Across Queensland, savvy homeowners with financial nous are seeing their properties pay their own way, banking profits that make Airbnb look like small change.
From an architect who turned an old cane farm into a $100,000-plus second income earner to the family in Brisbane that does nothing to get $50,000, homeowners are finding more ways to get money out of their properties than renting a room out.
Architect Gary Hunt of Hunt Design took a 53 hectare cane property called Mayfield Farm on the outskirts of Port Douglas and engineered it to earn over $100,000 a year – that’s more than the average full-time worker.
“It certainly covers the outgoings well and truly,” Mr Hunt said of the earnings coming off the property. “It would certainly be putting the money in the bank. I haven’t done the sums fully, but there is sufficient income from the farm.”
He has a sharecropping agreement with a neighbouring farmer on two-thirds of land that sees him earn 10 per cent of the proceeds of any cane harvested.
Most of the other one-third of the land has been fenced off as paddocks which are rented out as horse agistments to local equestrians.
He also turned his trade to his advantage, converting two old cane cutter cottages on the site, one of which became a professional office with NBN used by a dozen of his Hunt Design team.
The rental earning potential of that office was $80,000 a year, he said, something he was keen to continue with whoever bought his property off him. He has listed the estate at 291 Mowbray River Road for $5.2m with Barbara Wolveridge and Lynn Malone of Queensland Sotheby’s International Realty.
Then there’s a family in Brisbane that has the best phone reception around, thanks to the telecommunications tower they host on their land for $50,000 a year – also without having to lift a finger.
Simon Buchan of Elders Real Estate – Shailer Park had the property at Loganholme listed last year as one where you could “get paid just for living here”. The owners were asking for offers around $1.2m for the 2.05Ha property, according to CoreLogic.
At the time, they had been receiving annual income off the telecommunications tower for over 20 years. Radio frequency records show that the property has three of the biggest telcos using its tower – Optus 3G and 4G-plus, Telstra 3G, 4G and 5G as well as Vodafone 3G and 4G.
It’s rare for telecom towers to be placed within home sites, with the Loganholme acreage property the only residential one out of 10 locations in the suburb that have them, according to records kept by the Australian Mobile Telecommunications Association.
Among other homes looking to make a pretty penny off its landholdings is Rivermead Estate in the Gold Coast hinterland that was an equestrian hub in the 1900s.
Owners Tim Gordon and his wife Karin spent three years reshaping the property at 1 Caballo Road, Guanaba, into a tourism and hospitality hub. Apart from the stunning main house, it has a separate three-bedroom guesthouse, an international-sized polo field, world-class equestrian facility, grazing paddocks and a helipad.
Property Investment Professionals of Australia chairman, Peter Koulizos, said properties that earn big dollars from sharecropping, holiday cabins and telecom towers might be rare, but there were ways for the average homeowner to capitalise in their suburbs – especially those on main roads or close to education facilities.
“A typical one is a residential house conversion to student accommodation, that is quite common. Generally people buy residential for capital gain and commercial for income. Here you have the best of both, because by renting by the rooms you’re also getting income. You can have your cake and eat it too.”
“Another is if you have a house in a commercial zoning, you can get more out of it if it becomes a doctors surgery or consulting rooms. Typically these are along main roads, which is generally where councils will zone for commercial use. They’re not that uncommon.”
He said there was also the possibility of income for advertising signage on properties zoned commercial too.
“We’ve had commercial property and somebody has paid us extra to have their advertising sign up on the roof. That’s a good one, tens of thousands a year depending on how big the sign is and if it’s illuminated or not. Generally you’d want a lot of traffic going past for that to work.”
Mr Koulizos said the downside, especially for student accommodation, was that it could be a lot more work.
“It can be very lucrative but it is a lot more work. The beauty is that if things get too hard, you can rent it out as a normal home, and the same for the house on the main road converted to consulting rooms.”
Either way, he said, the property owner needed to look out for tax implications.
