Good morning,

WOW! This forum is only a day old and already there is plenty of great information. Thanks to everyone who is already contributing.

As far as the role play for this first post goes, here are the answers to some of the questions that have been asked so far:

Light Industrial?

When I inspected the property in the early afternoon the noise was not particularly noticeable outdoors and certainly quiet indoors. It’s a great tip though to inspect a property near an industrial zone in the middle of a working day though and not on a weekend []

Finance

Bank has approved an open chequebook based on 80% finance. Wraps are OK in this postcode.

Vendor

Vendor is moderatley motivated to sell and has priced it at $50,000 to get out quickly if possible. Property has only been on the market a few weeks and inquries are starting to pick up. No offers have yet been made.

Exit Strategy

My exit strategy for this property is either:

1. Wrap

Sell it for $70k with a $7k deposit at +2% to my interest rate. Rough figures have the nett cashflow at $55 per week and a cash on cash return of around 47%.

2. Rent It

Rent it at $120 per week would see me derive positive cashflow – but it would not be as profitable as if I wrapped it.

3. Worst Case Scenario

I look that so long as I can cover my mortgage at $65 per week, plus ownership costs of about $35 a week, then I am covered. This means that I could offer the property for rent at a discount of 16% to it’s current amount and still break even.

Tenants

Tenants are friends of the vendor and are happy to sign a six month lease at $120 per week. There is no lease in place at the moment.

Condition

I would call the property ‘tired’ but still in reasonable condition. There are some maintenance issues that I observed during my inspection, but nothing too big as to cause a big problem.

I have been quoted $350 for a building inspection… should I spend the money?

Economy

Unemployment is about 8%, but in reality anyone really looking for a job can find it.

Local infrastructure is good and forecast capital gains in the current market is about 3% per annum.

Similar Properties

Other 4 bedroom properties are prices at $60,000+ and rent for $140+ per week. This places this property in the cheap range, partly due to the proximity to the industrial area.

A 3 Br property two doors up and across the road just sold for $55,000.

Next move?

The bottom line is that the property is priced at $50,000 because of its proximity to the light industrial area and also because the owner would like to sell quickly.

No offers have been made yet… what do you think my next move should be?

In reality I have purchased this property already, but as a case study I’m interested to see what the community thinks… It’s an excellent learning tool

Keep posting!

Regards,

Steve McKnight