Report - Hotspotcentral Hood S… · STATISTICAL INDICATORS 5 FUNDAMENTAL INDICATORS 5 Project & property attributes 5 WHOLESALE VERSUS RETAIL 7 HOW IT WORKS É. 8 Investment Entity

PO Box 2068

Burleigh Heads QLD 4220

Property Investment Report

56 hood St, Sherwood QLD

Units 1, 5 and 9

INVESTMENT SNAPSHOT 2

What makes this a good investment? 2

WELCOME MESSAGE 3

CAPITAL GROWTH DRIVERS 4

83% Pass on THE Property Selection Index (PSI) 4

STATISTICAL INDICATORS 5

FUNDAMENTAL INDICATORS 5

Project & property attributes 5

WHOLESALE VERSUS RETAIL 7

HOW IT WORKS …. 8

Investment Entity 8

Borrowing Funds for Development 8

Post Settlement Strategies 8

LOCATION 9

56 Hood St, Sherwood 9

walk score = 71/100 10

TRANSPORT 11

SMART SCORE: 91% 12

PROPERTY PARTICULARS 13

introduction 13

typical floor layout 14

Price list 15

rent appraisal 16

BRISBANE PROPERTY MARKET 17

what the experts say 17

PROPERTY ANALYSIS 18

positively geared after retrieving original investment 18

cash flow summary over 1o years 19

INVESTMENT HIGHLIGHTS 20

HOW TO INVEST 21

Hotspotcentral.com.au | Property Investment Report !2

Investment Snapshot

WHAT MAKES THIS A GOOD INVESTMENT?

10 min walk to train line into Brisbane CBD.

Brand new - so maximise depreciation

benefits and rental potential.

A Walk Score® of 78 out of 100 means the

location of these apartments is “Very

Walkable”, so most errands can be

accomplished on foot with great

infrastructure in the area (work nodes,

schools, restaurants shops…).

Sold with independent registered valuation

and fixed build contract.

DSR BoomScore™ is 27 out of 48 having

lifted from 20 out of 48 twelve months ago.

This indicates a growing demand relative to

supply when measured against the 8 leading

property indicators including auction

clearance rates, vendor discounting, online

search interest, gross rental yield, vacancy

rates, stock on market percentage, etc.

Vendor discounting on sales have halved in

12 months (7% to 4%).

The number of days taken to sell properties

in Sherwood have halved in 12 months

indicating an increase in demand relative to

properties available for sale.

More than 4 times the number of people are

searching for property in Sherwood on

realestate.com.au than the Queensland

average.

65% of residents in the area are owner-

occupiers compared to 35% tenants; a near

perfect mix for renting or resale on

completion.


Note: the costs above do not include Hotspotcentral’s fee of $10,000+GST. Please refer to the Financial Services Guide.

ROI SNAPSHOT Unit 1 Unit 9

Required deposit by investor $168,000 $172,000

Armchair developer estimated cost price $267,000 $275,000

Independent valuation (as if complete today) $345,000 $355,000

Estimated equity gain $78,000 $81,650

Cash on cash Return 47% 47%

Annualised return - return over 12 months 55.3%% 55.3%%

Discount to valuation 23% 23%

WELCOME MESSAGE

Hotspotcentral is proud to offer THREE 1 bed ,

1 bath, 1 SLUG apartments at developer’s cost

price in a boutique block of only 14 apartments.

It is estimated investors will save 23% on

today’s market value as evidenced by a Savills

commercial valuation.

Exclusive to Hotspotcentral investors only, this

is a prime opportunity to co-develop 14

apartments ideally located in the established

suburb of Sherwood.

Sherwood is one of Brisbane's oldest and most

beautiful suburbs bounded by the Brisbane

River. Located on the southern side of the

Brisbane River about 9 km from the Brisbane

CBD, Sherwood has benefited from

enormous buyer interest in near and inner-city

living.

Residents have easy access to Indooroopilly

Shopping town and the University of

Queensland. Public transport is good;

Sherwood has its own railway station central to

the suburb. Like its neighbours, Corinda and

Graceville, Sherwood is a leafy, quiet residential

suburb with some homes located alongside the

Brisbane River.

