I completed my first property purchase :)

[sonic]

Cool Revaluation

Pretty good day for me today, I got a call from my broker saying my property got revalued to a cool $200K

I asked for $215K but can't complain I bought it about a year ago exactly for $115K!

I think the reason I got a good reval was:

1. I did all the work for the valuer, I got a printout from RPData of the sales of the units in my building.
2. Went to homepriceguide.com.au and printed out that potts point had a capital growth of 11% last yaer.
3. Printed a "select" few properties on domain.com.au which were asking for $220K+

But I think the big points were:

4. I got along with valuer pretty well socially we were joking around, he actually owns a unit in potts point himself (studio like me) and his eyes lit up when i said potts went up 11% last year.
5. Purchasing well.

I'm totally convinced now that in todays market you make money when you buy right.... that is until the next boom anyway.

Just got off the phone with my broker going to take a LOC out with colonial professional package ($300 a year ongoing but i get 0.5% off standard variable for life of the for the LOC), pull out all the cash in the LOC and pay off the margin loan i took out to put up the 20% deposit. (I save about 1.4% margin loan interest rates are expensive!!!)

I'm going to do the same thing for my next unit purchase hopefully buy well, use a margin loan for 20% deposit (save on stamp duty) and refinance in a short time with the additional equity.

However because I've already got this new LOC i'll probably take out the cheapest no frills loan option with paying interest only with minimal fees (my broker tell me there is a citigroup product with no est. fee or ongoing fees and the interest rate is 6.94%).

Cheers

 

[yadreamin]

Good news sonic, l bet it sure put a fire in your belly.So 85k in 12 months in a flat or sliding market.Give yourself a pat on the back as its sounds like you bought well.
cheers yadreamin

 

[Brenda Irwin]

Congratulations Sonic. While your new found equity is great news, I still can't get over the fact that the previous owner got negative capital growth over a period of 4yrs and lost $23,000. Their loss is your gain and then some.

 

[MarkB]

Pretty good day for me today, I got a call from my broker saying my property got revalued to a cool $200K

I bought it about a year ago exactly for $115K!

In anyone's book that is very nice buying.

I asked for $215K but can't complain

I think the reason I got a good reval was [among other things I] Went to homepriceguide.com.au and printed out that potts point had a capital growth of 11% last yaer.

I agree with the tactic of rattling off sales statistics to valuers. I'm sure other people here would do it. I know I do.

Nevertheless, I'm wondering how you hoped to advance your case for 87% CG by quoting an 11% CG figure?


Mark

 

[see_change]

In anyone's book that is very nice buying.

I agree with the tactic of rattling off sales statistics to valuers. I'm sure other people here would do it. I know I do.

Nevertheless, I'm wondering how you hoped to advance your case for 87% CG by quoting an 11% CG figure?


Mark

Mark

I assume that Sonic didn't know that he was going to get the percentage revaluation that he got, and that any stats showing an increase where better than ones showing a decrease.

Sonic , am also impressed with your purchase. I know of someone on the forum who recently missed out on a "deal of the decade , possibly lifetime.... " ? gazumped by associates of his solicitor ....

I know it is possible to get good deals at probably most stages of the property cycle .

Could you give people an idea of how much time you needed to spend to find this deal , how long were you looking for , how many open houses and Auctions etc.

See Change

 

[House_Keeper]

Pretty good day for me today, I got a call from my broker saying my property got revalued to a cool $200K

Well done Sonic! That definitely demonstrate the power of buying well. As they say, "You make your money when you buy".

If you were to resale the unit in the current market, do you think you would get 200K?

Cheers,

 

[Jindaro]

Pretty good day for me today, I got a call from my broker saying my property got revalued to a cool $200K

I asked for $215K but can't complain I bought it about a year ago exactly for $115K!

Wow!! Fantastic for you!! That's the type of story that I like to hear...

I just read through the entire thread and was impressed at the research you did beforehand. Sounds like you're heading in the right direction.

Stories like this are ones that newbies should take note of in regards to doing your due diligence and the rewards it brings.

 

[sonic]

I know it is possible to get good deals at probably most stages of the property cycle .

Could you give people an idea of how much time you needed to spend to find this deal , how long were you looking for , how many open houses and Auctions etc.

See Change

I have to admit like most things in life theres no free lunch. I read a whole lot of books and got interested in property investment before I even started looking. As a result I was continuosly looking for about 8-9 months before I made my first purchase I was nervous as well as I didn't want to stuff it up. I probably looked at close to 100 studios in the Potts Point area before I purchased and after looking at that many you can pretty much walk in and determine whether the agent priced it correctly or not.

