First Successful Real Estate Deal

Hi Everyone

Im excited to have learned Steve’s techniques and already finding a few positive cashflow properties in my searches

I want to contribute so Im posting details of my first successful deal so far

Back in june 04 a family friend informed us of a duplex 2 bedroom property next to hers that was being sold due to the death of the owner

It was in balga, WA, so in an area that some might consider less than desirable (but its improving a fair bit now )

The duplex was selling for between 109,000-119,000, and it was fairly ugly. All genuine 60s decor, like the mouse-crap infested kitchen cabinets, the hideously ugly, mouse-crap infested shelves, and the udly bathroom with a mould ridden wall, leaking shower ( into the walls ) and just dirty walls and cracked ceilings. Did I mention mouse-crap in every shelf and space

The previous potential buyer took out a building report, and the report came in at about $10,000 for the fixup costs. About the only good thing about the place was that it had new lino floors put in everywhere.

The duplex was on a 375 m2 block and in a good street in balga. It was about 1min walk to the shops, doctor surgery, and 15m to the bus stop. 15min from the perth CBD, so a quite good location

Perth is actually the cheapest average housing price city in australia, ( I found out in my research ) and I found out that Perth was apparently the 2nd fastest growing city. This information, plus the capital growth statistics for the suburb of balga ( thanks to reiwa.com.au ) mentioned that it moved up 19.7% or so from the 5 yr period of 98-03

I remembered about the whole thing about knowing comp prices, so I found out two renovated duplexes like mine were sold in Jan 04 at about $120,000 each. I was hemming and hawing but finally I jumped in and bought at the lowest offer of $109,000

After putting $1,000 deposit down, I tried to extend closing date by two weeks and was successful. At the time my finance was approved, and I was quite lucky as it was an all cash job and I only provided a letter of employment

For a couple of months I didnt do much work to the property, but eventually with family help we started to do bit by bit. We had to paint all the walls and ceilling, fix up the cracks, and get a tiler to completely renovate the bathroom. I bought a 2nd hand kitchen ( mistake ) for $2,500, and had a renovator install it for a few thousand. I was quite lucky in that I found a brand new electric oven, and had a cheap reno guy at $35 an hr. The bathroom cost me just over $2,000 to do up, and the kitchen about $4,000-$6,000. We used paint was lying about, and most materials we tried to get second hand or on discount or sale.

To cut a long one short, the property is now worth around the $180,000 mark so we did qutie nicely with an approx. $70,000 increase in value with about $10,000 worth of work

The prices have shot up in that timespace anyway but the reno’s helped a lot

To summarize I learnt a whole ton of lessons I could not from books, including:-

NEVER get emotional about putting a low offer in. My mum started with $114,000, until I changed it to $109,000 by NOT worrying about what the agent would think ( A $5,000 waste of money! )

Get others to renovate for you, and focus on either managing the project or getting other deals

Look at comps, and research data to get a good idea of the return

Joint-venture if you dont have the equity or money etc. I only put down $300 of the $1000 deposit and got access to security via the joint venture

And play cashflow 101 and 202 to cement in steve’s positive cashflow philosophy

Also, a great source of building materials and various furnishings is the classifieds, and building salvage shops. I bought a whole set of vertical blinds for under $100 for example

Try and get good deals with tradespeople by paying cash and working with people you know, try not to pay retail as you will pay a lot more

With Steve’s methods I’ve already found some deals with about 50-70 per wk cashflow, but in very small towns. Anyone have any advice on these sort of investments? One of them has a 12 mth tenant lease, but im not sure about the possible vacancy problem

What the mainstream media don’t cover
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