This is an article titled “A Place Called Alice” that appeared in the Australian Property Investor (API) magazine in November 2008. I give my views on the Alice Springs property investment market.
Why do you invest in Alice Springs?
Because it’s a great place for investment. An old timer summed it up best. He’d been living in the Alice for over 15 years; had real estate holdings in exotic places like Hawaii. Here’s what he told me, ‘If I had just made all my investments in Alice Springs, I could retire today a very rich man.’ He told me this when I first came to Alice Springs in 1998. At first I didn’t know what he was talking about especially when there were old commission houses selling for $150,000 on Bloomfield Street. I thought to myself ‘who in their right mind would pay $150,000 for those houses?’ Now, those very same homes sell for well over $300,000! I wish I’d bought a dozen of them. So, just when I thought there was no room for upward growth, the Alice keeps on going strong. He was right, the Alice is a great place to invest.
How is the Alice Springs market performing and what are your expectations?
The Alice Springs real estate market is performing as ususal; strong. Housing prices continue to rise. For instance, we purchased a house in early 2007 for $465,000. It’s a 4 bedroom home with an in-ground pool and over 1000 square meters of land backing onto the golf course. You’d be hard pressed to find a home with all these features for under $600,000 today. Rents continue to rise. We purchased a house in late 2007 for $308,000 and rented it for 360 per week. The rent has gone up twice since then. First, to $380 and now it’s renting for $400 per week. I’m told that this is a relatively low rent for a 4 bedroom house in a nice area of town. My expectations are that the market will continue to be strong.
What sort of investments do you look for?
I look for positive cash flow investments. Are they easy to find? No. But, I keep looking and looking. If I could find residential property that paid me $1 a month after all expenses, I’d be excited. After all, there’s no limit to how many of these you can hold. But, the minute the equation goes negative, you start to hit a limit and the brakes go on your investment portfolio. I have yet to find a residential investment that generated positive cash flow from day one. Therefore, my residential portfolio has grown slowly. Today, most of my residential investements generate a positive cash flow. But, that’s only after several initial years of negative cash flow. I guess I need to read more books on how to get rich in real estate!
What are Alice Springs’ pros and cons?
Pros: Strong, upward growing market. Lots of opportunities.
Cons: Strong, upward growing market. Lots of opportunites.
I’m not trying to be funny here but, I’m reading a book that sums it up wonderfully. The book says the greatest risk in any investment is not the investment but … get this – the investor! Boy did that hit home for me. In other words, what might seem risky to one person may not be risky for another. It depends on the level of expertise and experience of the investor. So, I guess the greatest “con” for the Alice would be those people who cannot or will not see the opportunities before them. But, of course this is true for any place in the world I suppose. I just hope I’m not one of those people who miss the opportunities!
What are your investment philosophies?
My investment philosophy is fairly basic. Get advise from those who are doing what you want to be doing and/or those that have the lifestyle you want, then do what they do. I get a lot of my “advise” from reading. People who are living the lifestyle I’d like to have are writing it all down on paper. I probably read at least one book a month.
Are there any Alice Springs hotspots worth keeping a particularly close eye on?
I reckon the Gap Road area is a great place to invest. Many of the properties have been rezoned to commercial which gives the invester more options. Now, instead of being limited to residential zoning, the investor can operate a business from the premesis. Or, rent the property to a business which usually means a higher return.
What has been your best investment (in Alice Springs)?
Probably an industrial shed we purchased back in 2002. It was offered to me when the first buyer backed out of the deal. I bought the shed for $250,000 with an existing lease agreement for $29,000 per year. Tenant paying GST and all outgoings; except building insurance. I jumped at the deal. After investing in residential real estate for many years, I realized this was a better deal than anything I’d ever seen on the residential side. There have been a few rough spots where government funding was looking shaky, so we were in danger of losing our tenant. I think this is why the original buyer backout out. Too risky. But, it’s worked out well for us. A recent bank valuation of the property came in at $475,000 and we just signed a new lease for $45,000 per year. I could use a few more investments like this one!