Have anyone buy a property there? I am going to buy one there because the return is excellent there. 
Kalgoorlie, WA
- Thread starter Coolwarrior
- Start date
There's some info in past threads- for a start
http://www.somersoft.com/forums/showthread.php?t=15499
http://www.somersoft.com/forums/showthread.php?t=14055
But be careful of buying ONLY for return. Check out the infrastructure, and the demographics. From comments made in the second thread I've quoted, Kal could be bad in a downturn. If a place is likely to be growing in population, the demand from renters will continue. But if a place is in decline, you may be facing increasing vacancy periods, which will shoot returns way down- to say nothing of negative growth. If the town is good, make sure you buy in areas in the town which are in demand.
http://www.somersoft.com/forums/showthread.php?t=15499
http://www.somersoft.com/forums/showthread.php?t=14055
But be careful of buying ONLY for return. Check out the infrastructure, and the demographics. From comments made in the second thread I've quoted, Kal could be bad in a downturn. If a place is likely to be growing in population, the demand from renters will continue. But if a place is in decline, you may be facing increasing vacancy periods, which will shoot returns way down- to say nothing of negative growth. If the town is good, make sure you buy in areas in the town which are in demand.
Coolwarrior:
The current selling market seems to be fairly slow. I have even heard of one vendor offer a $2000 Harvey Norman Voucher to a purchaser as an inducement.
Advertised prices appear to be a little lower than 6 mths ago. However there seems to be more for sale now, especially 1x1 f/f units in large complexes. For reasons mentioned elsewhere I'd steer away from these.
The rental market is fairly slow (has been for about the last 6 mths) though this is apparently normal for Kal and things traditionally pick up early in the new year. But be wary of rental appraisals given by selling agents, especially for f/f places.
It will be easy to find post-1987 properties and yields of 8-9 % but realise that this is not necessarily positive cashflow before tax given high council rates, (possibly) body corporate charges and the high management fees WA PMs charge (especially for f/f IPs).
Regards, Peter
The current selling market seems to be fairly slow. I have even heard of one vendor offer a $2000 Harvey Norman Voucher to a purchaser as an inducement.
Advertised prices appear to be a little lower than 6 mths ago. However there seems to be more for sale now, especially 1x1 f/f units in large complexes. For reasons mentioned elsewhere I'd steer away from these.
The rental market is fairly slow (has been for about the last 6 mths) though this is apparently normal for Kal and things traditionally pick up early in the new year. But be wary of rental appraisals given by selling agents, especially for f/f places.
It will be easy to find post-1987 properties and yields of 8-9 % but realise that this is not necessarily positive cashflow before tax given high council rates, (possibly) body corporate charges and the high management fees WA PMs charge (especially for f/f IPs).
Regards, Peter
Kalgoorlie
The property that i am looking at is in Dugan Street. It is 2 Block from Great Eastern HWY (Hannan St). The agent said it is in the CBA of Kal.
The property that i am looking at is in Dugan Street. It is 2 Block from Great Eastern HWY (Hannan St). The agent said it is in the CBA of Kal.
That's quite a long street. Yes it is in the CBD of Kal. Mainly light industry mixed with old houses and some newer townhouses so it's not what you'd call a blue chip residential area. Also one street back from Hay St.
Rgds, Peter
Rgds, Peter
Thank you Spiderman . I plan to buy a block of unit, so not paying the body co... etc giving 10% return on asking price and the block is under ten years old. All units are rented out at the moment.
. I plan to buy a block of unit, so not paying the body co... etc giving 10% return on asking price and the block is under ten years old. All units are rented out at the moment.Spiderman, it seems you know more Kal what i do. Question: If it is you, do you think it is good idea to go ahead or look else where? I really like to own a block of units. Anywhere really to give me positive cashflow and maybe growth.
I see no reason to believe mining will slow down in WA. Quite the opposite. (never been there personally). If it's anything like east coast mining towns then there would be a shortage of decent rentals and miners get good money so no longer wish to live like pigs. Large aircon homes are also popular for the single blokes.
T
T
Agree with Thommo.
I have been there, and the lifestyle demands for ppl in a mining community are no different to what ppl expect in the city.
There are lots of families that live in these places, not just single, ugly hairy miners.
The industry is supported by a wider service community comprising businesses, and service providers that once again, are made up of families.
Modern and comfortable housing is a priority in the 21 century, regardless of where you live in this country.
I have been there, and the lifestyle demands for ppl in a mining community are no different to what ppl expect in the city.
There are lots of families that live in these places, not just single, ugly hairy miners.
The industry is supported by a wider service community comprising businesses, and service providers that once again, are made up of families.
Modern and comfortable housing is a priority in the 21 century, regardless of where you live in this country.
Coolwarrior: On the surface of it, it could be pretty good.
