Can you really get a double-digit rental return in Queensland's Mount Morgan?

Some would assume that a mining town may top the lists of high yielding areas. However, this isn't always the case.

Miles, at 11.17% return, is the highest yielding area in Queensland and is a mining town.

However, offering a 10.35% gross rental yield, according to RP Data, with a median house price of $106,000 and weekly median advertised rent of $210, Mount Morgan is Queensland’s second highest yielding area for houses. In fact, with Miles, it’s the strongest yielding by far for Queensland’s house statistics – followed by 8.79% for Charleville, another remarkably low-priced location.

A double figure rental yield on a low price point undoubtedly makes many investors’ ears prick up, as does its 0.8% vacancy rate, according to SQM Research.

But why does Mount Morgan seem to offer such strong returns? And should you be rushing to put it on your cash flow radar?

The tiny town in central Queensland is approximately 40 kilometres south of Rockhampton with 2,115 people at the 2011 Census, and 1,078 private dwellings.

In the 1800s it was a gold mining town, but today the regional area is a little different.

The employment base is split; 18.7% are labourers; 17.2% community and personal service workers; 15.2% technicians and trades workers; 12.1% machinery operators and drivers; and 10.7% clerical and administrative workers. The rest of the town’s workforce includes managers, professionals and sales workers.

There is a 14% unemployment rate and 53.7% of residents work full-time.

The median age is 46 years and there are higher numbers of those in the older age brackets.

There is an interesting mix of properties currently on the market.

A house at 3 Little James Street is currently on the market for $135,000. The three bedroom, one bathroom home rents at $170 per week, or around 6.55% yield. To get to our headlining figure, rent would need to be almost $100 more per week.

Another is on the market at $155,000, rented at $175 per week, and has been advertised as rented “lower than market value”.

The highest price opportunity is $749,000 49 James Street (pictured above). For the price of a house somewhere in Brisbane’s inner suburbs, you can buy eight strata titled units.

It’s advertised offering $61,000 return per annum. That’s a substantial return – grossing 8.14% according to our calculations – but still not quite at the 10% plus noted.

Properties can be as cheap as a $60,000 doer-upper at 90 Darcy Street. Blocks of vacant land are available, though not particularly helpful in calculating rental yields.

Looking at sales over the past six months, many have fallen under the $150,000 bracket, including around the $50,000 mark. These sales regularly include “detonators” – homes that need to be knocked down and rebuilt, or completely remodelled, to be habitable. This suggests that while the sales would have been recorded as figures for houses, they were actually recording cut-price homes wanted for their land component only. Unsurprisingly, this can be expected to skew the median price south.

One property’s historical listings details note that while there is a house-like shack on the property, it was sold for “land price only”.

Perhaps this is why the rental yield is recorded so high.

This seems to be backed up when looking at rental listings, which show strong rent prices achievable on well-priced properties, like the three bedroom, one bathroom home on a quarter acre block on 25 Gordon Street. It’s asking $275 per week.

However, while this home is achieving more than the area’s suggested indicative rent, it also sold for more. Last year in September, it transacted for $205,000. This puts the rental yield at 6.98%, if this rent is achieved - not a figure to be sniffed at, but not quite our headlining figure.

Strong yields are available in Mount Morgan, usually around the 6% to 7% mark, but getting to double figures remains elusive.

Tomorrow, we'll look closely at our number one suburb, the mining town of Miles to find out whether being in a strong resources town can actually produce double figure rental yields.