“Income is income. Whether as normal residential or student accommodation or extra money through a sign, it’s going to be taxed. The first thing to do is speak to an accountant to see whose name it should be in, personal or company or however, and also speak to a QPIA qualified property investment adviser who has some fundamental understanding of property and how it works.”
Can SA house prices really rise 10 per cent in 2021 after coming through COVID unscathed?
While Darryl Kerrigan from classic Aussie film The Castle might say “tell him he’s dreaming”, the numbers tell us a different story.
There’s a growing group of forecasters predicting big things for real estate values in the year ahead.
Virus shmirus, they say, believing that home prices will be boosted by record low interest rates, rebounding consumer confidence, easier credit, huge government stimulus and targeted home buying and building incentives.
The vibe is positive.
Forecasts by SQM Research have Adelaide home values rising by up to 10 per cent in 2021 – the third-strongest performer in the nation.
Meanwhile, Property Investment Professionals Australia says median house prices in Adelaide and every other capital city have been higher five years after all of the four previous recessions since 1980.
South Australian property owners have been told for years that our home prices rise slowly and steadily, ignoring the booms and busts of the bigger capital cities.
It’s meant we don’t share in the excitement of rapid property price growth, but we also avoid the pain when prices head south by 10 per cent or more.
I’ve believed the steady-as-she-goes theory for a long time, but last week decided to dig a hole (dad) in the official numbers.
The results were surprising.
Since 2000 there have been five separate calendar years where Adelaide house prices climbed more than 10 per cent. That’s averaging one such rise every four years, and we haven’t had any since 2007, so we’re more than due.
Real Estate Institute of Australia data shows our biggest annual gains in the past two decades were:
• In 2003 Adelaide house prices surged 33 per cent.
• They jumped 21 per cent in both 2002 and 2007.
• There was a nice 15 per cent gain in 2001.
• In 2004 prices rose 12 per cent.
Of course, past performance is ancient history in the financial world, and nobody can predict the future.
But it shows that a 10 per cent-plus property price gain is not impossible. Other capitals such as Hobart, Sydney and Melbourne have done it in recent years, and forecasters reckon Perth could be heading that way too after a poor period lately.
Predictions of slight growth or flat forecasts for 2021, which we saw just two months ago, are being replaced by more bullish sentiment.
Factors behind this change of mind include a growing confidence that the Reserve Bank will leave us with ultra-low interest rates for a long time, a surge in housing finance approvals that suggests a supply squeeze looms in 2021, and Australia’s brilliant handling of the pandemic compared with most other nations.
COVID-affected borrowers are coming off home loan repayment deferrals faster than expected, while fears that the end of JobKeeper in March will cause forced sales were replaced by a realisation that the hardest-hit workers have been younger renters rather than older owner-occupiers.
Australia’s 2.2 million real estate investors are benefiting from record low interest rates but one big expense won’t go away – maintenance.
Many landlords fail to budget for replacing stuff, putting them at risk of losing their tenants or worse when a home starts looking tired.
But there are strategies to prevent problems, and it can start with a simple written plan.
Purple Cow Real Estate says investors should budget for all contingencies and future anticipated expenses.
It says these include repainting about every five years, replacing hot water systems within seven years, new carpets after eight years, new blinds and curtains every nine years, and replacing appliances such as dishwashers and clothes dryers every decade.
Investors who buy brand new properties shouldn’t have major maintenance costs for the first 10 years, particularly if they have a long-term tenant living there, according to Purple Cow client relationship manager Dana Hartley.
“But multiple tenancies put more wear and tear on a property,” she says.
If investors don’t maintain and upgrade where required, a property “ages very quickly”, Hartley says.
She says some people become accidental investors, perhaps through an inheritance, and are not suited to it.
“Some landlords can’t afford to be landlords and they shouldn’t be landlords because they don’t want to spend any money,” Hartley says.
“What you put out is what you get back.”
Property Investment Professionals of Australia chairman Peter Koulizos says some of the most expensive big-ticket expenses are structural.
