Hi Guys
I thought I would share a deal I have just completed today. I know how fustrating it can be as a beginner in real estate in order to put a deal together and so I'm hoping this can shed some light. Remember you always make a profit WHEN YOU BUY.
Many have heard and know that you should always find out why the vendor/s have listed the property for sale. It is also a great idea to meet the vendor personally. Why? It is own job to seek a solution that is going to meet the vendors needs as well as our own investing needs.
Secondly, it is imperative you know the area you operate in. You should know what changes are earmarked in terms of infrastructure, population growth, past price growth figures, price estimates of houses etc. This doesn't mean you have to know what every property in the suburb/town is worth. There are professional that can do that for you. Still, you must have a good idea what the market value is give or take $5-10k.
So, to the deal. The property is in a great location close to the city in town. Around 40 years old, mostly in original condition. 770 m2. The owner, in her 70's, needs to sell so her greedy daughter doesn't attempt to sell her mothers home and spend the money (she nearly did 6 months ago). The mother has decided to sell and pass the money to her son and spend some as well....as long as the daughter doesn;t have any she will be happy. The house isn't advertised so that the daughter has no knowledge of the transaction.
So far so good. The house is worth $145,000. The added twist is that the backyard can be subdived with its own separate access. This would cost $5,000 to do. The block will be worth $50,000 and the house would still sell for $130,000 without improvements. A quick reno would add more value.
I offered $110,000 vacant possession and subject to finance and DA from council to test the waters and to have more feedback from the agent. The offer is knocked back but the info I find out from the agent is gold. The owners most important issue is to sell immediately with a 30 day settlement. She also wants to rent back on a 3 year lease paying $145 per week with CPI increases in rent and the option to rent for a further 3 years. She also is willing to make minor improvements to the house such as painting in return. So if she has named the terms, then i would get to nominate the price I want.
In order to reduce my risk, buying subject to a DA would be best. However this wont suit the vendor. However, knowing the local market, I'm pretty confident it won;t be an issue. I offered $105,000 and exlained to the agent that buying on a 30 day settlement would increase my risk as I am primarily interested in the land.
So, if the DA is approved, the back yard block is worth $50,000. With $145 per week rent the front house would sell easily for $130,000 if not more. $180,000 - $5000 stamp duty/legals - $5000 for subdivision - $105,000 purchase price = $65,000 gross profit.
If the DA is knocked back, the house is $145,000 - $5,000 buying costs - $105,000 purchase price = $30,000. If I choose to keep the front house, the rental return is 7.2% on purchase price, a great return. This nearly covers interest and rates and insurance each year. Remember this is not a lease option or a wrap. Just a straight rental.
So there's a property with at least $30,000 if not $65,000 profit in it and is neutrally geared which will turn positive in a couple of years.
The deals are there. You just need to pound the streets, ask heaps of questions and make offers that push the vendors buttons.
I love motivated vendors!
Cheers
Oscar
I thought I would share a deal I have just completed today. I know how fustrating it can be as a beginner in real estate in order to put a deal together and so I'm hoping this can shed some light. Remember you always make a profit WHEN YOU BUY.
Many have heard and know that you should always find out why the vendor/s have listed the property for sale. It is also a great idea to meet the vendor personally. Why? It is own job to seek a solution that is going to meet the vendors needs as well as our own investing needs.
Secondly, it is imperative you know the area you operate in. You should know what changes are earmarked in terms of infrastructure, population growth, past price growth figures, price estimates of houses etc. This doesn't mean you have to know what every property in the suburb/town is worth. There are professional that can do that for you. Still, you must have a good idea what the market value is give or take $5-10k.
So, to the deal. The property is in a great location close to the city in town. Around 40 years old, mostly in original condition. 770 m2. The owner, in her 70's, needs to sell so her greedy daughter doesn't attempt to sell her mothers home and spend the money (she nearly did 6 months ago). The mother has decided to sell and pass the money to her son and spend some as well....as long as the daughter doesn;t have any she will be happy. The house isn't advertised so that the daughter has no knowledge of the transaction.
So far so good. The house is worth $145,000. The added twist is that the backyard can be subdived with its own separate access. This would cost $5,000 to do. The block will be worth $50,000 and the house would still sell for $130,000 without improvements. A quick reno would add more value.
I offered $110,000 vacant possession and subject to finance and DA from council to test the waters and to have more feedback from the agent. The offer is knocked back but the info I find out from the agent is gold. The owners most important issue is to sell immediately with a 30 day settlement. She also wants to rent back on a 3 year lease paying $145 per week with CPI increases in rent and the option to rent for a further 3 years. She also is willing to make minor improvements to the house such as painting in return. So if she has named the terms, then i would get to nominate the price I want.
In order to reduce my risk, buying subject to a DA would be best. However this wont suit the vendor. However, knowing the local market, I'm pretty confident it won;t be an issue. I offered $105,000 and exlained to the agent that buying on a 30 day settlement would increase my risk as I am primarily interested in the land.
So, if the DA is approved, the back yard block is worth $50,000. With $145 per week rent the front house would sell easily for $130,000 if not more. $180,000 - $5000 stamp duty/legals - $5000 for subdivision - $105,000 purchase price = $65,000 gross profit.
If the DA is knocked back, the house is $145,000 - $5,000 buying costs - $105,000 purchase price = $30,000. If I choose to keep the front house, the rental return is 7.2% on purchase price, a great return. This nearly covers interest and rates and insurance each year. Remember this is not a lease option or a wrap. Just a straight rental.
So there's a property with at least $30,000 if not $65,000 profit in it and is neutrally geared which will turn positive in a couple of years.
The deals are there. You just need to pound the streets, ask heaps of questions and make offers that push the vendors buttons.
I love motivated vendors!
Cheers
Oscar
