Forums / Property Investing / General Property / Lesson learnt in my purchase in Hervey Bay

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  • Profile photo of Jenny1Jenny1
    Member
    @jenny1
    Join Date: 2004
    Post Count: 269

    Hi all

    I will share with you my error of judgement in a duplex I bought in April 05 in Hervey Bay still untentanted even after dropping the rent twice).

    Good price paid for duplex, research done, tourism to increase (especially since the airport upgrade to allow both Jetstar and Virgin to fly direct to Hervey Bay, new resort and IT industry to open etc etc.

    What has happened is that developers have come in and have flooded the market with cheap houses, the resort (Peppers and another new resort opening at Burrum Heads)have promised high returns guaranteed for 18months. Developers will do it tough – guaranteed

    Tonight I spoke to a few agents and they all agree low prices for houses will push rents down.

    At the moment there are 63 houses for rent in HB 14 in Urangan this figure is down but houses on the market to sell are up 1017 houses for sale HB and 35 in Urangan. This is easy math as rental now down as people buying and now can’t get a tenant) are now selling.

    Hervey Bay is beautiful but people at the moment are not staying to live only to visit.

    It will take some time for Hervey Bay to get back on it’s feet again.

    Don’t quiet know what to do as I am told that I would be looking at spending $15,000 to have it fitted out for holiday letting, but again the same thing could happen as there is a glut of units on the market.

    What errors have you all made along the way?

    Jenny1

    Profile photo of RikkyRikky
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    @rikky
    Join Date: 2005
    Post Count: 313

    Hi Jenny

    Nice to see you on the forum its been awhile.
    You may have to sweeten the deal.e.g. first mounth free rent , put foxtel on for a year,offer to pay for removelist.
    The same has happenend in city appartments in melboure , there has been an over supply.

    Cheers Rick

    Monopoly, my favourite game

    Profile photo of Pro-ActivePro-Active
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    @pro-active
    Join Date: 2005
    Post Count: 66

    Hi Jenny
    Sorry to hear about your situation. Unfortunately, however, it’s all too common when investors have flooded the market and created an oversupply. Even though this may only be temporary, you still have to be able to afford to carry the losses.
    My suggestion would be to hire a really good pro-active PM (ask the right questions and make sure you pick someone with great local knowledge and experience) and get it rented asap, even if you have to drop the rent. It’s better to have it rented quickly at $20-$30 less than leave it vacant for weeks on end, as I’m sure you’d know.
    Make your ad stand out, offer something different (as has been suggested) and stay on top of your PM. Ask if they can put it in their window as a feature eg Rental of the Month with a sweetener such as free garden care (mowing) for first 3 mths or free paper delivery for life of lease, movie tickets every mth, cable tv connection, broadband etc.
    Assess the other rentals yourself and see what you can add. Sometimes, it’s all about you doing your own homework and finding something unique yourself that tenants will go for.
    Can you add something else such as a/c, an alarm or auto garage.
    Good luck with it all and sorry for the ramble- in a rush tonight :)

    Cheers,
    Pro-Active

    http://www.invested.com.au Australia’s premier Investor Education site

    Profile photo of lifeXlifeX
    Member
    @lifex
    Join Date: 2004
    Post Count: 651

    Possibly consider wrapping or a lease option on the property, if you can’t find a tenant with some of pro-actives ideas.

    I have a empty house in a town with many similar rentals and many houses for sale that have just come on the market too.

    I am trying foxtel digital tv as an incentive, it might not get a tenant straight away but when tenants do start looking, at least mine should be ahead of similar rentals in the area.

    And don’t fret too much, remember the tax deduction is a bit bigger when you hav a vacancy.

    Good luck!


    Live, Learn and Grow

    Lifexperience

    Profile photo of DazzlingDazzling
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    @dazzling
    Join Date: 2005
    Post Count: 1,150

    Good morning Jenny1,

    Maaaaaaaaate !!! I’m a bit confused with your HB pad.