There is a thriving small business and

commercial centre on one side of the railway

line, including supermarkets and small retailers.

There is also good access to nearby retail areas

in Graceville and Corinda. The suburb is

supported by a number of churches, primary

schools, and sporting fields. Sherwood's

popularity with Brisbane residents is based on

its beautiful older homes and its easy access to

the city and other facilities. Source: REIQ

Apartments in this small block are expected to

deliver strong capital growth and solid rental

income; an assertion supported by strong

fundamental and statistical evidence in this

report. End values are supported by a

comprehensive commercial valuation by Savills

and build costs based on a fixed priced contract

with the Builder, Rawcorp.

The estimated net profit per investor reflects a

23% discount to bank valuation “as if complete

today” with an estimated 47% return on cash

invested over 10 months (55% per annum).

These numbers do not factor in any potential

capital growth during construction. and much

of the potential development risk prior to

construction no longer applies as construction

has already commenced with completion

expected in November 2016.


Capital Growth Drivers

83% PASS ON THE

PROPERTY SELECTION

INDEX (PSI)

The PSI is an algorithm developed by

Hotspotcentral in conjunction with leading

buyers’ agents and data analysts.

The PSI examines over 100 drivers known to

influence capital growth, rental returns and the

price growth potential for the subject property.

Brisbane generally has been touted for growth

but this does not specify which Brisbane

suburbs will do comparatively better and which

ones to avoid.

The PSI drills down into these micro markets

(e.g. Sherwood - Units) and also factors in the

relative attributes of the subject property and

how it compares to competing alternatives on

factors including price per square metre,

builders reputation, design, fixtures and fittings,

developers reputation).

Each capital growth driver is given a weighting

depending on its relative importance or

influence on overall capital growth potential

when compared with all the other capital

growth drivers and indicators.

Each driver is categorised into three areas of

research before the PSI can be generated:

fundamental, statistical and the attributes of the

subject property.

This complex calculation ensures that all

investment criteria are examined when

evaluating a potential opportunity; a detailed

‘flight check’, if you will, to ensure a safe and

profitable outcome.

Any deals presented to Hotspotcentral with a

PSI score of 75% or more is examined in more

detail before an offer is created in an ASIC

prescribed format under the appropriate ASIC

licensing.

In addition to the upfront discount of 23% on

offer, this PSI score of 83% should give the

investor added piece of mind that their property

should perform well in the medium and long

term after retrieving potentially their entire

upfront cash investment.


STATISTICAL INDICATORS

DSR BOOMSCORE 27 OUT OF 48 PASS

This implies demand exceeds supply. The higher the

BoomScore the greater the potential for capital growth as

measured on 8 leading supply-demand stats (learn more).

DATA TRENDS PASS

Data is trending in the right direction for most of the data

elements measured.

• DSR BoomScore has increased from 20 to 27

in 12 months.

• Vendor discounts halved in 12 months (7% to

4%).

• Average days a unit takes to sell in Sherwood

has halved in 12 months.

RIPPLE EFFECT POTENTIAL PASS

Surrounded by more expensive neighbourhoods with

similar lifestyle amenities.

AFFORDABILITY RATIO™ PASS

The ratio of median price to median household income

should not be more than the average multiple for similar

surrounding suburbs.

MARKET CYCLE TIMING STRONG

If the suburb has been relatively flat over a 10 year period

when surrounding markets have done well, then there is a

strong possibly the timing is right.

TRADING VOLUME PASS

Sherwood is strongly traded, producing more reliable data

and property is more likely to increase in value if supply

continues at current pace.

RENT TREND PASS

Rents are increasing proportionately (slightly) higher than

similar and surrounding locations.

DEMOGRAPHIC PROFILE STRONG

Demographics are changing with more earning power due

to proximity to major employment hubs in the CBD and

surrounds.

HIGHER OWNER OCCUPIER RATIO STRONG

Although the apartment block will initially be sold to

investors mostly, the high owner-occupier percentage

compared to tenants in Sherwood means there is a large

pool of owner-occupier buyers.

UNEMPLOYMENT RATE PASS

Unemployment is low in Sherwood relative to the rest of

the State.

FUNDAMENTAL

INDICATORS

TRANSPORT INFRASTRUCTURE STRONG

Close to transport nodes including buses and trains, with

easy access to the CBD.

