Hi All,
Are there any experienced & successful investors in Perth, WA (or elsewhere) that would be prepared to offer some assistance to an investment “virgin”?
I have read heaps of books on wealth creation and implemented many of the concepts and ideas, which have helped my immediate financial position and laid the foundations for long term investment success. I have saved $40k cash, steady income, no debt and heaps of time available and believe I’m ready to start implementing a long-term wealth creation plan… but which one & how?
Of all the long-term wealth building strategies I’ve investigated Steve’s CF+ investment property approach appeals to me most for many reason including immediate returns and the ability to start small and scale up to an unlimited size.
Any guidance from those with the benefit of hindsight would be hugely appreciated.
Cheers, Chris.[
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[email protected][
]Hi Chris,
Why don’t you come along to our Property Investor Network Meeting. Last Wednesday of every month in Perth.
Send me an email and I will add you to the email list.
Regards
TraceyHi Chris – My suggestion is get a week or so off work in about a month’s time.
Book (and pay for) a return Prospector train ticket to Kalgoorlie for that week. Now you’ve got a deadline to meet and work towards!
In the next month spend every spare moment researching Kalgoorlie. Find out all you can about the place. Population trends, rents, wages prices, industries, etc. Also get preapproval for your loan.
Ring up locals and ask lots of questions (eg shire will help you re appropriate construction style and problem streets, property managers will give you an idea of what’s letting well, and what tenants in the area prefer, etc). Also contact RE agents and ask what they have available in about the last week. While you’re talking, ask about costs like rates, water, strata for properties they’re advertising. Send away for a Home Price Guide or WA Dept of Land Admin list of recent sales in the area and compare with ads on the web.
See Archicentre’s website re inspecting buildings. Find out the local pest inspectors & building inspectors in town and ring them.
Use the rents, prices and cost info you’ve gathered to do some sums to see if they work for you. Your bank will be able to tell you what the loan repayments are for loans of various sizes. Or you can use software to do it (most computers already have a Microsoft loan calculator somewhere).
Make a shortlist of ads you’ve seen that appear the best prospects (quality of property, location, rate of return, etc).
With all that you’re ready to go! Have a look around town, make an offer, buy something that is suitable and go home!
If you pay $100k for a place, you will need about $25k if borrowing 80%. With your $40k, you should be able to get a second place in 12 mths time, or however quickly you can save the next $10k!
So it is quite possible that in 12 mths time you could have two IPs, be receiving about $15-20k pa rental income (before costs) and planning the purchase of a 3rd IP!
Peter
Thanks for your detailed reply peterp.
My preliminary investigations into Kalgoorlie indicate that there are potential CF+ investment properties available!
Kalgoorlie’s negative population growth is the only thing making me hesitate. The average population growth over the last 10 years is +1%, however population growth only increased early in the decade, it has declined for the previous 7 years and at last count was negative (pop. growth 2001: -1.2%). Real estate prices have declined avg. 4.5% pa. 1999 – 2002, although in 2003 they increased 13.8%.
Research into other WA towns has shown that CF+ investment properties are far easier to find where there is a fluctuating or declining population and much more difficult to find where there is a steady or growing population.
Is a stable or consistently growing population essential for successful CF+ investment properties? What are your thoughts/experiences on investing in a town which has experienced some negative population growth? Does a declining/fluctuating population present great investment opportunities or should these areas be avoided like the plague?
Cheers, Chris.[
]Chris – An excellent question : ) that I hope others with more experience than me can answer.
I don’t know the answer, but I’d be wary about investing in areas showing long-term population decline, such as agricultural areas where the trend has been nothing but down for 40 years. On the other hand yields can be fantastic, and there may even be capital growth due to investor frenzies (the ‘Tasmania effect’).
Mining towns tend to be more volatile, which could present both opportunities and threats (especially if you have to sell during a slow time).
Kalgoorlie-Boulder for instance showed strong population growth between 1992 and 1998, a flattening off and then a decline as you pointed out. You are correct in pointing this out as a negative statistic and being concerned about this.
