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Property Investment Report

578 SHERWOOD ROAD, SHERWOOD QLD

Redwerks Pty Ltd PO Box 2068 Burleigh Waters QLD 2068

P: +61 1300 200 340

E: [email protected]

www.hotspotcentral.com.au/armchair-developer

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

578 Sherwood RD, Sherwood 9

walk score = 78/100 10

SMART SCORE: 91% 11

PROPERTY PARTICULARS 12

introduction 12

floor layout 13

Price list 14

rent appraisal 15

BRISBANE PROPERTY MARKET 16

what the experts say 16

PROPERTY ANALYSIS 17

positively geared after retrieving original investment 17

LOCAL COMMENTARY 19

what the LOCALS say 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 12

Required deposit by investor $205,000

Armchair developer fixed cost price $366,600

Independent valuation (as if complete today) $470,000

Estimated equity gain $103,400

Cash on cash return 50%

Discount to market value 22%

WELCOME MESSAGE

Hotspotcentral is proud to offer a 2 bed ,2 bath,

1 car apartment at developer’s cost price in a

boutique block of only 28 apartments.

Wholesale offers in this project sold out 6

months ago. The release of only one apartment

this late in the process means one investor can

benefit from all the work that has already been

done.

It is estimated investors will save 22% on

today’s market value as evidenced by a

comparable Savills commercial valuation.

Exclusive to Hotspotcentral investors only, this

is a prime opportunity to co-develop 28

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.

The estimated net profit per investor reflects a

22% discount to bank valuation “as if complete

today” with an estimated 50% return on cash

invested over 12 months.

This offer is unique in that the developer is

seeking to extract some equity from his own

project which has been under way for some

time. Construction starts in March 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 landing at settlement..

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 22% 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.

DATA TRENDS PASS

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

elements measured - correct at March 2016

• DSR BoomScore has increased from 20 to 27

in 12 months: solid capital growth potential

• Vendor discounts halved in 12 months (7% to

4%): sellers getting their asking prices.

• Average days a unit takes to sell in Sherwood

has halved in 12 months: demand is strong.

RIPPLE EFFECT POTENTIAL STRONG

Surrounded by more expensive neighbourhoods with

similar lifestyle amenities: prices should pass on to

Sherwood as buyers get priced out of more expensive

neighbouring suburbs.

AFFORDABILITY RATIO™ PASS

The ratio of median price to median household income

should not be more than the average multiple for similar

surrounding suburbs and better for the broader Brisbane

and QLD market.

MARKET 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 particularly when the

stats improve as they have recently.

TRADING VOLUME STRONG

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: better for capital growth.

UNEMPLOYMENT RATE STRONG

Unemployment is low in Sherwood and surrounds 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).

PROJECT & PROPERTY

ATTRIBUTES

WALK SCORE™ 78/100 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 EXCELLENT

The block is very small at only 28 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. See Cameron Kushers comments below.

Notable inclusions: Ducted air-conditioning, stone bench

tops.

CONFIGURATION GOOD

Two bedders are perfect for the target market this close to

a university and the CBD including young professionals

couples, small families and older downsizers.

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].” like 578 Sherwood Rd

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 retail prices.

Note how rental yields on cost increase

significantly while the armchair developer

realises a total difference in costs of $149.900

by removing many of the retail costs.

Purchasing the same property at full market

rates would cost the retail buyer -$34,940 in

stamp duty and other indirect purchase costs

(like lender mortgage insurance and additional

interest on mortgage borrowings).

ROI SNAPSHOT Unit#12

Armchair Developer

Retail off-the-plan buyer

Cost of property $336,600 $336,600

+ developers profit margin of 23% $0 $103,400

+ off-plan selling costs (average 6%) $0 $28,200

Purchase Price $366,600 $498,200

+ stamp duty* $16,640 $16,640

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

Total Purchase Price $383,240 $533,140

Profit or loss on purchase + $114,960 -$34,940

Gross rental yield 6.1% 4.75%

20% Deposit (avoid lenders mortgage insurance) $0 $99,640

Total Difference in Price and Costs $149,900 $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 …. The investor contributes between $205,000 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.

You 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 plus Hotspotcentral’s fee: 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 the Unit as an Investment and borrow the

balance. (E.g. unit #12: $366,600 minus $205,000) =

$161,600

Property will be positively geared.

2. Retain the Unit and use most of your 22% discount to

borrow up to 80% (no Lenders Mortgage Insurance) of

the value and hence drawing your cash deposit back

out; ($470,000 x 80% = $376,000). Property will be

either neutral or slightly negatively geared.

Remaining 2% of 22% profit margin could fund

settlement costs incl. stamp duty.

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

settle the same day you buyout. You would receive

your deposit of $205,000 plus manufactured equity

estimated at $103,400 less costs.

Important: These figures are entirely for illustration purposes and do not

take into consideration your personal circumstances. You should get

personal advice if necessary. 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

FSG provided on request should you wish to review the formal offer.


Location

578 SHERWOOD RD,

SHERWOOD 8.3 km from Brisbane CBD


WALK SCORE = 78/100

• Tenants have everything they need on their doorstep.

• Easy drive to the CBD

• Multiple transport routes and times to suit all commuters.

• Bus stops and train station minutes away

"One point increase in Walk Score was associated with

between a $700 and $3,000 increase in home values."

Joe Cortright, Impresa, Inc. (2009) Walking the Walk, CEOs for Cities


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 28 units

comprising 3 one bedroom units , 20 two

bedroom units and 5 two bed units with MPR.

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.

• Stone Kitchen Bench tops

• This is in addition to standard inclusions

such as TV/Foxtel points, carpet, towel rails

and more.

.

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 Stone

kitchen & bathroom bench-tops, stainless steel

kitchen appliances including dishwasher, and

with downlighting throughout.


FLOOR LAYOUT Unit 12


PRICE LIST

The retail price for this unit is in the dominant price range for properties in that area meaning there

are more sales at this price point. An important consideration for factoring in to your exit strategy.

The 22% discount to market valuation means rental yields on cost would also increase due to

wholesale investors paying $366,600 versus $470,000.


ROI SNAPSHOT Unit 12

Required deposit by investor $205,000

Armchair developer fixed cost price $366,600

Independent valuation (as if complete today) $470,000

Estimated equity gain $103,400

Cash on cash return 50%

Discount to market value 22%

RENT APPRAISAL

This has been ordered.

Rental yield appraisals for a 2bed, 2bath in a project by this developer up the road is estimated at

about $430/pw


Gross rental yields increase from gross 4.75% for retail buyers of the same apartment to 6.1%

for developer investors purchasing a unit at a discount of around $100,000.

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

This cashflow forecast is not specific to any

one investor but the general result would be a

$48/pw net profit after you have retrieved your

initial cash investment in the first year.


Local Commentary WHAT THE LOCALS SAY


Investment highlights

✦ Invest in an middle-ring Brisbane location.

✦ Save 22% on valuation immediately.

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

✦ Short project timeframe as building starts in weeks (March 2016).

✦ Most risks in development occur prior to building commencement.

✦ High annualised cash on cash return of 50%.

✦ Small low-rise apartment block of only 28 (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 on cost of 6.1% compare favourably to Brisbane average of 3.9%.

✦ High Walk Score of 78% 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.

✦ Major multi-award winning builder with solid financials.

✦ Functional floor plans with larger than average bedrooms.

✦ 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 i.e. have access to $216,000 in cash including fees

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

Allocation will be based on a first-in, best dressed basis.


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