But I'd check the following:
1. Location.
a. There are some dodgy-looking areas around the top end of Hannan St (I think the Social Security office is near there). You'd need to check with locals or wonder through there at midnight to see if these are as bad as they look.
b. You'd also want something that's easy walking distance to the CBD. The right part of Dugan St could be very handy to both the CBD shops and the hospital, and reasonably OK for access to the uni.
2. Is the 10% return you plan based on unfurnished rents? If not, then I wouldn't regard it as a good investment. 10% f/f is really equivalent to 8% u/f, factoring in likely higher contents costs, insurance, management, tenant turnover, etc.
3. Facilities: even the most derelict hovel in Boulder appears to have Foxtel and an air conditioner!
4. The building age should give good depreciation.
5. Is the property strata or single (note different rates and insurance costs)
6. Vacancy rates - I'm not familiar with those for flats. But there'd be a huge demand for reasonably priced accommodation suitable for singles or couples on $400-500pw as rents aren't that affordable. Housing conferences have identified this - you're either paid well by the mining cos or you work in retail, etc and have problems finding affordable accomodation that's not an asbestos house!
How did you find getting finance - when I checked Westpac would only lend 70% in Kal, but NAB and Bankwest lend 80% (more with LMI). This is for an individual IP - blocks of flats could be less. Main threat to rental demand is fly in/fly out operations, especially for the more remote mines.
Rgds, Peter
But I'd check the following:
1. Location.
a. There are some dodgy-looking areas around the top end of Hannan St (I think the Social Security office is near there). You'd need to check with locals or wonder through there at midnight to see if these are as bad as they look.
b. You'd also want something that's easy walking distance to the CBD. The right part of Dugan St could be very handy to both the CBD shops and the hospital, and reasonably OK for access to the uni.
2. Is the 10% return you plan based on unfurnished rents? If not, then I wouldn't regard it as a good investment. 10% f/f is really equivalent to 8% u/f, factoring in likely higher contents costs, insurance, management, tenant turnover, etc.
3. Facilities: even the most derelict hovel in Boulder appears to have Foxtel and an air conditioner!
4. The building age should give good depreciation.
5. Is the property strata or single (note different rates and insurance costs)
6. Vacancy rates - I'm not familiar with those for flats. But there'd be a huge demand for reasonably priced accommodation suitable for singles or couples on $400-500pw as rents aren't that affordable. Housing conferences have identified this - you're either paid well by the mining cos or you work in retail, etc and have problems finding affordable accomodation that's not an asbestos house!
How did you find getting finance - when I checked Westpac would only lend 70% in Kal, but NAB and Bankwest lend 80% (more with LMI). This is for an individual IP - blocks of flats could be less. Main threat to rental demand is fly in/fly out operations, especially for the more remote mines.
Rgds, Peter
Thanks guys . I am really appreciate your input.
. I am really appreciate your input.leonora
Hi
Does anyone know anything about leonora. Apparently it is about 2 hours north of Kalgoorlie. From what I have read the sons of Gwalia mine has gone bankrupt and Navigator?? has taken over the sons of gwalia mines near leonora. Is this a good buying opportunity??? I have spoken to someone in the town and they have lived there for 27 years and said that the town has a cyclical population due to the mine(s), however, it always comes back due to the gold still being in the town. He further said that the Sons of gwalia bankruptcy is a good thing for the town due to the ineptitude of SOG, the mine just needs someone with competence to manage it....I think the WA education dept has housing there on leases. Thanks
Nidagirl
Hi
Does anyone know anything about leonora. Apparently it is about 2 hours north of Kalgoorlie. From what I have read the sons of Gwalia mine has gone bankrupt and Navigator?? has taken over the sons of gwalia mines near leonora. Is this a good buying opportunity??? I have spoken to someone in the town and they have lived there for 27 years and said that the town has a cyclical population due to the mine(s), however, it always comes back due to the gold still being in the town. He further said that the Sons of gwalia bankruptcy is a good thing for the town due to the ineptitude of SOG, the mine just needs someone with competence to manage it....I think the WA education dept has housing there on leases. Thanks
Nidagirl
Soggy's bankrupcy is a corporate event. They borrowed gold from big American bankers and sold it "forward" at a price much lower than today's market. They do this because they then have the proceeds of the sales to do with as they wish. This is perfectly legitimate for new miners to get the necessary funds to actually open their mine. This was not SOG's intent, they simply gambled on the POG. Eventually they borrowed and sold more gold than their mines could actually produce. Their house of cards tumbled.nidagirl said:
This should not be mistaken for a real event, eg mining out resources but you may want to check which mine had it's resource down graded.
There is still a lot of mining/exploration around Leonora. As you suggest NAV may well do a better job than SOG with their ground.
Thommo
nidagirl said:
Ask yourself:
1. What if something goes wrong - does Leonora have a wide selection of tradesmen or will you have to get someone out from Kalgoorlie?
2. Are there any property managers based in town (or do you have to get one in Kal to manage the place)?
3. If there are local PMs, are they any good and is there a wide choice of others if the one you pick is incompetent and/or closes down?