However information from http://www.regional.wa.gov.au/rti/KalBould.pdf ) present other stats (though a year old) that are more encouraging.
The three I consider most significant for landlords are:
1. Reasonable employment growth (note the decline in the March quarter of each year and the strength of the rebound in June)
2. Unemployment below the state average (4.4% in June 2002)
3. Taxable income well above the state average (unusual for a non-metropolitan area)
The above stats also show strong non-residential building approvals, but declines in agricultural and mineral production, so it’s a mixed picture. The increase in residential building approvals could be a concern if sustained as population is not growing and vacancy could be the result. However there are lots of old asbestos houses there that deserve to be knocked down and replaced with something better!
Stats from elsewhere show a large proportion of the population who are renting and rents higher than the state average. Added to this is anecdotal evidence that the vacancy rate is low and good property finds tenants quickly. Property prices have been stagnant and yields are higher than average for comparable towns.
In summary, though not all stats are as I would like, there is sufficient in it to make the area worthy of investigation.
It is interesting to compare these stats with other areas, for instance the Latrobe Valley. The stats for this area also show population decline, but over a longer term. Unemployment is much higher than the state average and incomes and rents are lower. A few years ago prices were even lower, thus providing the average yields in the state. However the recent investor frenzy has led to capital growth even though the fundamentals like population and employment are poor and worse than Kalgoorlie.
I would imagine that most investment decisions are based on a weighing up of good and bad stats, and that it’s very seldom that all the planets line up! But if we wait for that we will be dead, so it might be better to bite the bullet now on something that we think is mostly OK and hope for the best! And try to diversify into other areas in case your judgement proves to be mistaken.
Peter
This post won’t be as long as the last (I promise, I promise!!!) but thought I might have a go at Chris’ very good question about whether it’s possible to do well in country towns where the population is declining.
Though some might attain Tasmania-style investor driven capital growth, I would not rely on this.
Instead the only reason I would invest would be yield. But I’d want long-term yield. There is a big difference between a town that has had static population for 30 years (eg Mt Gambier) and one that’s losing 3% a year. Using the Rule of 72 (for another purpose!) that means that population will be cut by half in under 20 years!
But let’s say that decline is only very slight. Could you still make money from certain types of property in such a country town (even if there is no investor frenzy)?
Consider country towns, their housing stock and demographic trends.
Country towns generally did not go through the 1960s/70s flat boom that capital and regional cities underwent. Therefore most have heaps of old unrenovated asbestos or timber houses on large blocks. There might be the odd duplex, but nice brick and tile villas might well be scarce.
Given the ageing of the population, there are likely to be many couples or single people living in houses like this. Most would own, but a few would rent. There might also be younger single or couples like teachers.
Such people may not be worried about having a quarter acre back yard. However they want a smart-looking low maintenance place. If it’s 5 min walk from the main street, that’s a bonus as well.
If I am right in this, the rental prospects for a well-located modern villa or duplex in a country town might be quite good due to their scarcity compared to older houses.
Comments anyone?
Peter
Hi Peter, thanks again for your posts.
To summarise:
• Towns with fluctuating or declining populations present advantages, predominantly higher returns and a greater number of investment opportunities.
• The risks of reduced rental income, vacancies and depreciation are also higher.As you point out some of these risks could be reduced by investing in premium properties and locations.
I’m starting to feel that a crystal ball may be necessary for successful long term investment in these areas and that they probably wouldn’t be an ideal learning ground. Investing in areas with steady or growing populations greatly reduces the risks, although investment opportunities are fewer.
As experience is gained and the tolerance for risk increases the riskier options should probably be reconsidered, though I imagine that they would only ever represent a small percentage of the total portfolio.
On the other hand they may be excellent places to jump start a property investment portfolio? Does anyone out there have significant real estate holdings in towns with fluctuating or declining populations? Comments from anyone else?