EDUCATION FACILITIES STRONG

There are multiple education facilities including the

University of QLD, private and state schools and daycare

for smaller children.

EMPLOYMENT OPPORTUNITIES STRONG

Sherwood has a number of local employers including the

university of Queensland, and most situated close by in

the CBD.

INFILL AREA EXCELLENT

Infill developments typically attract better rents and prices

due to the established nature of the area and the lack of

development sites and therefore supply (when compared

to massive land estates on the outside of city locations).

DEMOGRAPHIC PROFILE STRONG

Demographics are changing with more earning power due

to proximity to major employment hubs in the CBD and

surrounds.

PROJECT & PROPERTY

ATTRIBUTES

WALK SCORE™ 71/100 EXCELLENT

Very Walkable - so most errands can be accomplished on

foot. A high Walk Score has a proven correlation to higher

capital growth potential.


PRICE POINT EXCELLENT

Prices for both retail and Armchair developer buyers have

been set at valuation. Most developers price their stock at

slightly higher than valuation. Armchair developers paying

cost price will struggle to find the same price per sqm for

the same property in a similar inner-ring location.

DEVELOPER TRACK RECORD STRONG

The developer has a background in commercial

development funding which has given him a unique

insight into what projects fail and why. Funding Risk is one

of the biggest reasons for projects failing (see ‘risks’ in

Information Memorandum).

DESIGN & LAYOUT GOOD

The block is very small at only 14 units. This is very

attractive for tenants and owner-occupier buyers. The

sizes are good compared to similar priced apartments and

all apartments have functional layouts with good quality

finishes.

Notable inclusions: Ducted air-conditioning, caesar stone

bench tops, Good quality, lower maintenance Schindler’s

lifts (lifts not a requirement for a small block).

CONFIGURATION GOOD

One bedders are perfect for the target market this close to

a university and the CBD including young professionals,

single parents and the growing number of single-person

households.

DENSITY & SCALE GOOD

In 2016, according to the Australian Financial Review,

nearly two-thirds of unit approvals were high rise (4+

storeys or more) with a record low being below four

stories.

This four story apartment is in a low density infill area

which is favoured far more than high density, high rise

buildings typical of much of the unit development in

Brisbane.


ONLINE SEARCH

INTEREST HIGH DEMAND MARKET

One of the eight statistics we measure for over

15,000 suburbs and use to generate the overall

DSR BoomScore™. In isolation this statistic is a

powerful indicator of demand. When combined

with the remaining 7 stats we get a clearer picture

of Sherwood compares to all markets country-wide

CAMERON KUSHER. CORELOGIC RP DATA RESEARCH ANALYST

”Nearly two-thirds (64.3 per cent) of all units

approved over the year [in Brisbane] were high-rise

(four storeys or more). Just over a quarter (27 per

cent) were townhouses and a record-low 8.7 per

cent were low rise [like 56 Hood St].”

Wholesale versus Retail

The table below illustrates the savings a

wholesale ‘armchair developer’ can expect in

comparison to purchasing the exact same

property on the open market at market prices.

Note how rental yields on cost increase

significantly while the armchair developer

realises a net gain of $128,378 by removing

many of the retail costs. Purchasing the same

property at full market rates would cost the

retail buyer $29,687 in stamp duty and other

indirect purchase costs (like lender mortgage

insurance and additional interest on mortgage

borrowings).

ROI SNAPSHOT Unit#1

Armchair Developer

Retail off-the-plan buyer

Cost of property $267,000 $267,000

+ developers profit margin of 23% $0 $78,000

+ selling costs of 6% $0 $20,700

Purchase Price $267,000 $365,700

+ stamp duty* $0 $11,378

+ legals, lenders mortgage insurance, etc $0 $18,300

Total Purchase Price $267,000 $395,678

Profit or loss on purchase + $98,700 -$29,678

Gross rental yield 6.91% 4.67%

20% Deposit (avoid lenders mortgage insurance) $0 $73,140

Total Difference $128,378 $0

* developer pays stamp duty in certain circumstances.

These numbers are for illustration purposes only and do not take into consideration your particular circumstance.


