Am looking into an investment property that when searching extensively ticked all the boxes as a good ibuy below $200K interstate from me. The price is right in my pre approved loan zone.
My research leads me to see the areas potential high growth due to rising population and planned infratructure looks good. Media and local council research confirms this. Is currently rented at 6% yield with current renter wanting to stay on for atleast another year. This rent figure is above the areas median figure for this size property. 980sqm block proposes a potential sub div, this was not ruled out by council town planner. Areas min block size is 300sqm. But told, with block being a small frontage fanned shape, I would have to pay private planner for full confermation.
Price seemed too good in comparison to nearby sellers and recently sold in same catergory. Especially with the locked in high rental yield for a residental property.
Agent has been surprisingly transperant in mentioning that there is considerable structural damage.Thus this explains why asking price is low.
One major back wall in overly unstable. Considerable rising damp in 1 bedr and in bathroom that needs total re-tile.
Agent calculates the repairs as worth $30K. Property is about $40K – $55K under priced I reckon.I already have 2 invest properties already but never renoed. Would take on a cosmetic job but this seems a bit more than that. This price could be bargained maybe more due to the repairs needed. So does it look a big earner or a potential fizzer?
Downside being ;
-that the structural repairs are essential and wont add any aesthetic value, thus no real visable yield and growth value as compared to another property that can be sparkled up and priced up.
-the renter may deciede to leave and I'll be left with a having to drop rent and/or legally have to do the work to get another renter.
-costs could blow out beyond $30K.
-the obvious prior build and pest inspect in going to have the bank say no way anyway. Thus fee is money thrown away.
-I am not a builder and live interstate.
The upside seems pretty obvious if;- I can bargain down to a good price.
– retain the good renter.
– the fix is done easily and on quote.
– sub div is doable into 3 dwellings eventually after growth gives the $'s.At the end of the day it is my risk, but does anyone have an opinion on past structual repairs experience or building smarts that can help me in my decision. Before I look into getting quotes, is $30K a accurate figure for these type of repairs?
And can anyone give me good bargaining stratergies to use for getting the best price.Leave it alone and keep searching for a less complicated buy with less return, or dive in with minimal knowledge in renos and gamble a bigger reward?…..This is the question!
Hi
personally I wouldnt touch this, too complex and remote. The clincher for me is being interstate. Its hard enough to pull a significant reno together when you can be on site every day or every few days. Many other opportunities are out there.
PS: I am a conservative old fart and my opinion should be viewed in that light
Thanx Yarpos,
I may have a build and pest report to check the severity of damage and extent /quote of work needed.I live in QLD and yes the distance is of concern but my reasoning is that close to where I live is beyond my price range for what banks are preparred to lend. Claculated on cash flow and equity thats appox $180K with a $200 p/w rental return.
The 1st property is brand new, tax depreciated blue chipish, high growth (hopefully) and neg geared. The leverage for this next one is being created by #2 , a cheap total outright owned W.A. mining town house pos geared with $100 week rent.
Feel #2 is idle $ that could be used for another venture.This cheaper residential one became interesting due to the want to diversify the portfolio away from another cheap mining town again if possible to keep all eggs out of one basket.
So there is one blue chip, one cheap mining, one cheap residential. Then sit and wait for growth before diving in again.If anyone is aware of any area with buys in the $180K price and $200 p/w rental return range pls speak up.
Maybe mining town, or units ( trying to avoid due to overheads) is the only option at this price.
Thanx for youre words. Sorry this changed from a reno/repairs dicussion to financial….
I certainly would not invest in the property who has structural damage. Unless you know how to fix and sure that that is the only damage, it may be more than one wall.
OR… the land value = offer price (i.e. property is just a bonus)
Plenty opportunites in current maket…Cheers
Thank you god of money!
Am getting the gist its not the best even if a good yield and sub div is possible.Appreciate the advice.