    So what was the lesson learnt that you speak about in the title of the thread ?? More to the point…what solution do you think will stand up to harsh tenant scrutiny.

    What happened to the tenant you signed up ?? Your last post on the subject you were tossing around whether to get rid of it or….something else. Apparently a tenant came to rescue just in time and all was happy days ??

    Looks like it’s back to not so happy days ??

    I’m totally confused…not to put too finer point on it Jenny – your place in particular and HB in general sounds from your description and data like “Pittsville for Investors”.

    My suggestion from your last thread still stands…pull the plug – take the fin. hit, bank the lessons learnt and move on to far greener pastures. It’s been 4 months now…how long can you sustain this situation ??

    What exactly was your error of judgement ??

    (I’d rather shock you into action – any action at all – rather than sugarcoat the response and kowtow to tenants free wishlists and whims).

    Cheers,

    Dazzling

    “No point having a cake if you can’t eat it.”

    Profile photo of Jenny1Jenny1
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    @jenny1
    Join Date: 2004
    Post Count: 269

    Dazzling my white knight alias kick up the bum and get on with it (no pointy toe shoes though!)
    Just what I needed.

    Dazzling it is like this (don’t be confused) I bought this place with vision of sitting on it with a nice little tenant paying me regularly and eventually going up there to live.

    Got excited as sacked the PM and got another, dropped the rent and looked like getting a tenant. Paradise here I come. Not to be though as now I find out proposed tenant not able to be contacted to give the good news that they would make suitable tenants (with so many properties for rent, tenants putting in applications everywhere and picking and choosing).

    With all my other properties I have got (also I have never sold anything I owned or bank owns before)easy peasy straight forward, but I am being a real girl with this not knowing what to do next and when. Prob do know not too sure do I sit on the fence and wait 4 more weeks?

    What did I learn:

    Don’t get emotional just because you slaved your guts out cleaning it up with reno, after all it is an investment to make money not to sit with no one in it.

    Have your exit plan in place and use it (don’t be a girl!).

    Don’t be afraid to say I stuffed up and got wrapped up in the hype. etc etc.

    It is a learning curve this investment thing maybe this property is the one that I learnt from the most. Thought I had it down pat, obviously didn’t.

    You can stop kicking me now Dazzling!

    Cheers

    Jenny1

    Profile photo of lifeXlifeX
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    @lifex
    Join Date: 2004
    Post Count: 651

    Jenny,
    I disagree with Dazzlings surprising suggestion at selling at the first bit of difficulty on one minor aspect of an Investment Property…………………………………………………………..and Dazzling, I’m surprised that this came out of your mouth at all! As we all know you never shy from a challenge.

    Stay true to your research on the area and why you chose this property, especially if ties in with a future plan for you. This does slightly cross over from investment to lifestyle decision but isn’t that the end result for our investments anyway.

    Remember it is still the middle of winter for coastal areas and I would hold out at least til summer if you can afford it, and maybe try for the holiday rentals, it may just make up for the quiet time over winter (not that far away)

    I would exhaust all possible creative avenues and marketing before pulling the pin. In areas that have great capital growth potential but slumps in tenancy demand, things like lowering the rent and adding tenants “wishlists and whims” is just part of meeting the market wrt renting the place out.

    Ok, so maybe you underestimated the ease with getting a tenant “bank” this lesson and remember to include this in research with your next property. Just keep lowering the rent weekly until

    A: you get a tenant
    B: you canny lower the sail no more captain, and then it’s time to abandon ship.

    my opinion!

    cheers

    An worst case exit strategy is a good idea.


    Live, Learn and Grow

    Lifexperience

    Profile photo of Jenny1Jenny1
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    @jenny1
    Join Date: 2004
    Post Count: 269

    Thank you all for your responses.

    I will ponder my options for a little longer.

    Cheers

    Jenny1

    Profile photo of kay henrykay henry
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    @kay-henry
    Join Date: 2003
    Post Count: 2,737

    Jenny,

    Things sound a bit tough, but not having a tenant is something we *always* risk when buying a vanilla residential property. Presumably, as others have said, just keep putting the rent down, and you’ll get a tenant- meanwhile, it’s wise to have reserves. Can you pay it off if you don’t get a tenant for a year?? It could happen.

