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Why you should NOT buy a high yield, low cost house in Queenstown, Tasmania (or anywhere). Thanks for trying, Biz Opp Detective / Fitzroy Press.

First of all, let me say that most reviews you’ll see on the internet for anything like this are actually made by the company and posted on various sites by SEO companies as though genuine users wrote them. They’ll umm and ahh, go over a few cons but a lot of pros, and come to the solid conclusion that it’s a great idea and to go ahead and buy it. Not this one. It’s written by me, and it’s honest and frank.

I wondered to myself ‘is Biz Opp Detective legit?’ and decided that the money back guarantee, backed up by my credit card provider’s ability to charge back the purchase, made it a worthy risk if just to see if there was anything I could learn from it. Since the company had a .com.au domain and listed an ABN with a few related sites, it didn’t seem like this particular site, Biz Opp Detective, was necessarily a scam – yet. I’m not going to link to them, as they can pay for any traffic to their site as far as I’m concerned.

P.S. I may invite some anger from the company for posting this, however they do their own reviews of other schemes which are similar to their own service, so I gather they consider it OK to do so ūüėČ

I’m just going to go over one single¬†idea they came up with in the first email before I wiped the tears of laughter off my keyboard and unsubscribed…. but just imagine similar¬†outlandish concepts, enough to fill a PDF file.

 

Buy a house to keep as a rental in Queenstown, Tasmania.

Hoo boy. I don’t know if there’s any law against advising suck recklessly idiotic things to the sort of braindead people who pay for one of these guides…. but wow. Clearly the authors have some vested interest in Queenstown property as I can’t think of a worse place to permanently and irretrievably park your cash and never see it again. Check here for one of the examples of prime real estate which has been sitting on the market for 5 months since I first looked after buying the Biz Opps Detective newsletter:¬†http://www.realestate.com.au/property-house-tas-queenstown-121336574

high yield low cost property in queenstown tasmania

So, it’s basically a shack from the 1960’s. I won’t lie, it’d be a nice place for a getaway, to escape from the real world for a few weeks in the dead mining town that is Queenstown. But as an investment – this has to be comedy, surely?

Yes, the yield is nice. The thing about rental yield is¬†that¬†if it’s high, it’s always for a reason. Call it a risk premium, if you like. The reasons in this case are that first of all, very few banks are likely to touch a loan on it due to the location and condition, and the likelihood of anyone wanting to ever buy it in the event of a fire sale is very low (the bank considers this as they want to have a good chance of getting back their money if you can’t pay the loan any more). At a bare minimum any bank that goes near a property like this, or probably any in Queenstown, would require 20% deposit (which admittedly isn’t so bad when the purchase price is so low). Next, there simply isn’t much of a market in Queenstown for property. Sure, it’s up for sale, but no one is buying. I know this because I looked at all the available properties 5 months ago, and guess what? They’re pretty much all still there for sale, plus more, even since this newsletter told people to buy up there.¬†So even the most foolhardy of people could see through this one.

I enquired with a few of the agents in Queenstown by email about a few concerns I had. I was told in their non-committal fashion that ‘it could be instant OR take several months to find a tenant’ in the event that a property became vacant. That tells me I should assume the worst case there.

Before you paint me as a naysayer that just isn’t willing to take a risk, consider this. I actually own a small, high-yielding bedsit/unit¬†in a different area of Tasmania. Frankly, I wish I hadn’t bought it. The gross yield is near 10%, but it suffers from everything I have mentioned above, and more:

  • It would be impossible to sell. Others in the area have come up on the market, and sat there for months or more with barely any interest. If I was desperate, I’d possibly be able to offload it for 75% of the original price, and probably have to pay the bank extra just to finalise the loan.
  • Maintenance and bills are high. The fixed charge on a water bill is $160, whether you use 1 drop or thousands of litres. The plumber, locksmith or painter don’t charge 1/5th of their normal callout fee just because you paid 1/5th of the price of a family home to purchase the place. Electricity is still a complete rip off due to the sad monopoly of Hydro/Aurora in Tasmania. And strata fees. Who knew it was so expensive to do nothing at all and call it ‘miscellaneous maintenance’? When it comes down to it, I make about as much profit on my investment as I’d make by sitting my money in a high interet bank account.
  • Places like this attract unruly tenants who often can’t rent in a regular suburban property due to their criminal history and unsocial behaviour. I get so much value from my property manager with all the times they have to deal with the current tenant, that I feel almost guilty or sorry for them! The first tenant abandoned it after trying to burn it down (no rent for months and repair bills! While the latest at one point had it in an almost uninhabitable state due to pests, food waste, smoking inside… what a nightmare!
  • Rent is decreasing. Yep. Mine is renting out at the same price as years ago when I bought it because I’ve had the same (lunatic) tenant and I’ll be damned if he ever gets a better deal out of me given what it’s going to cost to give the place a makeover once he leaves. Others in the same area are not so lucky, receiving on average 15% less than the¬†rent they would have been receiving a few years ago! So much for inflation.
  • There will be no capital gains, ever. The place is a small strata unit, with decreasing rent and high costs of maintenance and ownership. No one is ever going to want to pay more for it than it is worth at this point. It’s pretty much a depreciating asset that I now understand was never the ‘good deal’ I thought it was all those years ago.

Now, imagine all these issues, except amplified by the remote, ghost¬†town location of Queenstown and the fact most properties there barely meet any building standards and were built in the 1960’s. Buy a dodgy falling apart shack if you really want one, but let’s not call it an investment, please!

Note, I am not a financial or otherwise qualified adviser and the above should not be construed as advice tailored to your circumstances, it is a general opinion piece/review only. No responsibility will be accepted if you choose to make any bad decisions as a result of reading it.

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