Hi guys, I’ve got this scenario and would like people’s opinion on it.
Have this property in WA (I’m in victoria) since April last year. Its in a small mining town. The agent is terrible doesn’t communicate and there’s no other agency there to go to. We have had one tenant who skipped out on a 6 month lease. Its been empty over 4 months (not long I know) . potential tenant but they offered $10 /week less and offered to upkeep the property for us and clean it up as the last tenant left in a mess.The CoCR at the original rent was 7.5% (taking into account that we’ve borrowed the deposit and purchasing costs off our home loan) or 13.7% (if we do not consider the interest for the money down). We did not cross collaterialise. If we accept this offer then the values go down to 4.5% and 10.7% respectively. We were thinking that because this is a 6 month lease, to increase the rent by $5 and then apon renewal another $5.
I’m not sure whether to sell the property now and if I get the price I’m asking for will get around 11.5% CoCR. Should I stick with it for another 12 months and see what happens?
Your experience and advice would be greatly appreciated.
Vanessa
Hi Vanessa,
Originally posted by vpas:Have this property in WA (I’m in victoria) since April last year. Its in a small mining town. The agent is terrible doesn’t communicate and there’s no other agency there to go to.
This is one of the problems with small town investments – one agent and a limited potential tenant base. That is why I prefer to invest in larger cities with the ‘security’ of many tenats and many employment fields.
We have had one tenant who skipped out on a 6 month lease. Its been empty over 4 months (not long I know) . potential tenant but they offered $10 /week less and offered to upkeep the property for us and clean it up as the last tenant left in a mess.
Sorry, but four months is a long time.
For me $10 less/week and the offer given is much better than no income whatsoever. Of course just because the tenant offers to clean up doesn’t necessarily mean they will but it is better than no tenant whatsoever.
If we accept this offer then the values go down to 4.5% and 10.7% respectively. We were thinking that because this is a 6 month lease, to increase the rent by $5 and then apon renewal another $5.
CCOR with some money is better than the CCOR on no money so to me this is a no brainer take the agreement while it is on the table.
By ll means you can try to increase the rent by $5/week but in essence over the course of the year this will only total $260/annum (less tax). This is really small fry stuff and there are bigger fish to be caught.
I’m not sure whether to sell the property now and if I get the price I’m asking for will get around 11.5% CoCR. Should I stick with it for another 12 months and see what happens?
You need to go back to the original reason for buying this property. If the reasons remain the same and the property is delivering teh goods in accordance with the goal then retain it. If on the other hand it is not delivering the goods then get out when you can. Small, single industry towns are problematic as investments.
Your experience and advice would be greatly appreciated.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958Derek has some great input there!!!
Heres another idea!!!… or 2
Lets say the property is renting for $175.00/week.
Your so called agent is raking (or was in this case) say $18/week + initial fee of 2 weeks to get someone in there.
That is $1286/ annum for someone to do the job for you.
How about offering an incentive plan to your tennants you could:
Ask them what they would like done to the property (additions or repairs). and in return for making sure hte payments are in your bank ontime every week…. you will reward them with that upgrade.
Or you could find out what things the tennants like to do and offer to give a rewards bonus program for paying the rent on time…. dinner tickets, movies passes, adventure trips … anything … as you have $1286 of play money to self manage it.
hope it goes well for you.
Cheers
Kiwi[baaa]Originally posted by vpas:Have this property in WA (I’m in victoria) since April last year. Its in a small mining town. The agent is terrible doesn’t communicate and there’s no other agency there to go to. We have had one tenant who skipped out on a 6 month lease. Its been empty over 4 months (not long I know) .
Hi Vanessa,
I am certainly not putting more boots in when you are down but this property has been vacant for ~50% of the time that you have owned it.
I hope this reality check helps in your decision making.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Vanessa,
4 months..!! That is a VERY long time.
I am anxious when 4 days have past on a vacant property. I would take the offer. The potential tenant appears committed, allow them to make it their “home” and also I like the idea of rewarding tenants.
Some income is better than no income and it would appear you have little opportunity to improve your prospects of sourcing tenants.
Good luck
Jeff Aquilina
Need a holiday? http://www.coralsearesort.com email me [email protected] 20% DISCOUNT for PropertyInvesting.com members
Hi Vanessa
Have you considered leasing it out, with an option for the tenants to buy 12-24 mths down the track?
Or, even wrapping it?
Just thinking of some alternatives other than selling…..Cheers,
Jacque
http://www.housesearchaustralia.com.au
Totally Independent Buyers Agents- Sydneyhttp://www.invested.com.au Australia’s premier Investor Education site
Thanks for the advice people. Particularly Derek. Yes its been very problematic with the agent in particular. I think that is the biggest problem. We will definately agree to put the tenant in and re-evaluate the situation. We are doing wrapping in Victoria as well as the buy and hold strategy. We currently need to free up some money and selling this would be an option to start another wrap which would be more profitable in the short term as a way to increase our available capital. So I’m very close to putting it on the market and see how it goes. I think it will sell well with a tenant already in place.
Vanessa
I think Kiwi is on the right track with self manage. You would eliminate the biggest problem in the equation then… the real estate agent, as well as increasing your figures.
Something else to think about….
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