Expert Advice with Todd Hunter. 25/11/2016
As a professional investor, getting the edge on the market place is what makes the difference between owning a portfolio that performs fantastic, as opposed to just average. Hence why I keep my cards close to my chest about where we invest. Reserved for me and my clients only.
That said, I understand that potential investors are wanting to know what I look for when I research, so I am going to divulge a recent location I invested in, but more importantly, why I invested there?
During the GFC, the Gold Coast was one of the hardest hit regions in Australia.
Around 6-10 years ago, house and land packages were being flogged to interstate investors in both Upper Coomera and Ormeau. Typically, investors were ripped off by property companies and marketeers. These four-bedroom, two-bathroom, double garage homes on 550m2+ blocks were sold for between $440,000 - $480,000. Mass sales volumes meant many houses settled simultaneously, resulting in relaxed tenancy due diligence. Affordability checks and tenancy checks were skipped. So it may come as no surprise these investors had an awful experience and lost money.
I started investing in both of these suburbs in January 2014 through to July 2015 (18 months). This is when the market was completely dead and prices had reduced considerably. So much so that we were buying these same houses for between $341,000 and $380,000. Yes that’s right, $100k -$140k cheaper than what the original owners paid and for majority of these properties, we were achieving yields of between 5.7% and 5.9%. Very few required any work too, worse case carpets and paint on a handful.
The reason we stopped investing there was due to the market heating up, which meant all the bargains were gone. The median house prices are now:
- Upper Coomera - $445,000
- Ormeau - $460,000
Not bad in 12-18 months! Market timing is everything. The funny thing is that there are now several Buyers Agents and property companies buying in these suburbs for their clients, and yes, they are paying $440k for these same houses and competing against other buyers to secure what houses they can. How does that make sense?
If you read the latest Core Logic suburb growth stats you will see:
- 12 month growth – 3%
- 3 year growth – 13.6%
- 12 month growth – 5.45%
- 3 year growth – 15.58%
Yet I have achieved between 23% and a whopping 35% in a little over 12 months. That’s under market investing!
Now don’t confuse Upper Coomera with Coomera – they are completely different. Coomera has tiny houses on tiny blocks and that’s why they don’t achieve the same rents and have a much higher vacancy rate.
So why these suburbs?
- Employment is a plenty – there are numerous regions on the Gold Coast for employment. Brisbane CBD is only a 35-45 minute drive away and both Brisbane and Coolangatta Airports are only 40 – 45 minutes away also.
- Schooling – the three best private schools on the Gold Coast are ALL in Upper Coomera. Wealthy families from Hope Island & Sovereign Island all bring their kids to these schools. There are also many public schools locally.
- Shopping – Ormeau has its own shopping centre and Upper Coomera is expanding its current shopping centre. Coomera shopping centre is still in talks to be approved and Westfield’s is only 7 minutes away in Helensvale.
- Transport – both Upper Coomera and Ormeau are on the M1 Highway which also has a train line heading straight into Brisbane CBD. Meaning you can earn the bigger dollars in Brisbane and have the lifestyle of the Gold Coast.
Todd Hunter is director, buyer’s agent and location researcher for Sydney-based wHeregroup. He is an active property investor himself and amassed a portfolio of 50 properties by the age of 31. For more of Todd's musings, visit the wHeregroup blog.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.