My experience buying 4 properties in Logan QLD during 2020

Happy new year PropertyChatters!

Having been a long-time reader of this forum, I thought I would contribute and share some of my own investing experience and learnings from purchasing a few properties in Logan during the pandemic.

My desire to invest in more assets and creating multiple sources of income was strengthened by the decrease in interest rates over the last couple of years. Lower interest rates meant a lower cost of debt, and a decrease in the value of money in the bank.

I believe in having a balanced portfolio, of both higher capital growth properties and positive cash flow properties, to diversify and mitigate risk. My previous properties were of higher growth and lower yield. In order to keep expanding my property portfolio, I needed to increase my serviceability by increasing my cashflow.

I started researching the Logan area because it was well-known for its high yield rental returns and its positioning close to Brisbane. The purchases I made were all in Crestmead QLD 4132 from April to June 2020.




Fig 1. Crestmead Suburb Profile. Source RP Data.

Reasons for buying in Crestmead:

· Proximity to Brisbane capital city

· Good population size and growth

· 50%+ owner occupiers (this group of buyers will drive property prices)

· Affordable entry price point, median $330K

· Prices have been flat for a few years which suggests potential for growth

· Value discrepancy between unrenovated and renovated properties, ability to add value and generate equity + rental yield

· Able to find 5-6%+ yields

Here are the properties purchased and numbers:

Property #1

· $259,000 purchase price, current value now ~$300,000

· 3 bed, 1 bath, 1 car

· $320 rent per week

· 6.4% rental yield

· ~$3,000 depreciation cost per year

· ~$6,000 positive cash flow per year after all expenses @ 90% LVR


Fig 2. Property 1.


Property #2

· $328,000 purchase price

· 4 bed, 1 bath, 1 car

· $380 rent per week

· 6% rental yield

· ~$5,000 depreciation cost per year

· ~$4,000 positive cashflow per year @ 105% LVR


Fig 3. Property 2.

Property #3

· $315,000 purchase price, current value now $335,000

· 4 bed, 2 bath, 2 car

· $360 rent per week

· 6% rental yield

· ~$5,000 depreciation cost per year

· ~$3,000 positive cashflow per year @ 105% LVR


Fig 4. Property 3.


Property #4

· Purchase price $329,000, current value now $350,000

· 4 bed, 2 bath, 2 car

· $380 rent per week

· 6% rental yield

· ~$5,000 depreciation cost per year

· ~$3,000 positive cashflow per year @ 80% LVR


Fig 5. Property 4.

By 2020 year end, we can see that the prices in Crestmead have been trending in a positive trajectory.



Source: Smart Property Investment.

Learnings

1. We can’t speculate, especially with short-term market changes. Buying during a pandemic/recession becomes less daunting if we pick a good asset, look at it from a long-term perspective and reduce our risk with insurances and adequate cash buffers. The advantages of buying during a recession includes less competition from other buyers, and more opportunities to pick up better deals from sellers who may be in financial distress.

2. Always inspect the property and try get a building & pest report. Online photos often don’t accurately reflect a property’s true state. With the borders closed, it wasn’t possible for me to fly from Sydney to inspect the QLD properties. Thankfully, I had an amazing property manager that I trusted to view the properties on my behalf. For my Crestmead properties, one front garden was a patch of barren dirt when the photos showed a vibrant green garden. There was also a bathroom which looked mint in the photos but in reality, was a peeling and flaking DIY tile paint job of poor workmanship.

3. Take advantage of differing regulations with borderless investing. In QLD, the contract of sale is subject to Finance and Building and pest. This protects the buyer and can be used to our advantage because we can withdraw from the contract should either condition not be met.

4. Having a good relationship with the real estate agent. Maintaining good relationships and submitting offers on multiple properties mean that the agents are more likely to remember you and so sometimes if a sale falls through, the agent may unexpectedly come back to you.

5. Find out the motive of why the vendor is selling. Sometimes price isn’t the vendor’s highest priority – it could be settlement timeframe or another condition that could allow you to negotiate on price.

6. Having your finances ready early in the process lets you be in a stronger position to negotiate harder. As they like to say, “Finance first, property second”.

7. Obtain quotes for any defects or repairs required. This provides strong evidence and figures that may be used as part of your negotiation.

8. Get a good property manager. They provide on-the-ground information. My property manager was able to tell me of the high demand for houses in the area. Can you believe for one of the properties there were over 8 rental applications in the first viewing?!

I hope this has helped provide some insights into buying interstate in QLD. I think there are always opportunities in any market if you look hard enough.

P.S shoutout to @Michael_X for opening up my eyes to the Logan area.

Wishing you all a wealthier 2021

Jyh

 

Hi Jyh888


I beg to differ....I have invested in NSW, Victoria and Qld. In my experience Crestmead is a dud....as the demand is being driven was driven investors rather than owner occupiers. I bought in Deception Bay and Crestmead, in both cases I used a BA (one from this forum). They have not proved to be profitable I am just breaking even now, and have had major tenant dramas in Crestmead.


I have also bought in Corio (Geelong) and Wendouree (Ballarat) both of these have grown about 25-30% in the last 3 years and rents are well are close to 6% and no tenant dramas. This compared to my rents dropping about 10% in Crestmead, and no capital growth, let alone the major maintenance/rent issues due to rougher tenants.


Out of curiosity did you use a BA?


I have now moved to targeting much nicer properties in regional Victoria.....the rent returns you mention is good but is chewed up by the higher insurance premiums and rates in Qld. I plan to exit my Crestmead investment once I have some growth there....


I thought I would give you some input. Lots of people have been led up the garden path of the cheaper suburbs in Logan and these have not performed.