“Character-style homes make great investments but can also be quite costly if you are looking at underpinning or salt damp,” he says.
“Generally modern homes don’t have that.”
Koulizos says property investors should have a sinking fund that gives them access to money for future maintenance issues.
“The most efficient way to do it is to have it in an offset account,” he says.
Whether it’s big maintenance or repair expenses or lots of little ones, the costs can add up.
“We just fixed up an investment property, a three-bedroom house, with a paint job, floor coverings and gardening and it was $16,500,” Koulizos says.
He says landlords don’t need to “go nuts” with fresh paint and carpets too often.
“If it’s an older home, people expect older carpet,” he says.
“It depends on what the market wants and how much the rent is. If it’s threadbare, yes, but if the carpet is a bit old, it’s a bit old.”
For much of 2020, it has seemed like just about everybody in Australia wants to move to Queensland.
As the pandemic began, so did a major demographic shift to the Sunshine State, with a recent report from the Australian Bureau of Statistics showing Queensland has had a net gain of more than 22,000 people in 2020, nearly double its 10-year average of 12,409.
Demand for houses is ramping up quickly as a result, erasing any predictions of property price plunges and pivoting them to prognostications of significant capital growth.
ANZ recently said it was expecting Brisbane house prices to grow by 9.5 per cent in 2021, with the Queensland capital likely to battle with Perth for the title of Australia’s property market leader in the coming months.
As well as Queensland’s enviable lifestyle and the state’s ability to suppress the coronavirus, buyers have been attracted to a rising, and reasonably affordable, property market.
CoreLogic’s latest data showed Brisbane properties’ average days on market for the three months to the end of September were just 45 days, while the city’s median dwelling price was just over $515,000 at the end of November.
Price growth for Brisbane in the year to November 30 was 3.2 per cent, while dwelling prices in regional Queensland were up 6 per cent over the 12 month period, CoreLogic said.
Gross rental yields in Brisbane sit at 4.2 per cent, while yields in regional Queensland at the end of November were 5.2 per cent.
Combine Queensland’s unique factors and market characteristics with historically-low interest rates, surging consumer confidence, and billions of dollars in infrastructure investment, and the scene is set for a property boom.
Mosaic Property Group managing director Brook Monahan is one property developer cashing in on the Queensland’s real estate rise, with his company’s projects among some of Brisbane’s fastest selling in 2020.
Mr Monahan said 85 per cent of its $92 million The Sinclair in East Brisbane sold over the pandemic, while more than 90 per cent of the 62 apartments on offer at its $72 million The Patterson had sold in the last two months.
At The Patterson, which was designed by architecture firm Rothelowman, the average sales price of the apartments was $1.2 million.
“It’s one of those things where there is no one thing that creates outcomes like that,” Mr Monahan told Australian Property Investor Magazine.
“There are so many moving parts that add up to having a successful project launch like this, particularly in the current environment.
“While things are certainly improving, and quite substantially, the reality is there has been a lot of uncertainty and there hasn’t been a lot of people doing average sales of $1.2 million off-the-plan in Brisbane in the last six months.”
Mr Monahan said Mosaic had made the decision to continue to engage with its clients and push on with its projects, even as doomsday scenarios for Australian property markets were being discussed daily at the height of the pandemic.
“South East Queensland was already in a very strong position going into this, it was sort of on the cusp of a broader based real estate boom prior to COVID hitting, so we knew that once we came out of the other side, providing we dealt with the crisis well and governments managed it well, both here and federally, that we thought we’d be in a good spot,” Mr Monahan said.
“We had a view that we would recover pretty early. While we were cautious, we were still broadly optimistic about where we would get to by late this year and early next year, and that helped us to stay the course with keeping our plans on track for these projects, which turned out to be a good decision.”
The next 14 to 18 months is set to be an even bigger run of development for Mosaic, with around $500 million in new project launches on its books in city fringe and high-value Brisbane locations, as well as close to water locations on the Sunshine Coast and the Gold Coast.
