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Karratha - 106 Wellard Way

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Project Overview

Total Outlay $395,000
Eos Estimation $550,000
Est Capital Profit $155,000
Est Rent Return ($1300/week) 17.1%
 

An excellent site, very near the town centre in Karratha has become available.   The house on the block is  for vacant possession.   Our research has indicated significant opportunities in the short term for profitable development.  The current market in residential real-estate is reflecting the massive demand for accommodation with rent returns of approximately 10% and vacancy rates extremely low.  A combination of demand and the high cost of construction have pushed prices up over the last five years and should continue to do so in the foreseeable future.

Considerations that should impact positively upon both rent and growth include:

The transformation of the city centre as part of the State Governments’ $500 million Karratha City of the North (KCN) plan.  Work commences early 2012.

Population forecast for Karratha anticipates growth from 12,000 to 50,000 people.

Massive and continued expansion of resource opportunities, particularly iron ore and gas including $123 billion in resource projects for the West Pilbara and Karratha.

Intentions:

We will develop this site into eight, one bedroom, one bathroom units with single carports.   Completion should be within 12 months.

Profit forecast:

Costs per Investor: (estimates)

Land                                                    $133,000

Construction                                    $262,000

Total                                                  $395,000

 

Est current market value             $530,000

 

Capital Gain                                   $135,000

Yield (rent)                                    $ 57,200/14.5% P/A

 

The total cost to investors of $395,000 includes interest on construction loan, furniture, stamp duty, borrowing fees, commissions and 5% contingency.   Full details are available in the Information Memorandum (IM) for each project.

Investors need to be able to fund the initial deposit of $133,000 from other sources however the final borrowing can be against the Karratha property.  Estimates indicate that if all funds are borrowed, the annual cash flow will be approximately $23,000 positive.

Construction:

Both residential and commercial construction in the Pilbara can be problematic.  Builders need to be able to manage a range of difficulties not faced in Perth.  These include weather conditions, strict building codes (cyclonic), an expensive labour market and transport costs.

We are recommending McGovern Construction for the following reasons:

-          Experience in the north

-          Large construction firm

-          Solid concrete construction

-          Built in Perth as a modular construction, fully fitted out and transported

-          Fixed price

-          Reliable construction times

Tax:

All investors are responsible for seeking their own tax advice, but they need to be aware that selling the property may attract both capital gains tax and GST.

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Disclaimer IMPORTANT:  This is not advice.  Clients should not act solely on the basis of the material contained inthis document.  Items herein are general comments only and do not constitute or convey advice per se.  Every effort is made to ensure the contents are accurate at the time of publication but clients need to be aware the figures are all estimates.  Clients should seek their own independent professional advice before making  any decision or taking action.  We take no responsibility for any subsequent action that may arise from the use of this document.  Published by Eos Property Group