Craig

 

Interestingly on the ground word is that like yourself, quite a few investors are selling up in creastmead and fhb are moving in. It will continue to gentrify as oo suburbs like regents park get too expensive which won't be long if things continue the way they are for the next few years. You will see some growth...

 

Tend to disagree, as I do not have a crystal ball into the future of this suburb and where OO will all wish to move in, so all I do is go by the history for the suburb or look at drivers and leading indicators instead.
BUT, if we look at above statistics provided by the poster the 10 year median average growth is what...0.62%? that's long 10 years for no CG, and look at the LVR of the investor, implies high risk holding around 95% in loans? Sorry, but personally it's not my strategy for investing into RE, although credit given for sharing to original poster, as it will be interesting to revisit in 10 years or so....
Sometimes a cheap suburb remains a cheap suburb into the future too unless a real gentrification is occurring, so what are the reasons why most OO would prefer to move there as opposed elsewhere, price alone is not a leading indicator, what is so attractive there?

 

The same was said: when these suburbs were $90k. They have gone up 366% since then .

 

So when was that not 10 years ago as per above figures provided not by me:

So can you please provide the actual figures? I have not seen such figures so would be interested to see who states facts/figures and who states opinions, that's all?

 

CRESTMEAD QLD, AU SUBURB PROFILE - FREE REPORT
So far I can find such reviews....

 

The following link may help... it seems back in 2003/2004 these houses were around 90K. For examples:
29 Clayton Court
3 Moonah Court

Crestmead - Property Sold Prices


I don't know about Logan area (I don't even own any properties in QLD) so someone who bought properties in Logan around 2003/2004 can confirm.

 

But where these block of lands or houses, as the house seems to be built in year 2000, especially the one 29 Clayton Court I just checked ....?
I think we would need ABS Median price for Crestmead as at year 2000 etc...
I bought a block of land with separate plans to build a house on in Ferny Grove QLD for around $84K in year 2000 and that's still what is displayed in RP DATA as that price with the house on it, but it was land value only since I have not sold or modified any data/information.
But what is suggested or implied is that one will be skilled in specific property rather than the suburb correct? I agree we can add value resell for more but I am pointing out to averages for median price provided by the original poster, not my figures, so I would like to see where there is growth of 336% in median price for this suburb?
I think we should be carful when we say things whether its opinion or a fact and whether we provide one property as example.
Don't get me wrong there's nothing wrong with how and where people invest I just state I have alternative investing strategy, hence why it will be interesting to see in say 10 years time, right?
I am not investing for cashflow my strategy has been always about CG, which may differ as there are many ways to invest into property as we know.
If we go by history and apply 0.06% growth in 10 years values that would not be attractive enough investment for me, obviously I would evaluate and do other research.

 

Got lucky... picked a good time to buy with a very opportune window.. some small paper profits (but not if subtracting stamp duty or eventual selling fees), However there is nothing to suggest that performance will be maintained in the next 5 years.

That said, maybe this will well pay off in this window, if this is indeed that once in 10-20 year boom that happens in SEQ.. but it will definitely be against the norms for that area and the Logan market in general over the last few years.

I think your money could have been invested better elsewhere..

 

Highsets were going for around 90k I believe in Crestmead Marsden area in early 2000 pre brisbane boom.

Your correct about the growth. These suburbs have not really seen much or no growth and are at 2005 prices maybe lower.

The market seems to be hotish in the area.

Will be interesting times in the coming years.

 

When we were buying IPs in the mid 90s standard 3x1 highest timber on brick base houses in Woodridge/Kingston were selling around $85K. Crestmead us a newer suburb.

 

Thank you for sharing Jyh888.

I am curious to understand the reasoning behind the very aggressive acquisition of houses in the area e.g. 4 properties in the same suburb with Property 2 & 3 being 105% LvR (Cross X?).

Is this part of your strategy due to the phase of your investment life? Was there consideration of land tax in this scenario (note I am not across the rules of QLD land tax to ascertain the $) or was there proper tax structuring to minimise this?

Cheers

 

Also, LMI being overleveraged? Or because you bought 15-20% below bank valuation, so actually only 90% and no LMI?

I think some regional Victoria like Mildura, Ballarat, Bendigo, Traralgon will be total duds as well.

 

Looking back too the mid 90s,for just above 85k one could have purchased in Moorooka-Annerley-on blocks above 800sqms for that price..
Once you compare the prices today there is a vast difference from Logan vs inner southside Brisbane in price range..imho..

 

I saw my next door property, 176 Osborne Rd, Mitchelton was bought for only 159 k in 2000. Last year, number 162 was sold for 1.05 m. Same size

But future might not be based on history, some Logan area might replicate the inner Brisbane success in the future? Beenleigh, Loganlea? Have express train line to the city, any chance for gentrification? Creastmed will be too further away.

 

I had a mate that bought in Crestmead about 1994 and i think it was in the 95k range ,we bought one investment property about the same time in the inner southside for just under 90k on above 800sqms already split on the title ..
My mate's sold that property middle of last year for around 340k--i have been offered above 1--2 mill for that property that we still control ,market within markets...

 

Like I said in Logan thread, I’d rather buy an old block of units in Inner Brisbane if I need CF, yet will definitely get better CG. Better tenants too?

My take is, the land value must be at least 60% of the total purchase price, more land than building. With at least 5% rental yield.

 

Ouch... the older investors have share their opinion about Logan Crestmead.
I am not as old as those guys. But generally growth is all in the land. Forget what sits on top of the dirt.
It is pretty much a number game in land radius to the CBD. There’s always exceptions of course.
History doesn’t always mean the future. But I would use that as a guidebook when I research future growth rate.

 

How about in the 60's my Parents bought 8 acres of farm land in pounds, 25kms from the Brisbane CBD that's now commercial land, and yes they still own it.