Cheers, Chris.[
]Chris,
have you looked at geraldton yet ?i have a few properties in Perth but still on the learning bandwagon and am also looking at outlying areas… hard aint it as you want to make the right and an informed decision.
had a look at http://www.abs.gov.au what a maze !? and only to find that the town i was looking at was tiny, and who knows where it’s heading (what with timber mills closing down etc..)
then there’s other towns such as dunsborough that just blow you away with the prices.
kalgoolie was bit “hmm dunno” for me… someone smarter and better may make a killing though.
Barry
PerthGday Barry,
I’ve produced a spreadsheet showing population numbers and growth in all 10k+ WA towns. Post your email address and I’ll send it to you, unfortunately tables don’t post well on this forum.
Over the past decade Geraldton shows a -0.5% p.a. population growth although a rise is forecast through to 2016. I think it is probably one of the best investment locations in WA that has a fluctuating population.
If you’re interested it could be worth emailing [email protected] and getting added to her mailing list for the monthly investors gathering in Perth (see her post above). Tonight there is a presentation from somebody in Steve’s MAP.
Unfortunately I cant make it to these meetings as I work in the evenings, but if you’d like to catch up some other time let me know.
Best regards, Chris.[
]Gday Chris
I am also looking at the areas you mentioned and doing the home work.But hav”nt quite put my hat in the ring yet.
If you could e-mail me a copy of your spread sheet it would be much appreciated.[]Regards
Chris
Perth [email protected]thanks for discussion on country towns and other places in WA.
Chris77 I would be interested in your spreadsheet also if that is possible.
Thanks also for your input Peterp
have 2 invest properties and starting to build, initially on -ve but moving rapidly to +ve
What are peoples comments on Karatha South Hedland Bunbury and Albany???
Great to be in chatrooms so to speak in something positive in life.
thanks to all
rmor8280People,
A quick word of warning about the WA reginal trends and indicators docuemnts. Watch out for the population growth projections! There seems to be a lot of areas that have exactly the same growth rate (eg that of the state as a whole) for future projections. Someone seems to have done a striaght line projection over much of the state.
I’ve been through about 30 of them with the same intentions as you guys, only a few (the larger towns/ areas) had actual projections for the region.
brett
Hi Chris77:
‘I’ve produced a spreadsheet showing population numbers and growth in all 10k+ WA towns. Post your email address and I’ll send it to you’
Yes please! My email address is [email protected]
I’m not too worried about the Geraldton population stats showing a 0.5% decline, which is misleading due to local government boundaries, and is typical of established suburbs in any capital city. ALL of Geraldton’s recent growth has spilt over into the neighbouring but little-known Shire of Greenough. To get a fairer picture try adding Geraldton and Greenough to get a ‘greater Geraldton’ figure.
Here’s some stats:
Geraldton 1986 20040
Geraldton 2000 19510Greenough 1986 5814
Greenough 2000 11942Thus while not spectacular, greater Geraldton has shown reasonable long-term growth.
There is also overall growth in the regional area that Geraldton serves. But this is not evenly distributed throughout the region. Coastal areas such as Irwin are growing while inland farming areas are not.
Peter
Hi Chris
That spreadsheet of yours sounds great.
Could you email it to me: [email protected]
Thx
Hot Rod
Hi Chris
sounding like a broken record here but could you also send me the spreadsheet
Cheers
SC
Hi Chris,
That information would be great~! Can you please email it to me? My email address is
Cheers,
Perry
One who ask a question remain a fool for 5 minutes;One who does not ask a question remains a fool forever.
Hi Chris,
Sounds like you have done some excellent research on potential investment areas!! Thats is really good to see!!!
I would be very interested in the spreedsheet you have offered.My email is [email protected]
Forwardly thanking you & keep up the good work.
Cheers
EdChris77
Could you send a copy my way too…Wow my first post and already asking for stuff…
Thanks in advance… : )Hi Chris
would very much appreciate a copy of your spreadsheet
Thanks in anticipation
]
]Hi Chris,
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