Hi all..
We are really keen on a 3br unit in our town. the asking price is $169,000. It needs up to $5,000 spent on it to bring it up to a standard where the agent say’s we will be able to get $220 pweek rent. I am trying to think of a realistic price to start off from. Do you use a calculation where you discount it by say 10% or more and move on from there? Just not quite sure where to start it off…damien hughes
220/w on $174,000 gives you 6.57% gross return
you still have to take out rates, insurance, repairs etc
after you deduct these, what % return will you get.If I was to spend $5,000 on doing it up straight away (urgent repairs) I would try to negotiate at least a $5,000 reduction on the purchase price.
I don’t think there’s a “specific” formula – it all depends on the individual investor and the property deal they are evaluating…
Learn, Love, Strive. Make a difference!
I think firstly you should ask the real estate what is the yield % (gross or rent return). After you compare it with the formula Purchase Price=annual rent/yield %.
the yield is due to the market.
So if yield > 6.57% (actual in your case, then the market price should be less than what is asked. If yield < 6.57% then the price should be more so what is asked is underevaluated.
Regards,
ErwanJGI think you should look at the market in this area. Ask what price have similar unit sold for. Make an offer based on the information the market gives you. If you do not want to do this then just remember that you can always increase the price you first offered
honestly compare the unit, to other units around the area.. get a fair idea, of what you think is fair value.. but put an offer of what you think is realistic… but also dont buy on emotions, but set a figure.. if they are asking to much, set your limit, stick to it.. or walk away…
Cheers,
sisNegiotating is a skill and you’ll only get better with skill..
Go into the deal armed with as much information as possible, you want to know the area as well as if not better than the agent..show them you are a serious buyer.
Dont just fall in love with the property..you need tofall in love with the ‘deal’..keep looking even while you consider this property..
as for offering 10% below sale price..why not, especialy if the need for work is evident to all..
research the forum on tips for making an offer..[wink]
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculatorif you can arrange access, get your repairer or builder to do an accurate quote on what needs doing, this then becomes the basis of part of your deduction. If you have pre approval and can make it a 30 day contract, reduce the purchase amount by $2k for that, if you get a price fixed on a contract, then pest report shows small termites or it needs a barrier in place, quote for this comes of price and should also be negotiated asap.
Checkout postcodes as some LMI headaches arrise from regional or just out of main centres re LVR on property. In major centres 80% lend is fine, outside can be as low as 65% or worse.
All are bargaining chips and only the tip of the iceberg regarding negotiating.
Good Luck whatever you end up doing.
DD
Buyers Agent (Dip Financial Services(FP)
Don’t sweat the small stuff,and it’s all small stuff!!I found the property sales maps you can buy, which show how mauch the current owner paid for the property and when, very useful. In Queensland you can order them from the Dept of Natural Resources and Mining. The link to their smart maps site is as follows:
http://www.nrm.qld.gov.au/property/mapping/blinmap/property_sales_map.html
You buy a map which contains the property your interested in and the surrounding properties. You can buy maps from A4 size up to A0. The larger maps contain more properties but I just got a $35 A4 map of the block I was looking at. Once you have the last purchase price, you can work out how much it’s appreciated based on the areas growth. It also gives you an idea on the property turnover in the area. And if there’s a similar property nearby that’s been sold recently, it gives you a top idea on the price you can look at paying.
Have fun,
Brett.Hi Damien
I have a couple more questions for you. Is this a single uint itn a small block? If so why not buy the whole block? If it is in a large block I personally would be shying away unless you can get a serious reduction in price. What price do the vendors need to move on, is this the best price they can offer you. Also don’t forget land appreciated and buildings depreciate, to my way of thinkning, bigger land content more opportunities for growth /increase in price.
Just my 2c worth
Good Luck
regards
Sue OwenMIT | Owen Real Estate
Email MeHi MiT
In WA of Late the CG of units has been lagging..but due to the rise in Housing prices it is now on the move, bettering (is that a word?) the CG of many residential houses as a whole..
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorI agree with lonnie about how to make a purchasing decision. Check past sales, and try and be a bit scientific about the purchase- if you can value the property yourself by doing as much research as you can, then you won’t be thinking about arbitrary things like lopping 10% off purchase price.
For example, if it was a beach front property for 169k- would you still need to knock that % off your offer? If you offer too low, you may lose the property, but is that too terrible in this market?
Check the “sold” section on realestate.com.au to make an informed choice.
Re the 5k needed to make the property more rentable… it possibly depends on what is needed. Some RE agents have different notions on what might be needed- I have heard RE agents tell me a place looks “tired”… because the property might not look like their own brand spanking new home. well, I don’t care if the property is asleep, quite frankly. It needs to be “tenantable”- but not immaculate. I am mentioning this because you haven;t provided info on what might be needed- just don’t overcapitalise in this market.
RE agents in the area can give you a rental appraisal. Sometimes sales agents overestimate the rent you can achive in order to sell the place.
Best of luck and add more detailed info about the place if you like and people can give you their opinions on stuff.
kay henry
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