QLD Units at Kearneys Spring (Toowoomba)

Discussion in 'Property Analysis' started by elbowz17, 6th Sep, 2019.

Join Australia's most dynamic and respected property investment community
  1. elbowz17

    elbowz17 Member

    Joined:
    7th Jun, 2019
    Posts:
    13
    Location:
    Acacia Gardens, NSW
    Hi All,

    Looking at purchasing 2 single bedroom units in Kearneys Spring on the outer skirts of Toowoomba.

    I've done the numbers and I've got enough to buy both units which are located in Uniplaza Court across the road from the University campus with a 35% deposit on each.

    At that rate, they'll both be nett cashflow positive after all the bank loan, council rates, strata fees, and rental management fees are paid.

    They look attractive (financially), and the returns are great ($275pw each), but I've only ever visited Toowoomba once.

    Not really looking for capital growth, just buying them for the rental income to add to my current portfolio.

    Looking for your thoughts on weather I should consider these units or not. They're both listed at $155k each.

    Cheers in advance.
     
  2. Todd

    Todd Well-Known Member

    Joined:
    16th Oct, 2016
    Posts:
    120
    Location:
    Canberra
    Hi elbowz17.

    I own in Toowoomba (a unit and a townhouse) but don't live there. Kearneys spring is a middle class suburb, not at the top or the bottom. Toowoomba has been poor for CG and rental growth the last 5 years and to be honest i am not that optimistic for CG (due to oversupply), although recently vacancy rates have tightened a little so we may see some rent increases soon. You are going to lay down 108k in cash and therefore will have a loan of $202,000 (lets say 210,000 with SD and legals), with a return of $550/week. In toowoomba for units, you will probably be looking at expenses of $5,000 per property (BC, rates, water, PM fees, R and M) and $210,[email protected]% you are paying about $8,400 in interest in total. So total expenses of $18,400 approximately and income of $28,600, so a $10,000 profit approx. So the return on your cash investment of $100,000 is about 10%. That's very good.
    I would be checking these things though:
    - Are the units currently tenanted or is that a rental estimate? If an estimate get it checked with an independent property manager because it seems very high for a unit worth 155k. My townhouse in Wilsonton in Toowoomba rents at 270/week and is valued at 260k. My PM is Coronis Toowoomba and i recommend them.
    - If tenants were to leave would you re-let easily at $275/week or is it some one off corporate, student or mining lease?
    Because if your yield drops significantly and you are left with just 2 x cashflow neutral units with poor CG prospects the deal doesn't look so good.
    Todd
     
    elbowz17 likes this.
  3. elbowz17

    elbowz17 Member

    Joined:
    7th Jun, 2019
    Posts:
    13
    Location:
    Acacia Gardens, NSW
    Hi Todd,

    Thanks for your prompt reply.

    The properties are currently tenanted (furnished) to individuals that are working individuals - no students or corporate agreements in place. 1 of the tenants has been there for years, while the other just started a new lease.

    As part of my due diligence I got a hold of the last 4 years worth of rental statements from the managing agent to verify the owners figures. They've averaged $270ea pw for the past 4 financial years (less expenses).

    The other bonus is, they're both under 1 title, so the rates are pretty cheap when compared to some other individual-titled units - hence why they're attractive (Council rates $2k pa for both).

    Only thing I'm struggling to reduce is the rental agent's management fees, the cheapest I could get was 7.5% inc. GST - which is 2% higher than what I pay in Sydney. Not sure if that's the norm.

    Cheers again,
    Elbowz17
     
  4. Todd

    Todd Well-Known Member

    Joined:
    16th Oct, 2016
    Posts:
    120
    Location:
    Canberra
    You are all over it! Sounds like a good deal.
    I pay 8% (GST inclusive) so seems like around that mark could be the norm. Lower rents, less properties, less compeitition in regional towns probably explains higher PM fees.
     
    elbowz17 likes this.
  5. elbowz17

    elbowz17 Member

    Joined:
    7th Jun, 2019
    Posts:
    13
    Location:
    Acacia Gardens, NSW
    Thanks for your help Todd - it's greatly appreciated.
     
  6. My House QLD

    My House QLD Well-Known Member Business Member

    Joined:
    9th Aug, 2015
    Posts:
    751
    Location:
    Brisbane
    What's the nett yield after body corp, rates and water and PM fees?
     
  7. elbowz17

    elbowz17 Member

    Joined:
    7th Jun, 2019
    Posts:
    13
    Location:
    Acacia Gardens, NSW
    Nett cashflow is 8.2% (give or take) on cash input after all expenses, and 3.2% on the purchase price p.a.
     
    My House QLD likes this.
  8. My House QLD

    My House QLD Well-Known Member Business Member

    Joined:
    9th Aug, 2015
    Posts:
    751
    Location:
    Brisbane
    Not really looking for capital growth, just buying them for the rental income to add to my current portfolio.

    I'm picking up houses in Logan with gross yields around 7% and purchase prices from mid to late 2's up to mid 3's...

    3.2% on units in Toowoomba or 7% on a house in Brisbane hmmmm ....
     
  9. My House QLD

    My House QLD Well-Known Member Business Member

    Joined:
    9th Aug, 2015
    Posts:
    751
    Location:
    Brisbane
    Not really looking for capital growth, just buying them for the rental income to add to my current portfolio.

    I'm buying houses in Brisbane with yields around 7% and purchase prices from late 2's to mid 3's.

    3.2% on units in Toowoomba or 7% gross (around 5% nett) on a house in Brisbane hmmmmm .......
     
    Last edited: 27th Sep, 2019
  10. Willy

    Willy Well-Known Member

    Joined:
    12th Sep, 2017
    Posts:
    160
    Location:
    NSW
    I was looking in Toowoomba about 12 months ago. Kearneys Spring was one of my picks. There was definitely an oversupply of units though, not sure if that's changed much.I ended up going Brisbane, similar price bracket, similar yeilds and hopefully more growth potential.
    Toowoomba has a lot going for it and is currently at the bottom of it's cycle . It would certainly be my pick for regional.

    Willy
     
    elbowz17 likes this.
  11. elbowz17

    elbowz17 Member

    Joined:
    7th Jun, 2019
    Posts:
    13
    Location:
    Acacia Gardens, NSW
    Sorry, maybe I wrote this incorrectly in my last response. I'm talking 3.2% on purchase price Nett yield. Gross yield on these units is 9%.