Hi all!
Today has been a very busy, yet somewhat eye opening experience. I’m glad for that.
I need your ideas, so I posed this topic in order to canvas ideas and to perhaps find out what you have done in a similar situation. Or if you haven’t been in this situation (hopefully you haven’t) you could use it as an example of what not to do [
]Here is the scenario:
House in currently supressed area of Outer suburbs: Capital Growth marginal but moving upwards, I hope (I don’t have a crystal ball, but I wish I had [:0)]) I think prices have steadied in this area. (Although the release of Steve’s book will probably set the pace again [
])
Purchase price approx 90K (not including incidentals, closing etc)
Ideal wrap 3 bedroom house with double LU garage, nice block.
Cosmetic work needed unless you like the decor of 50-60-70-80’s all in one.
Close to shops, park etc etcCurrent market value: approx between 100-110K? (Not sure, but today, I rang a real estate agent, who is going to go around and give me an idea of market value)
Currently: vacant for last 6 months [
](well I thought you’d be shocked!)In the deal is 20% of our money and we are making the repayments monthly.
Income: $0
Outgoings: alotMy thoughts:
1) Rent out house for going rental rate of $125 – $145 p/w, less the rental managers rate of 8% plus GST = approx $112 – $131 per week. Thinking of short term lease of 6 months.
Why 6 months[?] Well, I know we shouldn’t worry about CGT, but considering we’ve been loosing money on this property, should we decide to sell it, if we do it after 1 year it may be better off this way.
2) Potentially approach renter (once found and happy in property) if they are looking to buy a property in the area. If not, short term lease expires, no harm done by asking, nothing ventured nothing gained.
OR
3) Flip the house. Cut losses and try again.So far, I’ve rung rental managers and real estate agents to find out my options.
What do you think?
Cheers
Sooshie [
]There are no problems, only solutions
Hi again,
I forgot to mention the property is in Victoria.
Cheers
Sooshie [
]There are no problems, only solutions
Hi Soosh,
Just a few questions.
1) Is it worth renovating? and then selling.
2) Why hasen’t it been rented out yet?
3) Are there any problems with the house?
I will do some sums and post them up for you.
APIM
*************
Australian Property SoftwareComing very very soon…
*************Hi APIM,
Is it worth renovating? and then sellingYes, It has a lot of potential to renovate, althought the kitchen has already been done about 2 years ago.
Why hasen’t it been rented out yet?
The property was bought with the intention of wrapping, as the area is great and properties in that area will be torn down and then it will be like a 2nd Brighton. My idea to rent it out started about 3 months ago, but procrastination and time constraints and mind set was preventing us from making a move.
3) Are there any problems with the house?
Not structually (perhaps a hammer and nail for some loose weatherboards). We had a building/pest inspection done as per due diligence and it came up aces. It has heating in the lounge and an air con in one room (can’t remember which). The bedrooms are nice sized (2 with B.I.R’s), just ugly looking. Cosmetically it has 100% potential. It needs paint, ripping up of the carpet, perhaps polishing the floorboards, new curtains and attention to the wc and laundry which are almost combined but away from the bedrooms. There is an undercover area out the back for entertaining/b.b.q and if needed the laundry/w.c could be extended out. Extensions are possible to include a 4th bedroom, sunroom, study, extra toilet etc. Large Backyard, which could fit another unit (if not extending existing dwelling).
The painting and new curtains, carpet pull up etc, I could do, no probs (I’ve already bought 2 houses and done them up). However time is a problem.I hope I’ve answered the questions satisfactorly, but I’d be pleased to answer more if needed.
Thank you for your response [
], I was starting to believe I’d created a post for the ‘Too Hard Basket’ []Cheers
Sooshie [
]There are no problems, only solutions
Hi Soosh,
I need a bit more info.
– The interest on your loan
– Council rates
– Water rates
– Insurance
Once I get these details I will be able to have a closer look.
A good deal is a good deal, and I think this is a good deal. (so basically you can’t loose. You just have to decide which is the BEST way to proceed.)
