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  • Profile photo of ayjaeayjae
    Participant
    @ayjae
    Join Date: 2004
    Post Count: 8

    Just a post (a first for me on this forum) on this for anyone interested in an ‘on the ground’ view of what is the flavour of the month around Moranbah and Dysart. I am a local who works for BHP currently living in Dysart and working in Moranbah. My wife and I have been involved with PI.com pretty much since it began and have a medium level of investing experience under our belts just beginning to ramp up. We recently moved from Mackay into our first real mining town living (Dysart) after avoiding it for many years instead being part of the FIFO / DIDO crew. After only being settled in Dysart for a couple of months, I was part of the BHP mine which has been put in ‘care of maintenance’ (note this mine has not been closed as reported by many media sources) and been lucky enough to move to BHPs biggest site which will mean being relocated from Dysart to Moranbah. So it is with being on the ground I am happy to share information viewed from a layman’s eyes (disclaimer goes here).

    First and foremost; I will note that I am not invested in any mining town at present. I find that there is always potential, and have talked to many people invested in mining areas with very successful returns. However I have seen the opposite also. It comes down to the simple term in general, the higher the risk, the greater the return (and therefore the greater the potential loss). I have told anyone asking about investing particularly in Moranbah and Dysart, as with any investment, calculate your worst case scenario: can you afford for this property to rent for less than half the current value or not rent at all ? Can you afford for the value to drop by half ?

    I know a number of people investing, developing and renting property not only in Moranbah but in other Bowen towns. In talking to these people, reading media reports, looking at government and private sector activity for these areas (especially in the Fly-In-Fly-Out consideration), and actually working on the ground for a mine it’s easy to see that the coal resource is particularly strong and the outlook is favourable. Even such things as BHPs issue with strike action has its benefits in the reduced availability of particular blends of coal which can help inflate prices due to scarcity. There are a few things which I think are unique to being on the ground which I have observed over the last few months which are not necessarily easy to see from a distance – which may be important. I see a lot of investing media still advertising Moranbah as a green light for investors – I don’t necessarily disagree, but just as in tough times for standard residential require options, it would appear at present investors will need to be very creative to keep cashflow going the right way, into the bank account !

    Some of the things which may not be easy to find out are:

    At present, BHP does not lease private residential homes for employees. This differs from town to town, but the majority including Moranbah, Blackwater, and Emerald will not be adding any new lease agreements and it has been removed from the new accommodation agreement. On the ground it doesn’t add up looking at the current vacancy rate. When I am in town things are seriously busy. It’s favourable when a McDonald’s is opening in a town with such a small population – it’s not often that they get it wrong.

    BHP is using a major contractor to build some very respectable modular housing to replace its need for having to outsource accommodation. In Dysart (not sure about other towns) the same contractor is also renovating existing houses to a high standard. From what I have seen, these houses are fabricated in one of the capital cities and shipped to the new location. They are very quick to put together. Something of note here, due to the style of housing, they may not necessarily be included in the median stats for these towns, yet will have an impact on overall supply.

    One of the biggest providers of camp accommodation, The Mac services group while already having a substantial sized camp on the outskirts of Moranbah, has recently gained approval for one of the biggest mining camps to be built out of Moranbah – this has been opposed by the Mayor and many locals. However, when rents are so high local industry cannot support running business in town, a solution needs to be found. Part of the agreement with the mayor if this camp is built is that a certain number of rooms will be made available for town services which cannot afford to rent and make business profitable. Just a quick note here for those who have not seen a mining camp before, new camp accommodation would be close to a 4 star hotel quality room, with flatscreen TVs and Foxtel – some even have electrically operated blinds ! The advantage also is very good food hall facilities and very respectable watering holes

    In conjunction with this BHP has also almost completed its own camp on the outskirts of town accommodating any BHP employees and sometimes contractors who do not live locally.

    Rentals in Moranbah appear to be moving very slowly again, however, the rent range for houses with 3 BR now starts at $500 pw – still ranging up to as high as anyone would wish to pay pw for a premium property. Looking at Dysart, things are similar with some rentals being advertised reasonably ‘cheap’ to attract tenants. Also despite the suspension of mining at the Norwich Park Mine (which was accommodated out of Dysart), BHP is now housing new starters for its Peak Downs Mine – previously (and still for the majority) housed in Moranbah. This is located close to halfway between Dysart and Moranbah. So if anything, Dysart is actually gaining more people than less. In my opinion though, the commercial infrastructure does not support this – even to the point with one of the small shopping squares being closed down in favour of building residential units – that’s how great the difference in returns are.

    So all in all it makes for adventurous investing. Am really happy for any readers to agree or disagree, or even PM if you have any questions. I don’t claim to be an expert in the area as it is not our location for investing, however I have learnt over the past few months of living in the region, even being a local doesn’t mean it’s easier to pick how to invest locally.

