Purchasing an investment property in a mining town may produce a high rental return, however there are certain risks involved.
With the resources boom, companies that are focused on mining exploration are expanding into new areas.
As a result there are pockets of the country where mining companies are looking to secure accommodation for their employees and are happy to pay handsomely for a quick solution. So there are some investors that are scoring huge rental returns as a consequence. However, just because an opportunity exists for large rental returns, doesn't guarantee that everthing else will stack up.
Indeed, when it comes to borrowing money to purchase an investment property delivering these huge returns, potentially some lenders and the mortgage insurers may be concerned as the strength of the community and demand for housing exists simply based on one industry and potentially, even one company. In addition, for small mining towns there may be a lack of recent comparable sales to support your purchase price. Lenders will want to see that there are other similar properties to yours that have sold within the last 3-6 months for similar amounts.
If you are “ahead of your time” those comparable sales may not yet exist. This is not to say that all mining towns represent high risk to lenders. Well-established mining areas that are not reliant on a single employer for their existence are acceptable locations for many lenders. You do need to shop around as different lenders will have different appetites for lending in remote locations.