PROPERTY INVESTMENT

Understanding Property Investment and Development in Western Australia

May 6 2014
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Understanding Property Investment and Development in Western Australia

Kerrian Devlin explores the opportunities of Investment and Property Development in Western Australia. Kerrian is head of Ventura iD, Western Australia’s only dedicated property development and investment brand.

When starting a property portfolio I personally believe volume is King. Let me expand on what I mean.

Let’s say you have $1.2m to invest in property. You may choose to buy one property in a blue chip area that may get you $900-$1000 per week in rent.  Alternatively, you may choose to buy three properties and get $420 -$450 per week in rent for each one ($1260 – $1350 in comparison). The extra $350-$360 per week goes a long way to offset the argument for Capital Growth in a blue chip area.

It’s like when you play monopoly, the more properties you can buy, the more chance someone has of landing on them and has to pay you rent. Using this same analogy, the more properties you have the better your risk management is when it comes to receiving rent. It is easier to get three lots of $420 in rent than $1000 from one property.

In addition the tenant that is paying $1000 per week may default leaving you having to meet the bank payments, while all three tenants paying $420 per week would have to default at the same time to put you in that position.

So if I was starting a rental portfolio, I would be looking at areas that fall in the lower to medium rental belts that are affordable to the greater population. This strategy reduces the time it takes to get a tenant and to keep the tenant medium to long term reducing risk of occupancy.

WA property market.

Bunbury – South Western Australia.

I generally do not look at the capital growth when choosing an area for a rental. This is a different strategy altogether that we will discuss in another paper. When looking at rental properties, my personal goal is to create an income from the rental, and the quicker I can do that, the quicker I can move onto the next property. Capital growth is great if you want to cash yourself up by selling the property, or use the property as security against something else.

When working out how much capital growth you have actually made, you need to consider the in-going set up costs, the holding costs during the time you have had the property, and finally what it is going to cost to sell. Once you have totaled the cost up against the gain, the capital growth may not be as high as you think.

I would rather purchase properties with the view to holding them indefinitely, and to build the portfolio to a point where it can substitute my income. The earlier you start this process, the quicker you can achieve your goals. Most properties have capital growth over time, and in Western Australia we tend to work to a 7-10 year cycle where historically properties double in value anyway. I have never heard of an investor going broke because he is cash flow positive; however I have heard of people having to sell to get out of debt who are asset rich and cash flow poor. Sometimes these people need to sell in a down market, so they do not realise the full potential of the properties.

So to answer the question, there really is no individual town or suburb that is going to be the best place, it is a moving target!  The worst thing you can do is procrastinate and do nothing.

To find out more about Property Development and Property Investing in Western Australia, contact the team at Ventura iD – WA’s only dedicated professional investment and development team. 

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