But the key to getting such a good deal was a motivated vendor, he already had a deposit on his new home and basically needed to sell the thing. But again there is no free lunch the reason other people didn't want to touch the unit was because the strata is riducously expensive $850 a quarter levies + special levy. But I went to teh strata agent myself and determined that the special levy was over and my estimate is that strata levies should drop the reason they are so high is because they are repairing things (i'll find out if i was right and they drop in about 6 months time).

Basically for me in todays market I wanted to make sure I buy below market value so I have a buffer in case things go wrong or property stays flat for a very long time. I"m also on a relatively low income so I go for high yield places (I want to own many) They way I do this is:

1. Look at heaps of property to get a really good idea of market price.
2. Actually physically inspect rentals as well and watch the rental market in that suburb.
3. Try and determine the reasons why vendor is selling this is hard to get out of the agent a lot of the time.
4. When I am seriously considering closing I call up a friend who works at a Bank and get her to run a RPData report on the street for me so I know exactly what the purchaser bought it for and how much wiggle room I have.


For my 2nd unit I bought 6 months ago also in Potts Point it was similiar. I paid $158K for a 1bedroom its worth about $185K based on previous sales in the buildling in the same year. The reason I got it cheap was I saw it at the first open and I jumped early.

The agent had no idea what it was worth (she was not a local agent), it was renting at $150 a week and I"m guessing that why she valued it at $158K. I knew it was under-rented and after I bought it I know I let it out currently for $230 a week.

I'm also really interested in the financing side of things so I've spent a bit of time researching good loans to take out which helps cut down the costs.

 

[sonic]

Well done Sonic! That definitely demonstrate the power of buying well. As they say, "You make your money when you buy".

If you were to resale the unit in the current market, do you think you would get 200K?

Cheers,

Nope no way if I"m lucky I"ll get $180K worse case I reckon $160K.

As I said the valuer didn't really do his job property all he had to do was look at domain.com.au right now and see that there are two units in the buildling selling for $185K and $190K respectively. Both identical to my unit.

 

[sonic]

Touching on 4 years later wow brought back memories re-reading this post! A unit in the same block just sold for $230k, I'm seriously considering flipping this and getting out... With a bit more investment experience 4 years later:

1) I think a studio is not a long term great capital gain investment.
2) Lower end housing Sydney I think its moving purely because of FOHG goverment policy which is not sustainable.
3) I work in HK now and I can take advantage of a better tax rate when I"m selling it (I'm a non-resident for tax purposes and effectively have zero income in Australia so I only pay 30% tax, if I came back and sold it presuming I'd be working I'd be paying the highest tax bracket).
4) I'm my investment portfolio I am seriously overweight property I have 2 properties in Australia, 1 in HK and effectively only 20% of my portfolio is in equities. I think I should move a bit more into there (prob not now as I think economy is still crap worldwide but eventually). Given the current investment climate I"m happy to leverage a bit and sit on my cash.

What do you guys think?

Hey guys,

I'm so excited at the moment I got a call from my lawyer today saying that contracts for my property have been exchanged! I'm now the proud owner of my first property investment.

Its a studio apartment in the eastern suburbs of sydney and I purchased it for $115K. Theres a tenant in there at the moment paying $165 a week. The strata is quite expensive $850 a quarter which is probably why no one wants to touch it but I did a strata search myself and $500 is going into the sinking fund to fund for future repairs...

The property actually went up for auction. I was so embarresed the other properties on the market were worth millions of dollars. The first property got passed in for 1.1 million (it was a 3 bedroom house in bondi).

My property came up it was the second one and I waitied until it almost got passed in and I put a bid in for $100K. Obviously it didn't make the reserve and it got passed in.

The agent figured I didn't really to buy it and said to give him a call tomorrow. I mentioned that I'm interested and if I can get it for the right price I brought my cheque book with me and I can close the sale tonight if need be.

I tried to a stupid tactic pretended to call my parents for more money and offer $106K. The agent saw right through me and said don't bother. He called the owner and said I can get it for $120K I ended up paying $115K. Signed the contract right there and put on a 10% deposit gotta tell you my heart was beating so fast.

All in all I was very happy with the purchase I would have paid substantially more because

- I did a search on RPData and the owner bought the place originally for $138000 in 2001.
- I was prepared to pay a lot more than $115K.
- The vendor had to sell he has bought another place.

I'm so happy I finally got a place I'velooked for 4 months. One big thing I learnt is that number is very important. But more important is being able to spot a deal and sense when the vendor needs to sell and you can usually negociate in a strong position.

