Advise for Purchasing Duplex Pair

Hi All,
Slight Noob to investment properties, don't wish to make mistakes, why pay for the opinion of one advisor who may not know as much as the free opinion of many here :)

Placing an offer on 1981 B&T Duplex Pair on 1000sqm, separate rates, meters etc, asking price 400k for both (imo undervalued, elderly vendor, perhaps asset/income/pension/tax reasons).

Long-term tenants fearful their homes are about to get redeveloped (not in my short term plans) one 2004 other 2007, $220pw each, however elderly vendors haven't reviewed in 6yrs, comparable properties are ~$280pw.

Firstly, if yourself, how would you negotiate the O&A?

After lots of reading I'm considering proceeding in the following way;
Separate offer/acceptance for each
Separate variable loans with offsets for each

I have 20k cash avail, 170k redraw on 280k equity PPR ($30 owing).
Wondering if its best to payout the $30 closing the PPR loan, use its equity to borrow for both properties as investment loan (or 2 loans) with offset/s?
Or, would it be advisable to reduce the redraw on PPR to suit loan, keeping some backup for uncertainty's? (PPR would still be security)

Perhaps in 12mths have the IP's correctly valued, if possible redo the loan to have each property with separate lenders under individual equity releasing my PPR? (each lender would only have security/access to their loaned property)

I'm sure I'm missing something, getting late, appreciate any advise/feedback...

Cheers! (& thanks) ;)
 
Hi Westoz,

Welcome to SS this being your first post.

I take it the duplex is strata titled?

If so you will need a separate O&A for each side as its 2 separate title purchases.

Next refinance to pay out ppor and set up an investment dedicated LOC secured against it...

Each duplex half finance the 20% deposits plus costs from the LOC and borrow the remaining 80% required to complete settlement with a new loan secured against the respective duplex half.

Depending upon your plans for the properties, would determine whether you should use same lender for all or different lenders to minimise exposure risks.

I hope this helps.
 
Hi Rixter, thanks for your reply, yes newbie here (but an oldie) massively unlike your veteran self back in the old dialup days, you must have been a great aid to many over the years with 9+k posts, worth a cheers!

Found site (a thread) via google, was just having a site browse and realized I may have placed this in the wrong section, seeing there's a "Property Finance" one, feel free to relocate mods, apologizes for my noobness.

I don't believe it is strata, will clarify tomorrow, my PPR is a non-strata rear duplex, separate rates etc.
Hindsight after posting I der'd that if it has two rates it has two titles therefore would have to be two separate O&A's, the joint as one advertisement/sale threw me.

Only owe $30 on PPR so no refinance needed

So I understand,
1 x LOC secured by PPR to cover 20% + costs x 2 O&A ? (~100k)

Separate 80% loan for both secured by IP's? (~320k)
Or
Separate 80% loans x 2 O&A secured by IP's? (2 x ~160k)

From your reply I'm amusing it makes no difference if both under same loan or not (If I have no immediate plans).

Thoughts on Off-set account for rent income, pay loan, R&M etc?

Cheers!
 
Do you mean $30k or $30?

I would suggest you just pay down the PPOR loan and use redraw to borrow 20% plus stamp duty from this. This loan will then be solely associated with the investment property and all interest deductible.

Then borrow 80% against the new property. 103% finance and no crossing of securities.

Get a 100% offset account on one or both loans (depending how much cash you have) and park your cash in the one with the highest interest rate.
 
Hi Terry, only thirty dollars, paid it down to min about 12mths ago, left it open/available in-case I required it for renos or something...

So using redraw from the PPR loan would still be deductible?

Apologizes for my noobness, seen a broker today hoping to get info, took all my info etc, said he'd process and get back to me, left their office then realized he didn't ask about the rental income, turned out his only just started in the game, nothing against that, all gotta start somewhere, but didn't help me much, why I'm here looking for clues now before seeing agent for O&A tomorrow.

Had similar issues with accountants, unless they specialize in the inquiry the response lacks confidence
 
So I understand,
1 x LOC secured by PPR to cover 20% + costs x 2 O&A ? (~100k)

Separate 80% loan for both secured by IP's? (~320k)
Or
Separate 80% loans x 2 O&A secured by IP's? (2 x ~160k)

From your reply I'm amusing it makes no difference if both under same loan or not (If I have no immediate plans).

Thoughts on Off-set account for rent income, pay loan, R&M etc?