May take heed of what youve said and research the soil condition and current land value figure and offer that as a long shot for the knock down sub div. in the future.Cause the growth potential in the area is staking up.
Regards!
Hi beemseeker
I wouldn't believe a price estimation for repairs given by a REA. Get it independently costed. Even if will cost only $30,000 you are really only buying something $15 – $20 below value. I think that properties below value will become easier and easier to buy.
If you could confirm a price for repairs and negotiate the purchase price down further then it may be worth considering, but I think that there are easier ways out there to make money.
Cheers
K
Hi I live one hour from parkes in nsw, parkes was on the latest hotspotting list for cheapies with prospects it has also been listed in 2 of the major investment magazines in the last 6 months,
there is good reason for this numerous infrastructure projects earmarked for the next 1 to 5 years and anticipated population growth of over 50% in this time frame BOOM!!!
currently cheap home from 100000 to 200000 are renting at close to 6.5% and if you buy new homes better depn building write offs rent is around 5% and new homes are priced from 270000 to 390000. the best part to purchase in is east parkes. I am a not working mother with 4 young children my husband works in wa fly in fly out, I live and breath real estate I know parkes inside out and am buying my third investment property there soon, I have made 220000 on my first 2(near new) .
good luck with your investing"Hi Parkes nsw has a lot of infrastructure coming up in the next couple of years, growth last year was 16%, does anyone know if parkes is a good market for investment in the future or has it had its run." previous Chooker post March 2008
Hi Chooker,
I have briefly looked at Parkes previously. Has it really risen that much in just a few months? Well done and congrats for being able to stay at home. Do you think it will continue? It seems to be at about 6-7% growth this year. Any thoughts
I would definitely recommend that you get a professional builder to give you a quote on fixing all structural damage. Whatever their quote is add on an extra 20-50% and see if you still think the property is a good buy.
eg.
house valued at $250k
builders quote $30k plus an extra $15k just in case something goes terribly wrong
asking price $190k
In this scenario you would be making a saving of around $15k –If your happy with this then i do see any major problems
My main concern would be doing a renovation from interstate. Could get a bit messy.
and secondly you may be able to find another property that doesn't need any renovating where you could save even more money!
If you use some common sense and always look at the figures you can't go wrong.Cheers Banjo Smyth
Beenseeker,
I would stay away if I was you. I bought a place that needed carpet, curtains, A/C and other cosmetics from interstate and it took me more time on the phone than it would have had, had I gone to the location and orgainised it. It also cost a lot more.
Have you looked at some places close to Capital cities. Werribee in Melbourne has numerous 3 bedroom brick homes for under 200k (That rent for 220p/w) or if you travel up the Hume for less than 1 hour you can get a basic 3 bedroom fibro in broadford, seymour, nagambie for 110-150k. These are obviously close to transport, with a train line through all these towns too the city. These are renting for around 170p/w+. Not bad value for a long term investment. If you pick the right property it may even be +cash flow.
Good luck and keep us posted as too what you do?
JLIf the valuation indicated there is structural damage, many lenders will not lend or may require a engineer's report on the stability of the building.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi
I live in a relatively small country town, doing office work for a builder! I know, how lucky am I, the builder part I mean!
Anyway I was desperately in need of my first solely owned rental, with his advise I purchased a seriously structurally damaged property. A water pipe had burst under the slab and had not been repaired until the front of the three bedroom brick veneer had dropped 25mm. There was extensive cracks that were large enough to put your hand in but it was still quite livable. I got away with not doing the structural repairs for three years. I purchased the property $40K to $50K less than market value due to damage.The repairs cost around $30K (special employee discount). Now, five years after purchasing my property it has doubled in value. It has always been cash flow positive, mostly because the repairs could be left for a while.
Anyway, my main point is, if your property is in a smaller town you really need to seek out a builder that has a really good reputation as word travells fast in country areas. I know my house has been repaired by one of the best and so does everyone else which gives me piece of mind on the off chance I was ever wanting to sell.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