In hindsight I think I was very lucky. I was the only one at the auction with only 1 bid being put on. Thus when it got passed in I was in a strong negociatiating position (no other buy on the night so no dutch auction). Also the agent kept saying to vendor I had my cheque book and I could buy it that night if he wanted, I think this really emotionally effected the owner. In fact I put in a written offer of $115K 3 weeks prior to auction and it got rejected!

Thought I'd share my first experience I feel so happy after months of reading and looking I found a place that satisfied my criteria.

One quick questions. On the night I signed a blank contract. My lawyer said today the auctioneer signed it on the night. Is this legal? I'm not too familiar with auctions....

Does the vendor usually sign beforehand or can the auctioneer sign for the vendor? Thanks!

Looking for my second place this weekend will prob go out west and get a house!

 

[vbplease]

1) I think a studio is not a long term great capital gain investment.

Why do you say that? I'm not sure of your studio's location, but I think there will always be demand for studios for young professionals - perhaps more so in the future with changing demographics... and you'd be surprised how much gen y's are willing to spend (waste ) on fully furnished apartments.

Can I ask how much it rents for now?
Did the strata fees end up going down after the repairs?

Great thread by the way! Sounds like you did quite well in your negotiations.

 

[Alex P Keaton]

I wanted to learn the process of buying a property and in that improve my negociating skills and being able to analyze a business deal (i.e. property financials) and determine whether it is porfitable or not.
- I wanted to own a place!

congrats

 

[Alex P Keaton]

Pretty good day for me today, I got a call from my broker saying my property got revalued to a cool $200K

I asked for $215K but can't complain I bought it about a year ago exactly for $115K!
Cheers

Oohhhhh lol thought this was just posted the other day haha

hmmm thought that price of $115 seemed low

 

[sonic]

Why do you say that? I'm not sure of your studio's location, but I think there will always be demand for studios for young professionals - perhaps more so in the future with changing demographics... and you'd be surprised how much gen y's are willing to spend (waste ) on fully furnished apartments.

Can I ask how much it rents for now?
Did the strata fees end up going down after the repairs?

Great thread by the way! Sounds like you did quite well in your negotiations.

Rents for $260 a week now strata is about $800 a quarter didn't go down at all they kept adding to the sinking fund!

 

[kum yin lau]

Hi, a couple of points apart from congratulations on a good buy.

A lot can be done to minimise tax.

1) 'Salary sacrifice' excess income to self managed super fund.

2) Increase borrowings on IP to just above neutral gearing.

The borrowings will be tax deductible if they're used for investment. Can this not be used to increase the equities portion of your net worth?

There's another method with smsf. It depends on your age as well because of the cap on contributions.

I have done this just recently, capital gains almost totally neutralised by transferring cash and property into smsf.

Not giving you specific advice, just to point to what you can do. The best I've discovered is to borrow off the increased equity rather than sell.

The impt thing is to manage the extra borrowings so that they show a profit over and above what we pay for the cost of the funds.

Good luck,
KY

 

[sonic]

Hi thanks for your thoughts. Completely agree with you regarding with borrowing off equity and leveraging up instead of copping transaction costs with selling in theory.

I believe in this most of the timebut I think there are a few exceptions

1) If you investment long term isnot that great because its not a quality asset like a studio/1 bedroom apartment next to a brothe like mine. Better to sell and take the profits and roll it into a better performing asset.
2) Leveraging and reinvesting works well if you don't have cashflow problems AND you are comfortable with excessive leverage and you beleieve u are in a bull market either in stocks or real estate depending on whatever you invest in.

I don't think studios are in a bull market if anything they have run already due to FOHG stimulus increase.

Classic case is people using this living of equity method etc into stock markets and i.e. storm financial and got wiped out.

I"m 27 so not really thinking about super even though I prob should be!

Leverage is good if used wisely used badly and overleveraged means either wipeout in a bad case or crap returns in a good case.

Hi, a couple of points apart from congratulations on a good buy.

A lot can be done to minimise tax.

1) 'Salary sacrifice' excess income to self managed super fund.

2) Increase borrowings on IP to just above neutral gearing.

The borrowings will be tax deductible if they're used for investment. Can this not be used to increase the equities portion of your net worth?

There's another method with smsf. It depends on your age as well because of the cap on contributions.

I have done this just recently, capital gains almost totally neutralised by transferring cash and property into smsf.

Not giving you specific advice, just to point to what you can do. The best I've discovered is to borrow off the increased equity rather than sell.

The impt thing is to manage the extra borrowings so that they show a profit over and above what we pay for the cost of the funds.

Good luck,
KY