I prefer to use LOC's as opposed to loans with savings offset accounts. Purely to keep it streamline and more simpler financial structure. But it depends on ones situation if they may possibly turn their PPOR into an IP later on. If so, go the offset structure.

Since in this case PPOR is paid off, Investment dedicated LOC secured against PPOR and maximise its credit limit.

LOC funds 2 x 20% deposits plus costs.

Separate 80% loan secured against each IP (2 x ~160k)

Rents go into LOC and IP's Interest Only loan repayments plus expenses come out each month.
 
Need to bounce this of someone for brain clarity... (no one else to ask)

1) The advertised asking price for both duplexes is 400k (200k each)
The market is average, nothing like Sydney
What starting price/offer for negotiation would you make?
Aiming for a final agreed price of?

2) Apart from standard info on the O&A what would be considered a "must" for any special conditions etc?
Only thing that comes to mind is building inspection (incl termite), guess that would also cover any easements etc.
Was considering using these guys if anyone has any experience
http://www.affordablebuildinginspections.com/

Is there any consideration/inclusions I should have in the O&A re current tenant/s agreements? which are currently being managed by selling agent

Anything else to consider?

Thank you
 
Where's the property located?

Do your DD to gain an understanding of what you think the value is? Have a look at any recent comparative sales data etc.

Put the usual clauses in your O&A such as subject to B&P, finance thats acceptable to yourself, independent valuation acceptable to yourself if you're not prepared to back your own DD judgement.

Without seeing the property, there maybe other clauses. ie certain improvements need finishing off that you don't want to do yourself etc etc.

Are the tenants staying on? Are they on leases or periodic tenancy? Need to find out whats going on there too.

I hope this helps.
 
if they may possibly turn their PPOR into an IP later on.
That's the plan, not my preferred place to live (little old, next to hwy & rail, pedestrian access down the side) but was a cheapy to get into (single income) will be rezoned multistory in a few years so good long-term holder.

Will go over it with lender (CBA) if redraw on PPR is suitable, whilst deductible I imagine it would be cost saving (no fees etc) than LOC?

Do your DD to gain an understanding of what you think the value is?
Was more curiosity of how hard you experienced guys go in initially to test the water/vendor so to speak, vendor puts a price knowing its going to get countered, in this case I'm purchasing two rather than one property, whether you practiced a considered percentage etc.

In central Mandurah WA, close to beach/estuary, all amenities etc.

Long-term tenants who wish (demand) to stay, one 2004 other 2007" will find out about lease this morning
 
What is the appeal of this site?

You could get similar yield anywhere else in the same location.
You could get similar sized/zoned sites in the same location for around $100k less if it just had one house on it
You get something newer in the same location if you wanted 2 small units not on the same land
 
That's the plan, not my preferred place to live (little old, next to hwy & rail, pedestrian access down the side) but was a cheapy to get into (single income) will be rezoned multistory in a few years so good long-term holder.

Will go over it with lender (CBA) if redraw on PPR is suitable, whilst deductible I imagine it would be cost saving (no fees etc) than LOC?


Was more curiosity of how hard you experienced guys go in initially to test the water/vendor so to speak, vendor puts a price knowing its going to get countered, in this case I'm purchasing two rather than one property, whether you practiced a considered percentage etc.

In central Mandurah WA, close to beach/estuary, all amenities etc.

Long-term tenants who wish (demand) to stay, one 2004 other 2007" will find out about lease this morning

In terms of tenants, I would ask for vacant possession (this means no lease at Settlement) then ask them if they would like to have a new lease at the rate you want the rent to be.

If you keep them on current leases then you can't increase it by much. Be very sure about the current lease value as there are a lot of vacancies
 
What is the appeal of this site?
Being single I've never felt comfortable investing in single dwelling/income, with 2+ I still have income to assist if one is vacant.
Would have considered house with separate Granny on corner block (separate entry) but haven't seen anything my price.

Initial attraction to this is the vendor also has available adjoining rear 1650sqr block (combined 2700sqr R60, 600mtrs to foreshore) with 3 rented units, currently 660pw.
Was hoping to purchase both/package however at the moment I'm not in equity/income position.

same location
When you say "same location" do you mean central Mandurah, or Mandurah area in general, i.e. Lakelands, Greenfields, Dawesville etc?

