone tops, internal paint, blinds/carpet/tile package - turn key - for $157k ea.

pretty much unbeatable in my book, and i deal with a GREAT many builders.

 

[muney]

err... $80k for the land, $90k for each build, balance for costs. so the only loser in that deal was the builder!

was out your way yesterday morning in the pouring rain...looks like it's a wrap on the gt northern hwy ones? our ones are 6 weeks off thankfully, there is no profit in the job so i just need them built and sold asap

hey there..
shoulda given me a call..would have luved to have caaught up for a chat..
i think you payed too much for your block in the first place..i knew then that there wasnt any money in it..i personally wouldnt touch anything right now over $100k per site..its not worth it and you'll go backwards..not fun!
to make money in this market one needs to be extra shrewd..theres soo much stock out there its not funny..so if one site dont work...theres always one around the corner

 

[AUSPROP...]

yeh it was a shocking day and i will be out that way a bit from now on anyway, so will catch you soon.

at the time the market just had a dip and no one could see the credit crisis looming. in fact it was the clay on that site that caught me - if not for that ($150k of site works) it would have been fine.

anyway have moved up a scale from there and it's all onwwards and upwards, just need to tie up some of these loose ends

 

[Kennethkohsg]

How about you call me and i direct to more value friendly metro builders - recently had a 7 unit development quoted with a 6000 postcode for 129sqm total, 31c ceilings, stone tops, internal paint, blinds/carpet/tile package - turn key - for $157k ea.

pretty much unbeatable in my book, and i deal with a GREAT many builders.

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Dear Bluecard,

1. We agree with you to a large extent as we have previously built some 4 houses with Metro-style Builders, ourselves between 2004-2005 period until its building quotes for subsequent house construction, started to get increasingly less competitive for us, along the way.

2. Thank you

Cheers,
Kenneth KOH

 

[Kennethkohsg]

HI Kenneth,

exact is a tough standard to meet! Hegneys are dreaming. You may or may not know that I am part owner of a construction company and I can assure you that construction costs have risen dramatically, even over the last year. To think you can build a 2 storey house at $1000sqm is fantasy land. Then again I am constantly amazed at the prices some project builders can build at... it's all achieved by cross subsidisation from their manufacturing arms. Simplest thing to do is ring Perceptions and ask them what it would cost to build again. Your sales rep should be able to help you.

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Dear Ausprop,

1. Thank you for your excellent suggestion.

2. As per your recommendation, I have just written in to Perceptions Homes officially for their new building quote on the same Double-Storey House Construction at Lot 2012.

3. Let's see what the new quote will be before I send it to the Hegney valuer in question.

Cheers,
Kenneth KOH