How it works …. Each investor contributes between $179,000 to $183,000

(depending upon the Unit selected) in order to fund the

initial costs including purchase of the land and

professional fees associated with council matters and site

preparation.

The bank provides construction funding to completion for

the balance.

Note: Funding has already been approved.

Each Investor will receive a Shareholding in the special

purpose company established to undertake the project.

The Shareholding is relative to the Unit (property) that is

being purchased. In lieu of a profit share dividend, they will

receive their Unit at the Nominated Cost Price as detailed

in the Information Memorandum.

NOTE: The only investment required will be the initial

Deposit and no further funds are required during the

project (e.g. interest on debt).

INVESTMENT ENTITY

A Proprietary Limited Company is created to facilitate the

purchase, development and borrowing of funds from the

Bank to finalise the project. The Project Manager will be

the Sole Director of this Company and will manage the

project to completion and settlement of the Units to each

Investor.

The offer document to participate will be governed by an

AFSL Licensee and all monies will be controlled by the

AFSL Licensee with additional oversight by an

independent Accounting Firm who will provide full

financial reporting, taxation services and all relevant ATO

lodgements for the development company to the

completion of the project.

Once the project is completed and the Units are

transferred to respective Investors; and all accounting and

taxation matters are finalised, the company will be

absolved.

BORROWING FUNDS FOR

DEVELOPMENT

The Development Company will borrow the balance to

complete the development via a major Bank. Interest will

be capitalised into the loan. Once the project is completed

and the the loan paid out, the Units will be transferred to

each investor.

POST SETTLEMENT

STRATEGIES

Following Settlement, your Unit will be transferred to your

chosen entity (stamp duty costs may apply).

The following Strategies can be employed:

1. Retain Unit #9 as an Investment and borrow the

balance. (E.g. unit #1: $275,000 cost price minus

$172,000 equity invested) = $103,000.

Property will be positively geared.

2. Retain Unit #9 as an Investment and borrow up to

77% of the retail end value calculated as 100% less your

23% discount i.e. $345,000 x 77% = $265,650. You would

avoid Lenders Mortgage Insurance and draw your original

$172,000 cash deposit back out.

Property will be either neutral or slightly negatively

geared. Note - you could borrow 80% and use the 3%

balance of 23% discount to pay for stamp duty and other

legal fees.

3. Sell the property off the plan via a local agent and

settle the same day you buyout. You would receive your

deposit of $172,000 plus manufactured equity estimated

at $81,650.

(Note: Stamp duty may be applicable when transferring

the property.)

This is not a formal offer. Hotspotcentral is seeking an expression of

interest from investors who have previously expressed interest in acquiring

property at developer’s cost price. The formal offer will be made subject to

a full information memorandum and FSF on request.


Location

56 HOOD ST, SHERWOOD 8.3 km from Brisbane CBD


WALK SCORE = 71/100

• 56 Hood Street has a Walk Score of 71 out of 100.

• This location is described by Walk Score as “Very Walkable” - most errands can be accomplished

on foot.

• 56 Hood Street is a 10 minute walk from the BRIP Brisbane City - Ipswich line, the BRSP Brisbane

City - Springfield line and the CAIP Caboolture line - Ipswich line at the Sherwood, platform 3 stop.


Transport

Transport/Roads: Sherwood Railway Station is

situated approximately 700 metres to the west

of 56 Hood St and is in close proximity to

shopping centres, recreational and educational

facilities.

An established retail precinct is located along

Sherwood Road 500 metres north-west of the

Units. Local bus services operate in close

proximity, particularly along Sherwood and

Oxley Roads.


Smart Score: 91%

Sherwood has a very high smart score which is made up of the following attributes that can impact

an area’s desirability and therefore capital growth potential based on demographic profile.

Sherwood therefore has a particularly strong demographic profile in terms of affordability as a factor

of income relative to rents and property prices.

30% of residents in Sherwood are renters, ensuring a ready rental pool for new apartments.

Attribute Weighting

Average level of income 42.9%

Percent teen parent 28.6%

Percent improvised housing 14.3%

Affordability 14.3%


Property Particulars

INTRODUCTION

The apartment block includes a total of 14 units

comprising 3 one bedroom units and 11 two

bedroom units. It also includes secure under

croft car parking and a lobby on the ground

level, plus four levels of residential units above

serviced by a single passenger Schindler's lift.

