In our previous post, we shared Stafford, Brisbane’s suburb profile report we wrote for Property Wise Magazine and has been published in its latest February-March 2014 edition.
In this post, we’re sharing the case study on one of the properties in Brisbane, Stafford.
Phew! If you made it this far, you may have picked up on a few key reasons why this location is a great spot for investment. Let me point out a few of the main points:
- 7km from the CBD
- Direct and fast access to major freeways and arterials
- Surrounded by more expensive suburbs
- Affordable entry point
- Good rental demand with low vacancy rate
The main style of property in Stafford is your post war 1950s style weatherboard. There is a mix of unrenovated and renovated properties in this location and driving through Stafford you will certainly see a suburb undergoing significant re-gentrification as the owners renovate their properties as well as develop new style properties on subdivided land or demolish older style houses. You can pick up everything here from your renovators delight to a million dollar new home.
Entry level properties begin around the $400 mark and the top end sits around the million dollar mark.
The Case Study
Let’s bring this all together with a case study property. We’re looking at this property as a buy and hold long-term investment for capital growth.
Our case study property is a – you guessed it – 3 bedroom standalone weatherboard house!
It’s in a bit of a shabby condition but the location is good, walking distance to Webster Rd, Stafford Rd and Stafford City Shopping Centre. It has 3 bedrooms, 1 bathroom and a sunroom that comes off the bedrooms. It is essentially in original condition with original kitchen cabinetry and bathroom. Let’s assume that we pay $450k for this property.
There is capacity within the property to do some cosmetic renovations that may increase value and rental yield, so we’ll assess the numbers based on a pure buy and hold and also a buy, renovate and hold.
Assuming that we simply buy the property, spend a little bit of money on maintenance, let’s say $3000 to fix up some of the outstanding maintenance items, then we’d be looking at a pretty modest rental income of around $360 – $380pw in it’s current state. We’d have a property in a good location with scope capital growth over time, but if we were using 100% borrowed funds for this investment (let’s assume your deposit came from equity in your home rather than your savings), then the property would be significantly negatively geared, costing you around $160 per week.
How about we do some renovations to the property? Having actually inspected this property I can tell you that the sunroom has some scope to become either a 4th bedroom or even to be split and two new ensuites created from it coming off the two largest bedrooms. Given that this location would likely be a good location for a share house, I’m going to run the numbers on the two new ensuites option.
Let’s say we spent around $50k on the house to really pretty it up, including new floors, blinds, kitchen, bathroom and created two new ensuites giving us a 3 bedroom, 3 bathroom home with all new features. We would end up with a property likely to return $480 – $500 per week, which makes our new cashflow position around $80 per week. Not to mention the increase in value of the property, which I’d estimate at around $40k over and above our expenses associated with the renovation and holding costs during the renovation. Now that’s a bit more attractive! Our end position is now a nicely renovated, sought after rental property with a reasonable holding cost in a high growth location just 7km from the Brisbane CBD.
Here are the detailed numbers of the two scenarios:
In this article we’ve looked closely at the population demographics of Stafford so that we can understand our audience, we’ve looked at the facilities and services in the area and we’ve looked at the property style, numbers and the types of opportunities, including a detailed case study on a buy and hold investment.
There really aren’t too many places left within 10km of Brisbane where you can buy a nice home for less than $500k and right now, Stafford is still one of those places. For how much longer though, well, that’s for us yet to learn!