    Happy Investing.

     

    Alan.

     

    Profile photo of bardonbardon
    Participant
    @bardon
    Join Date: 2004
    Post Count: 557

    Interesting view point indeed particularly with the prefabricated homes.

    One of our business lawyers was telling me recently that they are getting involved in providing finance for this type of building in the mining regions. There is no capital gain proposed only depreciation but according to her the ROI is 30%

    Profile photo of ayjaeayjae
    Participant
    @ayjae
    Join Date: 2004
    Post Count: 8

    Hi Bardon,

    Have not done much trawling on this topic, did catch a glimpse of thread about Alpha mining accommodation (trial mininig already started). What I can say is that this is BIG business. There are very few providers who do this well as far as I'm aware. Worth pursuing if you can arrange a substantial amount of capital as I believe it would be more likely viable only on a large scale. I have been lucky enough to be see the progress of a friend of mine who is looking at this on a large scale. Being such an attractive deal there wasn't even much outlay initially required.

    Thanks for the info.

    Profile photo of jnbjnb
    Member
    @jnb
    Join Date: 2012
    Post Count: 29

    interesting read thanx

    Profile photo of streamlineinvestingstreamlineinvesting
    Participant
    @streamlineinvesting
    Join Date: 2010
    Post Count: 171

    I remember looking into mining properties, and to me there just was not the value. Because the high price of a mining property is only limited while the mine is in operation, it can only ever be seen as a short term investment.

    Look at a couple of scenarios, a house worth $750,000 in the mines, receiving $2,000 per week in rent, mine is in operation for 20 years. After the mine operates, the house will be worth $200,000.

    Alternatively, a house worth $750,000 in a good area in Sydney, receives $700 per week in rent, capital appreciaiton of 4% per annum.

    Scenario 1 – After 20 years, Total value = $200,000 + $2,000 x 52 x 7 = $928,000

    Scenario 2 – After 20 years, Total value = $750,000 x 1.04^20 + $700 x 52 x 7 = $1,643,342 + $254,800 = $1,898,142

    I know I have made a lot of generalisations, but the traditional scenario still shows more than double the value of the mining property.

    I am always open to hear other peoples opinions, just I believe that there is not much value in mining property, unless of course you are lucky enough to buy a property in a mining town, before a mine is discovered.

    Profile photo of KeyStrategiesKeyStrategies
    Member
    @keystrategies
    Join Date: 2011
    Post Count: 155

    Hi ayjae

    Thanks for sharing – love the Earl Nightingale quote – I recently met his wife Diana – when we spoke at Steve's 3 day Mega conference,
    She is a very interesting lady and has released a new book about her marraige to Earl.

    On the Moranbah front seems that more accommodation is being provided with new developments and camps and the new land release is now about to proceed also so its the old supply and demand equation in play – plus as you say BHP is providing a lot more accommodation of its own in modular prefab style and they have gone to 3 story walk ups in Moranbah.

    How soon before you think the industrial dispute will be resolved between BHP and the CFMEU?

    Profile photo of bardonbardon
    Participant
    @bardon
    Join Date: 2004
    Post Count: 557
    ayjae wrote:
    Hi Bardon,

    Have not done much trawling on this topic, did catch a glimpse of thread about Alpha mining accommodation (trial mininig already started). What I can say is that this is BIG business. There are very few providers who do this well as far as I'm aware. Worth pursuing if you can arrange a substantial amount of capital as I believe it would be more likely viable only on a large scale. I have been lucky enough to be see the progress of a friend of mine who is looking at this on a large scale. Being such an attractive deal there wasn't even much outlay initially required.

    Thanks for the info.

    Ayjae, I don’t doubt that there is opportunity here and if it does prove to have these high returns then I cant see any massive downside either. Personally I am not getting into any new investments for the foreseeable and I don’t have any appetite for new schemes. I ma actually reducing my holdings and have a property on the market now. I had a massive stoush with the ATO which was only resolved last month the outcome was favourable. The one major lesson I learned through this process was not to sail too close to the wind, as if you do and a couple of things go wrong at the same time it could tip you over. I mean how much money do you really need in retirement and is it worth the pressure and risk now to make a gazillion that would be impossible to spend anyway.

    So for me now is to reduce some debt by selling a house, keep the rest of them forever, maybe do a development on one of them down the track, super is growing and most importantly increase my cash reserves to provide a buffer should something go south. My cash flow comes from work and it is better that I focus my attention on that area while the rest of my investments grow.

    Profile photo of ayjaeayjae
    Participant
    @ayjae
    Join Date: 2004
    Post Count: 8

    Hi all,
    Thanks for your comments.

