We warmly welcome the new members who joined the ResiFund community this quarter. We hope you enjoy this newsletter.
The Fund’s recent QLD acquisition is a 410 m2 allotment opposite Birkdale Fair Shopping Centre. Birkdale is 19 km south-east of Brisbane’s CBD, near the Cleveland major business centre. These are attractive attributes for tenants.
While the site is zoned for Medium Density Development to a maximum height of 13m, we proposed a two-storey building with five studio-style apartments. Each resident will have a private kitchenette and en suite plus the benefits of a shared kitchen, laundry and dining room.
These small, multi-tenancy dwellings focus on single occupants. Similar dwellings around Brisbane rent for $250-$350/week. We estimate each of our apartments will rent for around $280/week.
At a total cost of $870,000, the building should generate net income of $51,256/year. By our calculations this will generate 5.9% net income return (before factoring interest costs or gearing benefits).
What’s more, an independent assessment puts the property’s expected value at $976,000 once it’s built and leased. The difference between the total cost of the building and the property’s expected value of $976,000 would see approximately 12% capital growth (before gearing benefits), which exceeds the cost to buy the land and construct the building.
After a slight delay resolving car-parking needs, we’re finalising building approvals. We expect construction to start in the next quarter, with full leasing by early 2020.
Meanwhile, we’re working on our next property purchase. We’re targeting more small, multi-tenancy opportunities in Melbourne’s inner north-east (Ivanhoe and Bundoora) and south-east (Clayton).
Supported by hospitals, universities, strong public transport links and superior retail and restaurant options, these areas enjoy high rental accommodation demand.
While residential property has performed extremely well in the past, one reason investors trust ResiFund with their money is our ability to identify future residential trends and needs to capture the best investment opportunities.
Kitchen layout showing NDIS housing accessibility requirements. Source: SDA Consulting
Positioning our portfolio for the future, not the past, also reduces risk by ensuring our properties meet future tenant needs. This lets us deliver sustainable, growing income distributions for you.
To these ends, we recently attended the Future Housing Taskforce annual conference on the Gold Coast. This featured a tour of south-east Queensland’s development precincts, with a focus on affordable, green-energy housing.
The conference included a lively debate between Ross Elliott (APP Property and Infrastructure Specialists), Michael Matusik (Matusik Property Insights) and Kevin Doodney (Future Housing Taskforce). The topic was: Is the great Australian dream of home ownership broken? You can imagine which side we took!
On the tour, we saw innovative housing concepts plus various ways to be more energy efficient and environmentally friendly (e.g. Josh’s House).
This sustainability aspect was valuable as it’s our medium-term goal to reduce ResiFund’s property portfolio carbon footprint. This won’t just help us address climate change. Improved energy efficiency will also lower property operation and tenant power costs while potentially raising net investor income.
Another exciting part of the new housing concept tour was seeing the Specialist Disability Accommodation (SDA) in its final construction stage before being leased to National Disability Insurance Scheme (NDIS) participants.
The tour showed us houses near Ipswich with pre-commitments of three tenants per dwelling. Due to the huge waiting list of people with special accommodation needs, tenants had been allocated by ballot.
These houses often include a “home office” for 24-hour onsite overnight assistance (OOA) for high-need tenants.
NDIS government funding covers OOA staff wages and partial tenant rent. While this can generate strong positive cash flow, there’s considerable up-front cost to build an SDA-compliant home. As SDA isn’t a long-term lease, there’s a risk of non-renewal – meaning the high cash flow derived from government funding could stop. So, we are developing our SDA strategy with caution but are optimistic that it could benefit ResiFund’s portfolio in the right location.
We’ll also monitor other potential high-income housing forms that aren’t yet in our portfolio.
ResiFund aims to outperform the residential property market and give you a 10% average annual return, medium to long term. Thanks to our recent Brisbane purchase, plus other opportunities we’ve been assessing, we’re well placed to achieve both goals.