    A couple of things… I think Hervey Bay was a place to purchase at 2 years ago. You only bought your property recently- probably at the peak of the boom. Probably it is never a great idea to read about a place being a boom town and then buying into it- buy into it when noone is talking about it- not when everyone is talking about it.

    Another thing… you talk about “cheap” properties now flooding the market. I would say that the market has more likely bottomed- rather than just a flood of crap properties onto the market. As someone else mentioned, oversupply is now an issue, and it will affect the value of your own property.

    LifeX reckons you could wrap it… well, if other properties are so cheap, I think you’d be flat out offloading this property as a wrap.

    You asked have others made mistakes- yes, absolutely- I made heaps. Thing is, I don;t expect my properties to make money *yet*, particularly if I have just bought them. Property is a long-term investment. I reckon try and sit with this place you bought and just try and pay it down- tenant or no tenant. I think it would be a mistake to flog it off now, particularly given that other properties are so cheap now in HB- try and hold it and be patient. [confused2] And pay EXTRA onto your mortgage if you can, in case it becomes overwhelming later.

    kay henry

    Profile photo of lifeXlifeX
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    @lifex
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    Post Count: 651

    Kay,
    I suggested wraps as this would make the property available to a market that may lie just outside of a Normal Banks Lending Criteria.

    Or potentially give access to a buyer who would be stuck with a crapper (cheaper) house if they only used normal Lenders.

    Don’t ponder Jenny, Make a decision and Act! Set a deadline or committ to holding on no matter what or try something creative or lower rent or hope the house burns down and is covered by insurance……….only jokin’

    Indecision is your real enemy here!


    Live, Learn and Grow

    Lifexperience

    Profile photo of grossrealisationgrossrealisation
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    @grossrealisation
    Join Date: 2005
    Post Count: 1,031

    hi Jenny1
    Not one for hitting the girls as a couple of you ladies are reasonably smart investors.
    so invest
    I am not with dazzling about getting out of this property for only one reason and that is you said that you wanted to move into it at some time, so it must be within your time line of where you want to be with 5 to 10 years.
    If it is not a major part of that then I would be looking at cutting my losses.
    sorry I don’t get attached to real estate it is purely a vehicle to were you want to get to and if this one is flat you don’t keep driving on it remove it, throw it away and get another wheel.
    as for developer supplying cheap product unfortunately this is wrong.
    A developer works out what is in the market and if he/she doesn’t get a 35% return they can’t develop there.
    So if its cheap maybe yours is dear.
    my sugestions is (A) if you can hold do so ( you can off load the losses to tax and if your search was correct in the first place then the property will be worth what you originally guestimated it would be worth)
    (B) if the value is not there and you suspect your orginal ideas, then sell, wrap, auction to the highest value and move to the next property not knowing the area but reading yours and dazzlings post this has been going for some time you need to re check your guestimations.

    here to help

    Profile photo of kay henrykay henry
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    @kay-henry
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    Originally posted by grossrealisation:

    Not one for hitting the girls as a couple of you ladies are reasonably smart investors.

    here to help

    HA! [lmao]

    kay henry

    Profile photo of wilandelwilandel
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    @wilandel
    Join Date: 2003
    Post Count: 761

    Hi Jenny,

    Sorry to hear you have still had no luck with a tenant so far…[cigar]

    How does the location stack up? Is it situated perhaps on a busy road like Boat Harbour Drive, or is it in a good location, within close walking distance to the beach (if it was, I definitely wouldn’t sell)… If it’s in a bad location, perhaps selling and moving on to a property in a better location might be worth considering. BTW, what price is the rent now? Just remember your goal was to move into it in a few years.. Don’t give up so easily. KEEP TAKING ACTION…[biggrin]

    We are shifting there soon, and I am a bit biased about HB, but I would try to stick with the IP until just before Xmas. Just remember, lots of people shift just before Xmas!! Hervey Bay definitely has been the flavour of the month with speculators for a while, and so it will take a bit longer to sort itself out. Prices HAVE dropped there, so maybe selling NOW is not so smart.

