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With Queensland prices lagging behind Sydney and Melbourne, investors have a bit of insight as to where the market can be expected to move. With this advantage in mind, one expert shares how investors can hit a goldmine of returns.
Investors may flock to houses or units with multiple bedrooms in popular areas, but as Ian Ugarte of Small is the New Big shares, there is a better way to improve returns in lower density areas.
“The Queensland market, in particular Brisbane, Gold Coast [and the]Coast, has specific policies that allow for people to get a double-digit return, as far as a gross yield is concerned,” Mr Ugarte said to Smart Property Investment.
The technique Mr Ugarte uses to see those double-digit returns is to create micro apartments in the same dwelling.
“It actually takes the pressure off the market, and then as a return for the investor [it's] actually better than any other property currently on the market,” Mr Ugarte said.
“If you're going to create smaller components or compartments within a property, you need to do it within a house so that people can get better outcomes. As far as the key areas to go to … I'd say the densely populated areas of the Gold Coast, of the Sunshine Coast. The five to 10 kilometre radius out of Brisbane City. Regionally, I like town build probably Gympie. I would probably would push on as another area as well
“So, I think those areas, with the right strategies, [are] areas that you'll get the capital growth and if you implement correctly, will get positive cash flow as well.”
When considering micro apartments, Mr Ugarte said it does not matter whether investors consider metropolitan or regional areas, double-digit returns are in reach, he claimed.
“The rooming house market, which is creating self-contained compartments within the same house gives a better return overall quite simply because, when you look at the rents that are required for a four-bedroom house ... So let's call a four bedroom house $450 a week. If I took those four bedrooms, I compartmentalised and used the policies available to me, we would end up with rent of $800,” he explained.
“So, we've barely doubled our rent, and when you look regionally ... for one room, you're paying one half to just over a half for part of the property for someone to live in it. So, it doesn't act as a real ratio. It's not as if a $450 house rents for just over a $100 a room, it actually rents for a $180 to $200 a room.”
In regional areas, Mr Ugarte said the demand is there for micro apartments, despite claims to the contrary, as he stated 70 to 80 per cent of renters are singles and couples, yet the current supply does not support this.
“Effectively investors are building houses for families when singles and couples are living in them or renting them. So, what we say is … you need to build to what the market is requiring, and no one is building these.”
Using one of his students in Mackay as an example, Mr Ugarte said they turned a negative $4,000 property to positive $15,000 after $13,000 of modifications.
“So, for $13,000, she effectively got more than a 100 per cent cash-on-cash return in the first year,” he said.
Ian Ugarte is the founder of the Australian Housing Initiative. He is a property expert, educator, author and change maker.
He is and passionate about creating co-operative partnerships between Social Agencies, Government and Private Investors to bring back the genuine connection of community through the provision of elegant housing diversification.
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An apartment is a personal residence within a house or building occupied by several tenants.
A house refers to a building or property used as living quarters or an individual’s place of permanent or temporary residence.