Seeking advice - Considering H&L packages in Redbank Plains (QLD) or Springdale Heights (NSW)

Hi all,

I'm a first time poster seeking advice regarding our second IP. In essence this is our first proper IP purchase, the first was in 2007 where we bought in Parkes NSW as we were living there at the time and in hindsight it wasn't the best decision. The place has nice rental yield and is positively geared on a IO loan, but CG is minimal.

So we're looking to spend a max of $450k on an IP, we are renting a subsidised staff home and will be for some time, therefore we aren't looking for immediate short term gains from this IP, we will be holding on to it long-term (10-15 years). We would be happy with a steady 5% CG and 5% rental yield

Our BA has suggested a couple of H&L packages in Redbank Plains ($400k, 4 bedrooms, $350-$380 rent) and Springdale Heights ($437k, Dual occupancy, 3/2 bedrooms, $580-$610 rent). I've done some research and I'm pretty comfortable with both areas; Redbank Plains given its vicinity to Ipswich and the Springfield development, Springdale Heights in Albury-Wodonga which continues to grow steadily.

I've read countless threads now regarding the issues relating to H&L packages (paying developer's marketing costs, depreciating asset, over supply, outskirts of town, etc.) so I'm starting to get some apprehension about this approach. In relation to Redbank Plains it appears there are plenty of similar homes less than 5 years old that can be purchased cheaper (over supply issue), I'm also wondering whether I'm better off buying something cheaper in a slightly better area (e.g. Bellbird Park, etc.). In relation to Springdale Heights, similar concerns given it is adjacent to Lavington which doesn't have the best reputation, however I think this H&L package may be more palatable given the high rental yield of the dual occupancy (7%).

So anyway as you can see my head is a bit of a mess at the moment but keen to hear any feedback. I've read plenty of threads on here so I'm not totally blind, but still very much a novice.

Thanks

 

did the BA suggestions fit in with your buying criteria that you outlined to them?

 

Hi Andres,

I have been looking into the Redbank Plains and other parts of Ipswich quite extensively. There is quite a bit of stock on the market atm with recent build (7 years and younger) 4x2x2 houses in the $330,000 - $360,000 price range. Rental amount will be quite similar (up to about $365). Depreciation on these properties would still be considerable also.

Personally I have no interest in the H&L packages for the reasons you outlined. There is some discussion going on in a Goodna thread started by SeeChange which has some more commentary on the general area which would be worth a read if you haven't already. The rental yield that you indicated does seem quite light on for the area and better returns could easily be found. We are about to go unconditional on a property closer to Ipswich with a property with a yield just under 6.5%.

Has the BA indicated whether there are any commissions that they will be receiving from the developer? Have you been to the area? When we were looking we spent a good couple of days driving around and it really helped us narrow down our target areas.

Mick

 

To be honest we engaged this property group with minimal criteria, essentially we just wanted to refinance our existing loan and then look at a good investment opportunity to make our money work while we plan to rent for quite some time. Only criteria really was the purchase price and looking for solid CG and yield, nothing specific really

 

Have a look at existing stock and what $400,000 gets you in the Goodna area. There is a reason experienced investors like @See Change aren't buying these products.

Agree with @Mick Butterfield comments, double check if the BA is getting a kick back for selling these packages. I would be very careful.

Cheers,
Michael

 

Yes that has been my impression of Redbank Plains also, seems there's plenty of recent build houses available at a cheaper price and similar rent. I do wonder though if you take a long term approach do these issues become less relevant as the population and development continues to expand?

I will have a look at the other thread you mentioned thanks.

No they haven't indicated anything about commissions, definitely a question worth asking as well as specifics about quantities released, whether each new batch has increase price, etc.

No I haven't been to the area but I think it's one thing I've realised from reading plenty on these forum, I think I definitely should.

In terms of Redbank Plains do you think it is a good place to invest or there are better areas in that vicinity (Goodna, Bellbird Park, etc)?