    Perhaps try to rent it thru another property manager at a different RE Agency. (maybe 3rd time lucky)… It was a big investment, so it’s worth a bit of mucking around to get a suitable tenant… We would ONLY use “The Professionals”. If you enquire there, ask for Sal and tell her that Del recommended you. She will be honest.

    We sold a house there a week or so ago, and I am seeing more “under contract” signs on the internet websites, and remember the Whale Watching season gets busy in September. Maybe in Spring things will turn around for you, either by renting it out or by selling. Hope so..

    Do some “soul searching” and work out what you really want to do, then stick with your “GUT feeling” and do what it takes to get a good result. Remember you have to be able to sleep at night.

    If you decide to sell, we may be interested if it’s a good deal, so feel free to email me the details !! Hopefully you will get a great tenant this weekend.

    Good luck,
    Del

    http://www.nzpropertytogo.com

    Profile photo of Jenny1Jenny1
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    @jenny1
    Join Date: 2004
    Post Count: 269

    Thank you for your moral support.

    Yes I know property is a long haul deal and it is in a good position (1 street back from the beach)the rent for the property started off at $200 per week and is now at $170 with adds going in tonights local paper fingers crossed.

    I love Hervey Bay (hubby born and bred there) it will really be great to live there in approx 5 years or so.

    grossrealisation

    You will get yourself in strife with those comments [biggrin]

    Cheers

    Jenny1

    Profile photo of wilandelwilandel
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    @wilandel
    Join Date: 2003
    Post Count: 761

    Hi again Jenny,

    $170 sounds about right price and should rent soon, we have a 2br unit on BoatHarbour Dve, (noisy area) and it rented at $175 after 2 wks.
    Might see ya there one day!!

    Del
    http://www.nzpropertytogo.com

    Profile photo of Jenny1Jenny1
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    @jenny1
    Join Date: 2004
    Post Count: 269

    Hope so Del

    Beautiful spot, it will get better over time when more people will be attacted to job/lifestyle change.

    Cheers
    [biggrin]

    Jenny1

    Profile photo of MillyMilly
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    @milly
    Join Date: 2004
    Post Count: 288

    Hey Jenny, I reckon you should take a photo of the place, add some palm trees and beach shots and then submit them with an ad to a melb newspaper. This is the perfect time of year to tempt some more mexican retirees.

    oh and kay, I had a giggle[biggrin] over your response to grossrealisation’s clumsiness.

    milly

    Profile photo of grossrealisationgrossrealisation
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    @grossrealisation
    Join Date: 2005
    Post Count: 1,031

    hi jenny
    please give me the good oil.
    I have a 250 unit develop in hervy bay and i’m just doing the numbers.
    what sell price new is it currently
    what are they discounting by currently.
    As soon as this guy was telling me your post came to my mind.
    somebody is going to get the project not sure yet if its worth running with yet.once I get the paperwork can let you have a look if you wish and give me your input.

    here to help

    Profile photo of DazzlingDazzling
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    @dazzling
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    Yeah that makes sense GR…??

    Jenny is having trouble renting out her IP.

    I’m sure that amply qualifies her for financially and feasibly reviewing your 250 unit development project ???[blink]

    How’d ya go Jenny ?? Got it rented yet ?? What is your cut off criteria…for the IP that is ??

    Cheers,

    Dazzling

    “No point having a cake if you can’t eat it.”

    Profile photo of foundationfoundation
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    @foundation
    Join Date: 2005
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    250 unit development in Hervey Bay? I asked a friend who works in the planning field in the region whether he knew of such a development, and the answer was a resounding “NO…?”
    Not meaning to doubt you, but are we talking about the same town? The one in QLD? Is this a high-rise development?

    Cheers, F.[cowboy2]

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