The resources boom is a huge opportunity for property investors: Robert Projeski

The property outlook for 2013 is looking very positive for seasoned investors to further their success, with some areas offering great opportunities to piggyback the demand for housing brought about by the resources boom.

Liquidity is now present and interest rates are at their lowest level in years, and may fall even further.  

These conditions present a huge opportunity for people with the financial insulation and capability required to capitalise and take advantage of areas which have a booming mining industry nearby.  

Undoubtedly, it is vitally important to do your research, and do it properly. There are obviously different types of mining areas you need to consider: large, well-established regions, or smaller, isolated communities.

The questions to ask yourself before investing in booming mining regions include:

·         How many mines or companies are investing in the area?

·         What stage of development is the mine?

·         What is the mine's expected lifespan?

·         What is the location’s current and expected population?

·         Is there likely to be more growth?

·         Are there more jobs being created?  

All investments have an element of risk. Firstly, let’s have a top line look at different types of areas and their level of risk. From this information you can categorise the area suited to your risk profile.  

The higher risk options are the mining towns, where the economy relies solely on mining projects. There will often only be one mining company in the area. These areas are seeing extremely good returns with high rents and good occupancy due to the requirement for staff, on-site personnel, and fly-in-fly-out workers. If you can source a property and are willing to take the risk this could pay off substantially.  

If you think you’ll lose too much sleep and be worried about the lifespan of these areas, you may be more suited to areas which are a lot larger and often have multiple companies and types of resources. As examples coal, iron ore, natural gas and the buzzword at the moment, coal-seam gas.

Lastly, this is what you would call the low risk category for these types of investment areas which don’t have a sole dependency on the mining industry. Although there is still a strong mining presence in the region, which are being built for the longer term but they also have a strong local economy. There are some great areas that fit this bill.  

Gather all the information you can and investigate what stage of the project's lifespan the mining investment is at.

You really need to understand what is in front of you if you make this investment choice. Will the benefits for your property not only be in the short-term but mid- to long-term also? Remember, past performance is not necessarily an indicator of future growth and ensure that you understand the data being used and that is not skewed as a result of distortions in that market.  

The key to success in this instance is to do as much well-thought-out research as you can and it is also a good idea to calculate some ‘what if’ scenarios on the local economy from your investigations.

Robert Projeski is a leading property finance expert and the founder and managing director of Australian Mortgage Options. He has appeared on radio and TV and written extensively on property and finance matters.