As we establish our portfolio, more of your initial return will come through property value growth – reflected in our monthly unit price. Like a share price, this tracks your investment value – including accrued but undistributed rent income.
Based on independent asset valuations, our unit price is reflecting our increased property values. This means current investors are benefiting from the value we’re generating and future investors will pay higher unit prices (subject to market factors remaining stable).
The table below shows our unit price rising steadily. With more members joining ResiFund, we’re set to expand our portfolio in coming months when our next purchase opportunity passes due diligence. So, watch this space!
We recently posted our June 2019 Quarterly Market Update on our YouTube channel. Though recorded before the Federal election, it covers the main forces we think will affect property in the year ahead.
Since the election, the property sector has seen resurging confidence. Lending changes (driven by looser assessment criteria – which APRA sets and banks apply) plus a lower interest rate outlook, will likely return property to capital growth sooner than predicted.
ResiFund is ideally placed to capitalise on market price appreciation. That said, our focus to buy well-placed, high-income properties remains. We believe this strategy will deliver attractive returns regardless of market sentiment.
Source: ResiFund YouTube
One reason people invest with us, rather than buy property direct, is our potential to deliver higher-than-market returns.
Though difficult to compare returns, it’s notable that ResiFund’s unit price has risen in recent months. Meanwhile, CoreLogic (the world’s largest property data firm) reported a first quarter fall of 2.3% across national dwelling values.
This reinforces our claim to outperform the market and deliver attractive returns despite difficult market conditions.
Our view was and is that long-term residential property investment fundamentals remain sound.
Our recent Birkdale purchase is in the Shire of Redland around 19 km south-east of Brisbane’s CBD.
Birkdale benefits from the Redlands’ relaxed lifestyle beside Moreton Bay. It features a marina, golf course and sporting precinct.
With a population of around 157,000, the biggest employment areas in the Redlands are health care and social assistance. See the graphic below to learn more.
The Redlands is defined as much by the water as by the mainland. On shore, its bayside villages feature cafes, seaside fun and nature to explore, while Moreton Bay’s many islands (the jewel being North Stradbroke) run on their own time zone with plenty of adventures to be had.
ABS ERP 2018
Health Care and Social Assistance
Proximity to Brisbane, clean coastline and good access to boating and camping destinations make the Redlands a baby boomer hotspot. An emerging food and beverage culture is attracting many day visitors from Brisbane’s broader metropolitan area.
The Redlands’ main age group is 40-49, with around 73% of houses owner occupied.
Coastline and native environment, including significant koala habitats, make the Redlands a hard place to develop. This limited development potential is a key reason we love this area for investment.
Our members comprise people of various backgrounds, in different life stages, investing directly or via their SMSF.
Selena Fernandez is a Human Resources Manager with a young daughter. One of our early investors, Selena recently gave a testimonial about why she joined ResiFund.
After making an initial investment, many ResiFund investors then participate in our Distribution Reinvestment Plan (DRP). This means they reinvest their quarterly income distributions into extra ResiFund units. It’s an easy way to build wealth and make your money work for you (rather than just let it sit in a bank with little interest).
Another way to make the most of your money is to use our Regular Savings Plan (RSP). As with Selena, it can also provide a long-term savings plan for children.
RSP fosters investment self-discipline via a regular direct debit (e.g. $100/month) from a nominated bank account. This helps parents and children save for a house or deposit when they turn 18. By acting now, rather than in 2037, RSP investors enjoy today’s property prices and not the far future one’s.
To invest via DRP or RSP, use the form on our website.
We hope you found this newsletter informative.
We look forward to bringing you more updates in our next one.
Director and ResiFund Investor
To learn more, contact:
Client Liaison Manager
Ph: 0439 586 964
Wholesale investors and financial advisers:
Head of Property Capital
Ph: 0439 586 964
ABN: 38 154 921 730
AFSL No. 417371
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