 

Personally I think that the western corridor through to Ipswich has great fundamentals for growth. There is a lot of money being spent and the Government seems to be investing in the region also. The population and growth forecasts for the City (Ipswich) are quite strong also. We found that there is still less buyer demand in the area in comparison to Logan and Moreton Bay, which was desirable for me.

When we went up there we looked from Goodna through to Ipswich central and found a couple of pockets that we liked. We ended up getting a house in Eastern Heights which is just out of Ipswich CBD with no flood issues, higher percentage of OO and is in a quiet street close to parks, uni and schools. Potential to value add also. The yield on this is just over 6.4% so quite strong for the area.

Goodna, Redbank Plains and Bellbird Park were nice enough and if the right property was there at the time we would have had no hesitation in buying.

Time allowing, I would suggest taking what the BA was going to charge you and putting it into a DD fund for you to go there, look at some areas/houses and get a really good feel for the area. I would anticipate you would still end up way in front and would have got some really good experience for your future purchases.

 

I am in the same boat. Looking at Redbank Plains/Gooda area. Tossing up between and the $250k-$300k older home price bracket and then newer $330k price bracket. The older lower priced homes are normally on bigger blocks. The newer homes around 400sqm.

 

I completely agree with this. I just got back from a trip to Goodna/Redbank plains, didn't get a good vibe from the area, ended up traveling out towards Ipswich and found a property in one of its surrounding suburbs. Placed an offer and it has been accepted. 6.5% yield and got it 50k below market value

Government is pumping huge amounts of money into the RAAF base in Ipswich and there is so many new buildings going up in the area. The area is well below its below its peak in 2009. I get the feeling its going to boom but maybe after Goodna.

 

Very much over priced, as you have noted existing stock 3-4 bedroom places on 600m2 can be purchased for 300-350 which are only 10-15 years old.
There's plenty of stock sub 300k too.

I would question the independence of the 'buyers agent' here, it just sounds like a developers sales pitch.
The yield for this H&L is poor for the area indicating to me that its over priced. You can pick up lowest brick places now for around 300k which will rent for $310-$320 per week.

 

Yeah I've had a look at the Goodna thread, some great info which is making me reconsider my options

I will ask the BA if they are getting commission for these H&Ls, would that be fairly common?

 

Some great feedback, much appreciated, I do like the idea though of trying to stay within 30km or so if Brisbane

I will definitely be making a trip out there, any agents you recommend around Redbank Plains, etc?

 

Yep I have the same concerns, these new H&L packages are on such small blocks, given the possible over supply I wonder if the old, larger blocks may be more attractive to renters as they are different and larger than the cookie cutter H&L blocks

 

Yeah there is plenty of stock around and on larger blocks.

Look I don't believe the BA is just flogging off a developer's stuff (could be wrong though). I've been dealing with them for months while sorting out the finances and during that time they've travelled a fair few times to QLD, initially recommending Toowoomba, then after further visits narrowing it down to this area. I think their process of identifying the area was great, just not sure if the H&L is the best option

The dual occupancy H&L is intriguing though given then high rental yield

 

Their reasoning for the H&L is all about the positive cash flow and tax deductions, the idea being that with the tax benefits it will be positively geared right from then start

 

@Andres you mentioned that you engaged a 'property group'? What does that entail?
Warning bells for me.

 

They're an independent group with mortgage brokers, financial planners and property consultants all throughout NSW.

I've been dealing mostly with the broker and now the property consultant is on board and provided these initial options

 

Okay, just tread carefully, question everything and look at what you can purchase independently of these advisers as the Redbank Plains deal doesn't look that great compared to what's currently listed for sale in the suburb.

 

Sounds like Binvested / Metropole style

 

Looks like we are on the same page Timwest. Can I asked where you bought? I got a really good feel for the Ipswich area within a 5 min drive of the CBD.