    Biggest news today is the approval of the Grosvernor mine located very close to Moranbah – another 1500 jobs about to be posted. In addition is a new dedicated website from the government target the resource sector, note though it's only compulsory for companies with migration agreements (ie Gina Reinhart) as they must prove that they have given aussies a chance at employment first. Something else interesting quoted in the same article:

    The National Resource Sector Employment Taskforce expects that current activity will create about 62,000 new mining jobs by 2015.

    I am not sure who the NRSET is, but it says it's figures are based on current lodgement of new mine applications. Working at Australia's largest Coal Mine – I would agree. It is busy and mining companies can't get the resource out of the ground fast enough.

    Streamline: thanks for the comment. I agree with your scenario. My only comment is that having being around mining towns for a very over a decade now, to enter into mining property with a long term strategy would be a great risk. In my opinon it would be less risky (if there is such a thing) to look for a shorter term deal gaining high yields with a potential gain if you know the supply/demand ratio is going to change in your favour. Still real crystal ball stuff that I could not foreseeliving and breathing mining. Even those who make decisions on new mininig operations cannot foresee it's success. So agreed. It comes down to high risk, high return (and high losses. I am like you and am happy to accept a smaller % return for less risk.

    Hi Michael: I did not get a chance to meet / see you, but was also at the MC. I was lucky enough to have had a couple 'after conference lemonades' with amongst some of the hard workers, Diana. Wow what a person. I am so grateful that I can use Earls' 50 years of thought, research and education and apply to my life in an instant. That goes for any of you reading here – go listen to The Strangest Secret ! I have read and listened to many pioneering authors, but this brought it all back to basics – just keep it simple.

    As for the question of when the EA will go through (industrial action) – if I knew I would be charging as that sort of info. could attract a heafty fee ! Sorry, I can't help you. I thought it was looking favourable 6 months ago, but negotiations turned on their head pretty much overnight which triggered the last very unsuccessful ballot.

    Hi again Bardon: Thanks for sharing so much wisdom. I am really impressed by your summary of what are we really chasing. If anyone younger than 20 asks me about investing these days (not that I am an advisor) I tell them to buy a house, then go buy an investment property, something good for long term growth, then find a job you really enjoy and live life. Just think if we all had our own home paid off with reasonable equity and another paid for by taxman and tennants which we held for 20-30 years, we would probably have a great house and $ 2M (or it's future equivalent) invested giving you $ 100K pa if you're only making 5% from it ! This is the only thing I wish I had been taught at school. So now we play catch up. I completely agree with your thinking on how much is enough.

    Thanks again.

    Profile photo of ayjaeayjae
    Participant
    @ayjae
    Join Date: 2004
    Post Count: 8
    Profile photo of moxi10moxi10
    Participant
    @moxi10
    Join Date: 2010
    Post Count: 193
    Profile photo of bardonbardon
    Participant
    @bardon
    Join Date: 2004
    Post Count: 557
    ayjae wrote:
    Hi again Bardon: Thanks for sharing so much wisdom. I am really impressed by your summary of what are we really chasing. If anyone younger than 20 asks me about investing these days (not that I am an advisor) I tell them to buy a house, then go buy an investment property, something good for long term growth, then find a job you really enjoy and live life. Just think if we all had our own home paid off with reasonable equity and another paid for by taxman and tennants which we held for 20-30 years, we would probably have a great house and $ 2M (or it's future equivalent) invested giving you $ 100K pa if you're only making 5% from it ! This is the only thing I wish I had been taught at school. So now we play catch up. I completely agree with your thinking on how much is enough.

    Thanks again.

    Yep, many of us would have done better to start earlier but I would guess that in general we are all probably starting earlier than our parents did. This is the case for me. Better still my young boys have an eye for good property, understand finance and tax and know about estate planning.

    Profile photo of taxdivataxdiva
    Participant
    @taxdiva
    Join Date: 2011
    Post Count: 25

    Hi Ajae

    I have a SMSF now looking to purchase our second IP. Looking at all regions I hear that Moranbah is once again in favour. I would be interested to hear your thoughts on purchasing in Moranbah. I have. 5 year plan so looking for the best bang for my dollars and the returns would seem are very healthy. Looking to fatten up my super

    Cheers

    Profile photo of Heinz57Heinz57
    Participant
    @heinz57
    Join Date: 2012
    Post Count: 26

    In the Bowen Basin and the Surat the modular camps are opening every week. The employees like them and so does Big Mining. Tread carefully. 

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    taxdiva

    I assume if you are looking at investing inside your SMSF you will be using cash, a related party loan or will putting in a hefty deposit as non of the conventional lenders will go to 80% lvr in those post codes.

    The majority of lenders have excluded the area for lending full stop under SMSF loan.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

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