Had a good search (for my abilities) and couldn't see anything better central, in the end decided to lessen the risk (baby steps) by taking the lesser $ two duplex site, which is in better condition, faces/closer to foreshore, big block, long-term tenants.
Unit 1 has disabled single female since 2004, just renewed 12mths in April, immaculate, tidier than me, pays rent 2 months in advance.
Unit 2 is also single female, since 2007, lazy/messy but not destructive, occasionally forgets to pay rent so they have her on periodic which apparently helps keep her motivated. If it becomes an issue she's gone, will tidy it up and re-let, or as its better than my PPR I might move in and rent mine.

Be very sure about the current lease value as there are a lot of vacancies
Yes, the next 12mths will be interesting over here, when isn't it though, will leave it as is for now, asses it in ~12mths.

For me its long-term, can't go wrong central location, walk the the restaurants, murphy's etc, have a few bevies, don't need a cab to get home etc, many properties around it have already been developed, will hold on to it till either I or my kids decide to develop...
 
Good to see you have looked at tenants and hopefully the tenant ledger so you can ascertain all is correct.

In terms of offer, how long has it been on the market. If you PM me the address I can do a price finder report on it which will show that and any price decreases etc. Don't worry I don't want to poach it off you.

If it has been on the market for awhile then I would offer lower, maybe $380 but you can strategise that when you have the information
 
I agree with Westminster here, I'd be very surprised if there weren't better opportunities in that central Mandurah area for whatever strategy you're pursuing.

If its the property I'm thinking of, then I wouldn't have called it undervalued at all - it sounded about right considering you can get nearly get two separate houses for $400k around there.

Have you compared this property to two separate houses in the area?
 
and hopefully the tenant ledger so you can ascertain all is correct.
Never heard of tenant ledger? I briefly met the property manageress this morning who's apparently been looking after the properties for 27yrs, she seemed upfront/honest, I'm always a skeptic though.

PM sent

considering you can get nearly get two separate houses for $400k around there.
Really? Maybe I'm not searching properly, is there a better way than realestate.com.au (sensing you'll lol at that)

for whatever strategy you're pursuing.
Strategy is to improve my financial security prior to retirement, don't wish to rely on the pension/taxpayers, will it to my kids.
Been self employed most my life, at 49 I only have 30k super, got burned big time through divorce, don't trust my share trading after GFC. Cash in the bank is safe but earns bugger all, PI feels the safest bet for me.
 
Really? Maybe I'm not searching properly, is there a better way than realestate.com.au (sensing you'll lol at that)

Nah, no lols here - I pretty much use it for 99% of my searching as well.

I'm exaggerating a little with the two separate houses for $400k, but my point is that two separate houses isn't very far off - so it might be worth keeping an eye on that option as well, and as a comparison.

But it sounded like you've made an offer on the place now...?
 
Nah, no lols here - I pretty much use it for 99% of my searching as well.
Cool! Had me concerned I was missing out on some awesome site/info I wasn't aware of

But it sounded like you've made an offer on the place now...?
Yes as said in Fridays posts I was doing O&A Sat morn.

BUT.... O&A is still on the table.
I requested settlement for 8 July, whilst price has been accepted they countered for 26 June, as some of the comments above have made me concerned I'm making a poor investment decision I haven't agreed yet.

My head is thinking (spinning)...
Two blocks for ~440k vs one for 400k???

However....

Two blocks at ~700sqr with untenanted timber frame (termites, previous damage etc), fibro (asbestos) old shacks on them for ~440k?
I'm not ready to develop, what type of tenants/issues am I likely to have to pay loan etc

VERSE...

One block at 1000sqr with two long-term tenanted brick & tile units for 400k
Lender considers "initial" 440pw rental income, no immediate work to do, general DIY down the track (paint, flooring, gutters etc) if required...

However (head spinning) perhaps the coin could be better used on an alternative purchase, out of central, or town/state, like new subdivision build with two story duplex/unit (search becomes more confusing)
 
Hi again, been reading posts for ages but need some more clarity/advise please...

I take it the duplex is strata titled?
Turns out its not, one council rates, one O&A (However separate water rates, meters, leases)

As said I only owe thirty dollars on PPOR (with CBA, 179k redraw avail, val~270).
20% is confusing me as I was only asked for $1000 deposit? can cover it with cash.
Was gunna go 2 x loans (total loan/cost divided by 2) plus offset for each.

However I'm now considering having the periodic tenant moved out by settlement and move into it myself as PPOR, turning my current PPOR (since Dec 2010) into IP.
Plan would be asap build new duel (or more) at another location, 1 PPOR, other leased etc. If required bounce between them for 6yr rule etc.

Wondering how to best structure?

Thanks again...
 
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