success stories

OK, I'll go first.
This is a non success story (OK, I'll say it, a FAILURE)
Getting all excited about the mining boom in a nearby town, we entered into what looked like an exciting opportunity to subdivide/reconfigure a few blocks of land and resell.  The agent was a local Councilor (as in local govt, not as in psych), smoothly made it sound like we could make $200K in a few months.  There was a lack of other information available to us on the market. No local paper.  No local property manager.  A couple of agents operating locally.  The RPData report wasn't current enough to keep pace with the fast moving market.  Council had a subdivision of their own underway, and we felt sure we would be finished and sold before them.  In the absence of other information, I relied too heavily on the opinion of the agent.  Big mistake.  Our ability to make money out of the project hinged on our abilty to complete within a certain timeframe.  Things started to go wrong before the contract became unconditional.  The bank wasn't happy.  A broker found me alternate finance that leveraged everything we had.  There was trouble getting a shed demolished in time for a surveyor to do his job (the shed was in his way).  Council dropped their price for blocks in the new subdivision below our price.  There was trouble getting services put in within our timeframe, then a building report came in with one of the residences having a leaking roof.  In the end if started to feel that the world was conspiring against us with the whole deal, and we exited the contract using the clause about us being unsatisfied with the building report.  We lost a few grand in the cost of valuations, and council approval for the subdivision, but the relief was immense.  A few months later, interest rates started to rise.  The council subdivision didn't sell.  Then the global economy started to shake. 

What did I learn?  If you  can't get good information, don't substitute with bad info from a RE agent.  Give the deal a miss.  
Talk to your financier first, don't get your heart set on a deal that will cause you to be over leveraged.  Allow for your timeline to at least DOUBLE.  Be prepared to exit a contract, losing a few thousand dollars, rather than risking everything.  There is no substitute for intimately knowing a market yourself, rather than relying upon the opinions of others.  Vendors who are selling potential development sites will often have priced the site as if it were already developed, leaving little or no margin for the actual developer.  They know it is valuable real estate and are trying to capitalise on that without actually carrying out the development themselves.  Make sure your contract has plenty of good ways out.

Hi 14281239,
Here's a bit of a success story to hopefully get you pumped to get out there and find one of your own.

I live on the Gold Coast and a couple of years ago became interested in a little coastal town in SA after reading an article in API.  After a bit of research and making a few offers i jagged one.  I offered the asking price ($105K) because the market there was on the boil at the time.  The offer was accepted so i arranged a flight down there the following weekend.  In the meantime i contacted a local builder and arranged for him to meet me at the house so we could go through it together.  When we got there we dicovered that the house would need quite a bit of work done on it to bring it back to it's former glory but other wise it was still quite liveable.  The current tennant was happily paying $90pw on a month-to-month basis and had no intentions of leaving. 

The builder estimated that it would need $10K put back into it based on what he could see but after a bit more discussion agreed with me that the figure would likely blow out to $20-$25K once he got stuck into it.  Based on the revised repair figures i withdrew my offer of $105K and told the agent I'd only be prepared to pay $85K and asked him if he had any other listings he'd like to show me.  We looked at a few more that he had but none really suited me. 
Later that day the agent phoned to tell me he'd presented my new offer and that the vendors would sell at $87K.  I accepted on the condition the tennant sign a 6 month lease at $120pw and he did without batting an eye lid.

9 months later i needed some cash for a reno on the Goldie so I had the SA deal valued and it came in at $130K, 49% more than what i originally paid.  I still own it today and it's currently rented at $140pw.

Hope that story's helpful.
Happy house hunting

Hi Pental,

Sorry i should've been clearer with my description of this deal.  The estimate of $20-$25K in repairs was fairly accuate but to date i've only had to spend $120.00 on a leaking water pipe and a sticky door handle.  The repairs were not things that needed to be attended to immediately.  And yes, when you include things like stamp duty, legals etc the net return would be substantially less.  So the 49% return i quoted is Gross.  And I should also mention that the rent is Gross too…minus rates, water, insurance and management fees.  I apologise if my first post was misleading to anyone.
Cheers