Each Unit on offer will also be provided with a

single car bay.

In addition to the standard inclusions below, it’s

worth mentioning these apartments will also

include:

• European Appliances – ceramic cooktop,

oven, slide out range hood, dishwasher.

• Blinds.

• Ducted Air Con.

• Elevator.

• Good size bedrooms for all 3 Units being 3.0

x 3.2 m with inbuilt wardrobes.

• Reconstituted Stone Kitchen Bench tops –

Caesar stone.

• This is in addition to standard inclusions

such as TV/Foxtel points, carpet, towel rails

and more.

The apartments are currently under

construction by one of our preferred builders;

the multi-award winning Rawcorp Pty Ltd.

On completion, the apartments are turnkey and

include everything your tenants require to move

in on completion. They will present very well

and have a high level of finishes including

Caesar stone kitchen & bathroom bench-tops,

stainless steel kitchen appliances including

dishwasher, and with downlighting throughout.


TYPICAL FLOOR LAYOUT

Unit 1 example


PRICE LIST


Extract from Savills Valuation dated December 2015

RENT APPRAISAL

Units 1, 5 and 9 approximately $350/pw to $380/pw


Rental yields increase from 4.6% to 6.9% for developer investors purchasing a unit at a discount

of around $80,000.

Brisbane Property Market WHAT THE EXPERTS SAY

“Brisbane has had the highest average annual

house price growth across the country’s capital

cities since 1970 at 11% per year” … “Brisbane’s

prices have improved by an annual average of

13.6% since 2000, while Sydney’s annual

average has been 10% during that time.”

Terry Ryder

"Similar market dynamics to

Sydney will drive a 14 per cent

surge in Brisbane house prices

over the next two years to June

2017, but outside of these two markets the

outlook is much weaker". BIS Shrapnel


A CAUTIONARY TALE!

When quoting the forecasts for Brisbane of the

mainstream media commentators it’s important to

remember that forecasts refer to the average

expectation across a very large market and ignore the

many micro markets that exist.

If the average for Brisbane is 5.7% or Sydney 4.3% in

2016 this means there are suburbs within these markets

that will do much worse and others that will perform

much better than these averages.

To this end there are locations that will perform much

better than Sherwood in just about any major city around

Australia and beyond.

The armchair developer strategy is about seeking the

optimum mix between a location that will sustain good

future capital growth and purchasing the right property

at a substantial and proven discount to market value.

This combination just about trumps any purchasing

strategy in terms of the returns on cash invested and the

amount of time and effort expended to achieve these

results.

I’d rather not overpay for a property in a great location

nor get a genuine discount for a property in a poor

location. Hotspotcentral’s Armchair Developer Program

combines the use of our proprietary location picking

technology (DSR BoomScore™) and the Property

Selection Index that examines over 100 capital growth

indicators seeking to get a balance between the

statistics, fundamentals and the property’s attributes.

- Michael Fuller -

"Brisbane (6.4%) is expected to lead the market in

the next year ..."

NAB Quarterly Review

In the three months to January 31, 2016 dwelling values across

Australia’s combined capital cities fell 0.6%, the latest

CoreLogic RP Data Hedonic Home Value Index shows.

Brisbane (0.8%), Perth (1.7%) and Hobart (3%) were the only

capitals to record positive growth for the quarter.

Property AnalysisPOSITIVELY GEARED

AFTER RETRIEVING

ORIGINAL INVESTMENT

For the majority of investors (depending on

income tax rate), after retrieval of initial sum

invested at settlement, these apartments

should be positively geared.

The 23% discount could serve as a 20% holding

deposit. A 20% holding deposit helps ensure

valuations are upheld and saves lenders

mortgage insurance. The remaining 3% could

be used to offset transaction costs including

legal fees and stamp duty tax.


Market value at 4.6% p.a. vs Loan

Who pays for the property?

