Home' API Magazine : April 2014 Contents 36
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MH: Looking at comparable rentals in the area, it’s about right.
It’s possible that the rent may come back slightly if the current
tenants were to vacate depending on the time of year.
¿ WHAT ARE ITS PROS AS AN INVESTMENT PROPERTY?
BA: It’s close to the train, buses and local shopping.
MH: From a location perspective, it’s a walk to the train station
and shops, it’s near an employment area, clear of flooding and
not far from Westfield Chermside. From a rental perspective, it
has quite a few tenant-friendly features like fans, built-in robes,
a large covered outdoor area and a fenced courtyard.
¿ WHAT ARE ITS CONS AS AN INVESTMENT PROPERTY?
BA: It’s in a complex that’s pretty much entirely held by
investors from interstate. In a downturn, if a few of the owners
have to offload their unit in the complex at fire-sale prices, it’ll
have a negative impact on the whole complex. I prefer to find
units and townhouses in complexes with a good mix of owner-
occupiers and renters. Owner-occupiers tend to keep standards
up as well. This area has traditionally had a reasonably high
crime rate too.
MH: It’s too close to the train line, which makes it noisy and
often results in longer vacancies between tenants and a longer
time to sell. It’s also a bit too close to the industrial area. It’s
a large complex of townhouses, all except two of which are
rented. There are two blocks of units in the street that are public
housing as well as several new complexes. In terms of features,
it has small bathrooms, no toilet on the lower level and the
building appears to be in poor condition and may need quite a
bit of maintenance.
¿ WHAT ADDITIONAL QUESTIONS WOULD YOU ASK
BA: Why is the owner selling it? How long has the current
tenant been in the property? Does the tenant intend to stay?
How much is in the sinking fund? What are the council
rates? Are there any special levies coming up in the body
MH: What’s the balance of the sinking fund? How long have
the tenants been there? What’s the rental history and periods
of vacancy between tenants? Are there any known issues
with the building? Are there any known issues within the
¿ HOW HAS THE MARKET BEEN PERFORMING FOR THIS SUBURB
AND FOR THIS PROPERTY TYPE?
BA: This suburb has been ticking along over the past few years.
There was a big run in the four months leading up to Christmas
so available stock is fairly low at the moment.
MH: According to RP Data, median prices for units/townhouses
in Zillmere have performed well below the Brisbane median. In
2013, prices fell 7.1 per cent compared to a 1.5 per cent increase
across Brisbane. In 2012 prices fell 2.9 per cent compared to
neutral growth in Brisbane. Based on recent comparable sales,
the current market is likely to pay $295,000 to $300,000 for this
property. While the income may appear attractive, the opportunity
cost of an investor using their capital to buy this property has
actually cost them around $65,000 in growth over the same period
if they had invested the same capital in a better location.
¿ WHAT’S THE MARKET
OUTLOOK FOR THIS
SUBURB AND FOR THIS
BA: If the investment market
takes off again over the next few months,
then the market will be fairly strong in this
area. Townhouses by their nature are a robust
investment property so there’s generally a good
market for them.
MH: The median price here is around $335,000. This property
is listed at a price close to the median so is affordable within
its location. However, there’s a high risk of oversupply of
medium-density housing in Zillmere. Currently there are 79
properties for sale in the suburb, 17 of which are townhouses.
This represents a year’s worth of supply, as there have been
15 to 19 townhouse sales per annum over the past four years.
Of the 17 currently for sale, the entry-level asking price is
$299,000 for something on a main road with a high of $435,000
for something brand new. In my opinion, the long-term outlook
for townhouses in Zillmere is for stagnant or negative price
growth. Under the draft Brisbane City Council City Plan, the
whole of Zillmere is zoned for medium-density residential
development and doesn’t have any demolition control of
character housing, so there’s a very high risk of oversupply of
this type of product.
¿ WHAT SORT OF INVESTOR WOULD THIS PROPERTY
BA: It’d suit a passive investor who wants a set-and-forget
property with low maintenance.
MH: An entry-level investor who has an income-focused
strategy and/or needs to cover most of their costs in order to
hold an investment property.
¿ AT ITS ASKING PRICE WOULD YOU LOOK TO BUY/CONTACT
THE AGENT OR WALK AWAY?
BA: This property would probably make a perfectly good
long-term passive investment, however I’d walk away and find
something in a smaller complex with more owner-occupiers.
Owner-occupiers tend to pay more than investors, as they’re
more emotional. This results in greater growth over time than a
complex that’s mainly owned by investors. Secondly I’d still be
concerned about the local crime rate.
MH: We’d walk away without contacting the agent because
too many of the basic investment fundamentals haven’t
been met. API
æThere was a big run in the
four months leading up to
Christmas so available stock is
fairly low at the moment.Æ
OPEN FOR INSPECTION //
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