Based on my quick calculations and knowing that the area you purchased the property is going to get better with time I would defenitely rent the property now, (keep it do NOT wrap it, since you will be able to cash in when all the old houses get pulled down.)
The property IS already positevely geared and is EVEN better AFTER TAX!!! (you will be able to net about $800 per year.)
OK this is nothing great but it is not costing you a thing! In 2 years time you will be able to sell the land for $200,000 and then keep the profits. (hopefully)If you can find a tenant for $130 a week WITHOUT renovating anything, then I would suggest you rent it out.
*************
Australian Property SoftwareComing very very soon…
*************Hi APIM,
I think I over exaggerated, the houses may or may not be pulled down. The area has long been a housing commission area, in fact when I bought the property, almost the whole street went up for sale just afterwards. I will try to get you the details.
Cheers
Sooshie [
]By the way, are you an insomniac like me [?] [
]There are no problems, only solutions
Hi Soosh,
No i am not insomniac[
], I just work till very late… but I get up late too [8D]It is important to know what will happen to the suburb in the future. If investors are going to come in and start pulling down and rebuilding then defenitly keep the property. (Is your block flat? does it have views? How big is it?)
APIM
*************
Australian Property SoftwareComing very very soon…
*************Hi APIM, Hi all!
I had an agent do a drive-by and he said “it’s not a bad house”. He did say it’s not worth putting a unit at the back because you’d loose all the garden (it’s not as big a block as I originally thought). He estimated between 110 – 120K asking price, but it could achieve rent about $130 -145 per week…less 7% management fees…
Cheers
Sooshie[]There are no problems, only solutions
Hey Soosh!
Have you tried ye olde trick of offering a bonus to the first person to sign a lease on it? Usual examples include a book of movie tickets or even a DVD player for a longer lease – people usually imagine they cost much more than cheap ones can be bought for!
I have a couple of friends who have tried this after a long vacancy period, both to fill withing a couple of weeks.
Good Luck!
Quasimodo [^]
__________________________________________________
It seems to me that action has a most magic way of answering all the questions our fearful mind tries to throw before us…
__________________________________________________My first time here so go easy.
Reading thru your post I thought this sounded half decent, but the rental vacancy of 6 months sounded ominous. Why is it vacant and why for so long? Then you say it is housing commision area. MAJOR alarms.
I lived in a beautiful area in a suburb of Lismore called Goonellabah close to schools shops transport sporting facillities. In a nutshell it was perfect. Then they put in housing commision around the corner. And now the place is a toilet. Even if you could renovate it is in an area that 99% of middle income families will avoid like the plaque. With H/C you have major social problems, theft alcohlism drugs family disputes and a major lack of respect to anyone that has $1 more than you.
When looking at property the first question I ask is would I like to live here myself. If you wouldn’t why would someone else who can afford good money in rent every week.
Housing commision don’t get closed down very often and it sounds as if it will always be housing commision. In theaory when using dollars and cents as a quide it is all rosy untill yet get no dollars and cents coming in.
Hi, Darryn.
I also live in Goonellabah, and have just sold an housing comm at a profit of $40k, and I must say that it was an excellent investment, owned for 5 years, only vacant 3 weeks in that time, and had no problems with any tenants. In reality, over 90% of tenants are fine, so the odds are in your favour.
If you would like to contact me direct, then email
[[email protected]].
Sooshie, couldn’t you lease option this at $200pw?
What are the requirements of tenants in this area?Hi there,
Thank you for your replies. The BIG problem here was ME. Mea Culpa Mea Maxima Culpa[
]. Before publically flogging myself, I should mention that the ‘house’ was being supervised (so to speak) by another party, but ultimately I did NOT do my due diligence and hence time slipped past until 6 months had gone and hey presto 100% Vacant, I have no one but myself to blame.
I am back in the helm and that is why I have done a number of things to rectify the situation, including posing this post to PI community.
I’d like to know more about your lease option idea. I must admit, It never crossed my mind. Like DUH Sooshie! It was just an anaesthetic, not amnesiatic! []
Look foward to your repliesSooshie [
]There are no problems, only solutions
]
])
](well I thought you’d be shocked!)
]
], I just work till very late… but I get up late too [8D]
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