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Mining Town investments

Discussion in 'General Investing Discussion' started by tonyb1971, 13th Feb, 2013.

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  1. tonyb1971

    tonyb1971 New Member

    Joined:
    13th Feb, 2013
    Posts:
    2
    Location:
    Adelaide, SA
    Hi all,

    I have just discovered this site, which appears to be all I need.

    I actually came across this site, by Googling "Australasian Investment Group", to try and find out some information on a Company I was intending to invest in. There was another post, from a person that sounded a lot like me, ie: first time investor, and 'sold' a convincing story. The company generally doesent google too bad, and has won a few 'Customer Service' awards in VIC.
    I have just finished a conversation with the Company's General Manager, and-being first time investors- need some advice from guys on this site.
    The Company is selling investment properties in Mt Perry, QLD, which is a small mining town.
    The GM of the Company was very insistent on selling us a property, and used the time-honoured spiel of 'only one left', 'dont miss out', 'huuuuge rental returns', etc, etc. Basically it all seemed too good to be true.
    The Company also used their own 'preferred' builder, 'preferred broker', and 'preferred' legal firm, which raised alarms with me. He also didnt want to leave a copy of the Contract with me, promising to send it out "in 4-5 days"...another alarm bell.
    Anyway- against my better judgement, my wife urged us to sign a Contract- which we did.
    I then began to research the area, rental prices, rental availability, mine longevity/history, and land sizes/prices. I know I should have done this first, but he really 'sold' the property, and we were dazzled by tales of untold riches, and talked into signing.
    What I found during the research was that what the Company was offering was not too bad, re: price of the house, and estimated rental return.
    However- I couldnt get away from the thought of signing over nearly $250k to what was essentially a stranger walking onto my house, off the street.
    The words of every investor were ringing in my ear, ie: "If it sounds too good to be true....." , so I called the guy after he left, and cancelled the Contract. He begged me to reconsider, but I held firm, and demanded he destroy the Contract.
    I guess I am now asking advice wether this type of investment is a worthy one. My wife was bedazzled by all the stories spun about extra cash in our pocket from the rental v payments, huuuuge tax benefits, etc etc.
    Is all this too good to be true- or is there a chance to make $20k+ p.a, with no money down, on a sight unseen investment property?
    Also- what can I do to confirm the Contract has actually been destroyed, ie: should I email and ask for evidence?
    And- who do I ask for advice in the future, ie: do I talk to a bank, re: my investment options? I have used a mortgage broker before with succes, I foolishly assumed this would be the same.
    Any help for a novice investor appreciated : )
     
  2. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    Tony,
    I don't know the company but anytime someone is pushing to buy without giving you time to do due diligience and to use your own conveyancer etc, it will indicate to me that you need to stay away from them. Are they there to assist you or just to sell for themselves?

    I don't know Mt Perry so not able to comment on appropriateness or not, you need to do the research before you buy anywhere, do that then identify what it is you are seeking, is it growth, rent yield, appropriate risk reward, price, timing etc before you get down to identifying potential properties. There seems to be a lot of properties for sale in Mt Perry for a town that small.

    I suggest you get confirmation that the contract has been cancelled.

    As to advice, there are people and firms who specialise in assisting people to build a property portfolio but do your research, get some education and ask questions as you are now doing. OTP and H&L packages are generally about marketing companies getting paid by developers to sell, find a company that is interested in helping you grow your own wealth.
    Good luck
     
  3. tonyb1971

    tonyb1971 New Member

    Joined:
    13th Feb, 2013
    Posts:
    2
    Location:
    Adelaide, SA
    Hi Greg,
    Fantastic information, and thanks for your reply. We have decided to pass on the property at the moment- I will confirm the Contract has been destroyed today. I felt the pressure was far too much, and the deal seemed too good to be true.
    I have been doing some research today, and have found that the quoted estimated rental return ($400pw) is on the money for a new 4br house in the area. Interestingly- the house was set up as 'Miner Accommodation', being that each bedroom had a bathroom, plus a communal bathroom/kitchen/living space. I guess this also limits your target audience somewhat.
    However- the sums quoted simply do not add up. Especially when you're talking about "an extra $20k p.a in your pocket", as quoted by the spruiker. I'm no genius, but a quick calculation of $400pw = $20800 p.a. From this amount- the loan must still be serviced, as well as ongoing expenses for the property. One of my current variable loans ($170k) currently costs me $19k+ p.a (P&I) to service, so I'm unsure how $400pw will service a $250k loan, which was what was being offered.
    Anyway- I've decided to pass, and would welcome any avdice anyone can give me on what's the best way to go. I have been told DHA is not a bad option, but have no experience in them at all.

    Cheers for your help : )
     
  4. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    Tony,
    I have had a number of clients purchase DHA properties, mainly for a hands off well managed investment interstate that will produce rental income 52 weeks of the year and low maintenance costs generally. Most are new or near new properties managed by DHA with long term leases albeit at a higher management fee that you would get charged by a normal suburban property manager.

    For higher income earners, the depreciation and building allowance of a new property can be useful.

    Some care needs to be taken to make sure valuation stack up as I have had cases (not many) that they come in short, so perhaps pick a lender that will accept a COS price and not require a valuation, depending on LVR. As a suggestion, go for properties in areas that are likely to offer growth due to population and jobs and/or reasonably close to facilities.
    Let me know if you need anything else.
    Greg