Dear investors,
My fiancee and I have a contract upon a property in Invercargill, NZ. It is conditional upon a builders report, and following the report, several things have come to light that are making us wary.
However, the cashflow is good for the property, and we would welcome opinions as to whether we should proceed with the purchase and thus choose to deal with and fund the repairs.
Details as follows:
purchase price $79,500
deposit 10%
rent per week (current tenant) $180urgent expenditure needed:
new fire $3,000
re-roofing $9,000Thank you for advice and opinion.
Warmest regards,
Brad Barr and Rayna Brown
Hi Brad and Rayna,
I’ve had building reports done in NZ – not many but my advice would be:
– either get another report from another builder
– check with the builder whether these repairs are urgent or can be done in 2 years time.
– show the building report to the vendor, telling them that with these kind of repairs, its unlikely that they’ll get a purchaser (a roof restoration is a major repair) and that you’ll be happy to purchase the property if they’ll leave some money in the deal. Either they vendor finance part of it, or they drop the price by $10k – you can negotiate this.Make sure you do everything before your du-diligence time-frame is up.
I don’t find this to be an attractive deal – not very +CF in my opinion but be creative in your deals and anything is possible. Don’t worry if it falls through – there are better deals around.
Hope this helps…
Kind Regards,
George.I’ve found a way to help you save and earn whilst not selling or delivering any product. If interested, drop me an email or PM me to find out how
Hi Brad
You need to be careful in Invercargill at the moment, rents have actually dropped in the past 4 months and unlike 6 months ago when the city had no vacant properties today the market, while still good, will not command the same rental as before. You MUST get a independant rental assessment on the property to assertain if in todays market the property is a $180pw home, many homes have dropped by $10-15 dollars. It is possible that this tenant let the home when rents were higher.
As one property manager said to me on Friday the market is still good just not as good. If the home is cold and over priced it will remain vacant in todays rental market in Invercargill. Properties are still moving but as said not if overpriced or inadequate heating.
You should be able to buy homes today in Invercargill that will rent easily, that need no major work showing at least 10.5% return.
I agree with Geo this deaol isn’t that great especially with the builders report, try for a 10K off or walk from the deal. If you want me to give you some feedback on the street/area just ask as i know this city well. I go to Invercargill often and will be there tomorrow.Regards westan
I live in New Zealand and for a fee find cash positive deals there, email me at [email protected] to join our database
Hi there,
I agree with westan and geo.
only you will know if 79500 minus whatever you an negotiate, plus grief, time, on an 11 percent yield return is worth it.
How likely is it that you could find a similar property at a similar price without anything needing doing? (hopefully if you have looked around you will kind of have an idea of what’s on the market)
will you make money or lose money solving the problem?
think about things like chances of capital gains, rental demand, town, street, etc and weigh it up.
Personally I would say “i’ll go unconditional at 63k”. That way you get a house still for 79500 all up, but with a new roof and a new fireplace, more chance of a tenant and long term viability, and 4k for the downtime/grief of organising it.
if the vendor says yes, go for it. You’ve built yourself in some safety, plus like I said you can probably get a new roof for less than 9k.
If the vendor says no, then think about it some more and figure out if you can go up a bit. I.e. you might decide that at 67K or whatever (less the estimated price of repairs) it is still a good deal. then go for it. But don’t be scared to write off the cost of the builder’s report (negligible in the long term) and walk away.
cheers-
Minijoy to the world
Thanks to Geo, Westan and MiniMogul for the great advice. We have taken it on board, and today we contacted the agent and put in a much lower offer that will give us a buffer against the costs if the deal goes ahead.
We don’t think the vendor will accept the offer, but that is OK, as we are now quite prepared to walk away from the deal.
Again, thanks for advice
Brad and Ray
wicked!!!
I went through the ‘walk away’ process on my first potential purchase after a dog of a builder’s report. it was a more expensive property so my expectiation of what I should get for my money was higher. My second two properties also had dogs of builder’s reports but they cost about 30K each less than the one I walked away from with almost just as much rental income. I spent about 9k on one and 14k on the other and ended up with two completely redecorated properties, both with new fireplaces, both fully maintained (as much as any landlord ever can!) and one with a new bathroom. of course the value went up should I ever decide to sell, the places look fabulous, and tenants love them because they are always tenanted.
but the reason I went ahead with the second two but not the first one is that with the cheaper properties I wasn’t expecting them to be that flash (they weren’t) and I was prepared to fix the problems if I could get them at the right price. That’s all it comes down to really and even vendors and agents can understand that. so you don’t need to be apologetic about the discount you require. if the vendor says no they say no, walk away. however my tip when trying to get a sizeable discount after finding ‘issues’ is to mention the word ‘unconditional’. I mean don’t negotiate unless you know you would be prepared to go unconditional. then the old ‘bird in the hand is worth two in the bush’ applies and the vendor could decide, how long would it take them to find another buyer who would give them 5, 8k more or whatever, and here they have a buyer in the hand who is prepared to go for it despite the defects, i think they will go for it or at least meet you somewhere halfway. and if you know ahead of time what your cut-off price is to walk away or to proceed, it’s simple.
Good luck with it and keep us posted ok!!
cheers-
Minijoy to the world
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