Snapshot Year 1 Year 3 Year 5 Year 10

Cash flow p/a (pre-tax)

$724 $1,624 $2,580 $5,232

Cash flow p/a (after-tax) $4,156 $3,244 $3,476 $4,776

Gross yield 6.79% 7.21% 7.65% 8.87%

Net yield 5.30% 5.62% 5.96% 6.91%

Total returns (cash & growth) $14,074 $45,602 $81,960 $196,809

CASH FLOW SUMMARY OVER 1O YEARS

Show all years (0–10) Today Year 1 Year 3 Year 5 Year 10

Capital growth rate % 5 5 5 5 5

Consumer price index % 3 3 3 3 3

Property market value $ 345,000 362,250 399,381 440,317 561,969

Amount of loan $ 281,349 281,349 281,349 281,349 281,349

Statistics

Equity in property $ 63,651 80,901 118,032 158,968 280,620

Loan to value ratio % 81.55 77.67 70.45 63.9 50.06

Surplus equity to reinvest $ 5,349 8,451 38,156 70,905 168,226

Buying power $ 26,745 42,255 190,778 354,524 841,130

Rental income $ 365pw 18,980 20,136 21,362 24,765

Gross yield % 6.79 7.21 7.65 8.87

Net yield % 5.3 5.62 5.96 6.91

Cash deductions

Property expenses $ 0.00% 4,188 4,443 4,714 5,465

Loan 1

Interest rate % 5 5 5 5 5

Interest payments $ 0 14,067 14,067 14,067 14,067

Principal payments $ 0 0 0 0

Pre-tax cash flow p/a $ 724 1,625 2,581 5,232

Pre-tax cash flow p/w $ 14 31 50 101

Non-cash deductions

Depreciation $ 9,000 6,000 5,000 4,000

Summary

Total deductions $ 28,256 24,511 23,782 23,532

Net profit/loss $ 9,276 4,375 2,419 1,232

Tax refund $ 3,432 1,619 895 456

Land Tax 0 0 0 0

After tax cash flow p/a $ 4,156 3,244 3,476 4,776

After tax cash flow p/w $ 80 62 67 92


Investment highlights

✦ Invest in an inner-ring Brisbane CBD location.

✦ Save 23% on valuation immediately.

✦ Potentially cash flow positive from day one … after retrieval of initial deposit.

✦ Short project timeframe as building has already commenced.

✦ Most risks in development occur prior to building commencement.

✦ High annualised cash on cash return of 55.3%.

✦ Small apartment block of only 14 (highest demand with lowest supply).

✦ Numerous above-standard fixtures, fittings and finishes.

✦ Most apartments already sold.

✦ Conservative Savills commercial valuations supporting end prices.

✦ Investor can recycle investment into next project … and repeat.

✦ Close to transport.

✦ Location has smart score of 91% meaning solid demographic profile supporting future capital

gains and rental increases.

✦ Rental yields jump from Brisbane average of 3.9% to 6.9% on cost.

✦ High Walk Score of 71% meaning very attractive to tenants and owner-occupiers alike.

✦ 83% score on PSI measured against over 100 investment criteria suggest this investment

should perform relatively very well … while costing the investor nothing to hold.

✦ Capital growth score (DSR BoomScore™) measured across 8 capital growth indicators is

trending upwards meaning demand is beginning to outpace supply in this particular location.

✦ Developer has a strong reputation with lenders.

✦ Major multi-award winning builder with solid financials.

✦ Functional floor plans with larger than average bedroom.

✦ Not available on internet and exclusive only to Hotspotcentral subscribers.

✦ Offered within an ASIC prescribed structure for added protection.


How to Invest

Please understand that we get a huge response to these offers and they are always oversubscribed.

To give qualified investors a chance we ask that you only request the documentation if you qualify

financially for this offer.

If you qualify we will gladly spend a lot of time helping you make an informed decision. You will find

us and our partners very transparent with all the information.

To obtain a copy of the offers documents, please contact

[email protected]

OR

call 1300 200 340

Shares/Properties will be allocated on a first-in, best dressed basis, with priority given to existing

Hotspotcentral clients.


Documents

Report - Hotspotcentral Hood S… · STATISTICAL INDICATORS 5 FUNDAMENTAL INDICATORS 5 Project & property attributes 5 WHOLESALE VERSUS RETAIL 7 HOW IT WORKS É. 8 Investment Entity