4. Do you want to be exposed to the higher risk of a smaller mining town?
5. Are you able to get finance as easily as for bigger centres?
6. Is there a strong rental market, containing more than just mineworkers?
7. What are the towns population trends like?
8. AND is the 2% extra yield you'd get in Leonora (vs Kalgoorlie) worth all the abovementioned risks?
Regards, Peter
Nidagirl
I wouldn't.
Peter has said it all.
You could do well from it- but you're gambling on the future. In my view, you're far better to go to a much larger centre, not dependant on one industry, with a strong base of renters (and PMs), and with good growth prospects and good infrastructure- the things which will go towards consistent capital growth.
I wouldn't.
Peter has said it all.
You could do well from it- but you're gambling on the future. In my view, you're far better to go to a much larger centre, not dependant on one industry, with a strong base of renters (and PMs), and with good growth prospects and good infrastructure- the things which will go towards consistent capital growth.
coolwarrior,
i lived in kal for 10 years and my parents have had IP's in kal for around 10 years. my opinion is that kal is currently near the bottom of a property market cycle and the only way is up (over the long term). my parents properties have also never been empty (even though they experienced a major downturn in the market). I beleive the potential for capital growth is very good and if you can get 10% yield, why not?
from the small amount of info i have, your property sounds like a good buy. and crime etc in kal aint that bad...
spiderman, you're still waiting around for kal to take off too? it's good to see that at least you've done your homework. what you said about leanora is pretty much spot-on.
i lived in kal for 10 years and my parents have had IP's in kal for around 10 years. my opinion is that kal is currently near the bottom of a property market cycle and the only way is up (over the long term). my parents properties have also never been empty (even though they experienced a major downturn in the market). I beleive the potential for capital growth is very good and if you can get 10% yield, why not?
from the small amount of info i have, your property sounds like a good buy. and crime etc in kal aint that bad...
spiderman, you're still waiting around for kal to take off too? it's good to see that at least you've done your homework. what you said about leanora is pretty much spot-on.
Henry said:
My general impression is that the market in Kal reached rock bottom a few years back when the central banks were selling off gold reserves. It had recovered somewhat in 2002-3 but was not that strong in early 2003 (when I was there). It was very strong in late 2003-early 2004, with prices peaking around April (when I returned). Hannan street was more prosperous, eating out was better and cheaper, and there were fewer beggars (though more skimpies). I estimated approx 10% cap growth between early and late 2003, and maybe another 10% more since then to early 04. The rental market was also very strong in early 04.
Since then the market appears to have cooled. However so have rents, so yields have remained the same.
My perception of this recent decline is reflected in the stats at:
http://www.eszeberryman.com.au/cgi-bin/clients/tesales/pagecomposer1/clientdisplay2.cgi?record=1
This figure shows 5 year growth performance of Kalgoorlie as being poor (a trifling 1.7% pa, ie underperforming inflation). Kalgoorlie had some cap growth in 2003-4 but, unlike other places, this was not enough to give reasonable growth rate.
However despite this low growth rate, I do not regard much Kalgoorlie real estate as being particulary undervalued at this time.
In particular, houses in better suburbs with GEHA leases are no cheaper than what you can buy in Perth or Bunbury. If you lose your GEHA lease (and rent drops from say $400 to $250-300pw) you're left with a very badly negatively geared investment with limited growth potential (see article in recent API). I would also have similar comments about 1br units, especially if you do all your calcs on the basis of them being furnished, attracting silly rents like $200pw.
It's much better to buy something affordable that attracts good rent by itself without gimmicks like GEHA leases or adding furniture. Also if you want to maximise your leverage and get LMI, it gets harder to do so if your IP costs over $200k or so (compared to more generous limits elsewhere).
Looking at 5 year trends, it's interesting to see how a short recent spurt can make the 5 year figure look respectable.
Geraldton for instance, has long languished with years of approx zero growth. However in the 5 year stats its avg growth per year over 5 years has been 7.7%, compared to Bunbury's 8.5%.
Geraldton has had higher rental yields than Bunbury, so gross returns would be approx 15% a piece. Coincidentally this 15% the same as suggested by Jan Somers as a long-term average in More Wealth from Res Prop (p92).
Overall gross returns for Kalgoorlie would only be approx 10-12%, due exclusively to lower growth.
My hunch is that wheras the other centres have shown a mixture of plateaus and booms with a general upward trend, Kalgoorlie might behave differently.
Kalgoorlie seems more like a cycle where there are declines as well as rises.
You can still do well if you avoid buying anything that's overpriced, and avoiding certain types of properties. But if you don't the losses are high and the long-term underlying growth trend is perhaps weaker than for other towns. Hence if you do make a buying mistake it might take 20 years to correct rather than 10.
On the other hand, if you do buy well you still have the possibility of capital growth combined with good rental yields and tax benefits (due to the large number of post 85 IPs there).
Rgds, Peter