“We’ve got three project launches on the Gold Coast next year, and all in really high-end suburbs connected to the beach,” Mr Monahan said.
“Our markets there are Mermaid Beach and south of the border, including Burleigh.
“We also have two project launches next year in Brisbane’s inner west, both around Toowong, with another next to the shopping centre in Indooroopilly, and then we have got another riverfront project in the heart of the Sunshine Coast.
“These projects were already planned and we have been able to stick to those plans, but we have also added to the pipeline out to 2022 now.”
While acknowledging South East Queensland’s market conditions would be extremely enticing for property investors, Mr Monahan said those with the capacity to buy should remain cautious, even as positive sentiment continues to rise.
Mr Monahan said he expected a reasonably broad-based boom from 2021 to 2024 in South East Queensland, but cautioned that not all market segments would rise at the same rate.
“If you’re an investor, you must be buying product that the local market wants to live in,” he said.
“Don’t buy based on someone telling you a good investment yield story.
“If you’re not buying what the locals are buying into, you are not going to get the same yield or capital growth this cycle.
“It’s going to be a fairly broad-based boom, but I do think the better quality products in the locations which are difficult to replicate with the better developers who are more reputable … the gains are going to be proportionally towards that type of product, rather than just everything.
“Don’t just rush into Queensland and buy whatever you can get your hands on, you have really got to look at and understand the market, and if you don’t, find people who do.”
Sydney-based buyers agent Darren Venter, founding director of Strat Prop, also has his sights set firmly on South East Queensland, and the Sunshine Coast region in particular.
“The market segments that we are shopping in have literally in the last quarter gone up by 16.5 per cent to 20 per cent – that’s a quarter, not even a year,” Mr Venter told API Magazine.
“Our markets are generally predicted to have around 10 per cent plus growth, we try to aim for 10 to 12, maybe 14 per cent, and that is annually. We weren’t expecting this sort of a jump.
“It’s been very interesting. The markets, as well as the cash returns, are just ridiculous at the moment. It can be very rewarding if you know where to look.”
However, Mr Venter said he believed time was of the essence for those wanting to buy into what he believes will be Australia’s hottest property market in 2021, stressing that those with the capacity to buy should do so before responsible lending rules are relaxed in March.
“I think they should act now, sooner than later, for the pure fact that the markets are going to become very crowded because people want to get into the market and they have seen the opportunity,” he said.
“Once the relaxation of lending rules comes through, it’s going to be a very competitive market.
“So if you can get in right now, it is best you do, because essentially it will be competitive but it will be very rewarding for those that are already in the market because they will be able to reap the rewards from all the demand that’s going to come after March.”
Brisbane-based Universal Buyers Agents’ founding director, Darren Piper, described the current market conditions as a “real estate gold rush”.
He said his agency had bought at least one house per day for the last several weeks, with local, interstate and international buyers competing fiercely for coastal homes and larger properties.
“In all my years I’ve never seen buying conditions quite like this, we’re seeing properties get snapped up sight unseen and within days of reaching the market,” Mr Piper said.
“As much as 40 per cent of properties are being bought off-market before they even reach a public listing, demand is absolutely booming.”
For Melbourne’s Accrue Real Estate, which has assisted investors to purchase more than 3,000 properties since it was established in 2005, Brisbane is set to be a new growth frontier next year.
Managing director Jason Nevins said the company had recently opened a Brisbane office, with internal forecasts showing 70 per cent of its clients’ spending would be in the River City in 2021.
Mr Nevins said specific areas to invest in Brisbane were the west and south west corridors, with locations 30 to 40 minutes from the CBD to perform the best.
“According to the Property Investment Professionals of Australia, a third of investors predict that Brisbane will become the best capital city to invest in property over the next year,” Mr Nevins said.
“Queensland’s property prices are booming now and will be in 2021, due to affordable property prices and strong interstate migration.
“Low interest rates, government stimulus and a surge in consumer confidence has also contributed to the growth in property prices.”