I put an offer and have agent come back 9k higher - need some opinions

[MIW]

Don't think speaking with them directly is possible.

Also at the moment negative gearing does not concern me. I want a few in metro before moving towards cashflow. The capital growth/equity in these will help buy others...It's a snowball effect.

I am a little bit unclear about the capital growth/equity of this property. I thought I read it was bought for $218K and 8 years later it's $235K (That's what you are willing to pay, right?).
After costs there would be no capital growth in the last 8 years....so just out of curiosity why do you presume there will be for the next 8-10 years?
Perhaps if you can generate the equity to increase the value by 10-15% than it would be worth it to leverage further, is that your plan?

 

[MsAli]

MIW, actually I believe that the vendors purchased it expensive at the peak of the market. Plus it is the best in the complex. They purchsed it renovated - so no wonder they paid that much. Currently in the area 2 BR modern units are selling around $225k - $230k. Hence I saw the value in this....but doesn't seem like it will give much equity even if it was purchased for $231k. The upside was the rental which is around $350 per week...I haven't called the agent back. I guess you can say the purchase is around $220k given the condition of the property. But again defeats the purpose of equity

 

[Piston Broke]

The agent was pissed off and said he had another offer of $232,000 which has been rejected and the best they can do is $235,000. He shut the phone saying "it's now in your hands".

Don't play the his game, play yours.
What it really means is the vendor is losing more money each day he hangs on.

My attitude is to buy if I am getting a good deal or none at all.
I would not have increased my offer.

Well if they paid 218k eight or so years ago 235k seems like a good buy.

Just like saying ABC was a good buy $7.

Don't think speaking with them directly is possible.
Also at the moment negative gearing does not concern me. I want a few in metro before moving towards cashflow. The capital growth/equity in these will help buy others...It's a snowball effect.

Translated means you want to buy just for the sake of buying something because doing nothing may seem not be an actual decision.
Growth is speculative, you do not know it will be there, and the snowball effect work just as fast backwards.

Why speak to them directly when you can use the REA to your benefit?
They still have to pay the REA his fees.
He wants a commission, all he wants is a transaction.

Currently in the area 2 BR modern units are selling around $225k - $230k. Hence I saw the value in this....but doesn't seem like it will give much equity even if it was purchased for $231k. The upside was the rental which is around $350 per week...I haven't called the agent back. I guess you can say the purchase is around $220k given the condition of the property. But again defeats the purpose of equity

Hence imo the offer should be 220k, no offer should be made that includes a for you, only and

 

[Ergophobia]

Are the comparitive prices you are quoting listings or sales?

I think a sub 1k increase counter offer would **** anyone off, you would have been better holding your ground IMO

Remember you are buying this property for your benefit, not out of pity for the vendor.

Hence imo the offer should be 220k, no offer should be made that includes a for you, only and

I like that... pity we can't have bbcode in our sigs

 

[Edmond Dantes]

What's your definition of "metro area". this property to me appears to be no near a metro area

 

[lizzie]

It is definately not your problem if the vendor owes money on the property. A property is only worth what someone is prepared to pay for it ... NOT ... as most vendors think ... what they would like to get for it.

I'd stick firm at your $230k - and keep looking. There will always be another deal.

 

[shuggy]

The agent was pissed off and said he had another offer of $232,000 which has been rejected and the best they can do is $235,000.

Possibly meet them half way on $234,500.

I don't understand why you won't pay the extra $500 if you think it's good value and intend to hold long term ? I've played this game in the past and lost out on teriffic buys because i was being stubborn over a few thousand bucks. Don't forget the time and energy you are putting into this. Is it really worth $500?

 

[NedKelly]

What are the body corporate fees per week?

 

[MsAli]

Thanks for the responses guys.

Shuggy, still considering. Equity is imperative for me to move forward. Still considering. I don't think they have any buyers. Tough for them. Mine was a genuine offer. I will consider what they have come back on.

NedKelly, the corporate fees are ~$38 per week.

 

[Piston Broke]

I don't understand why you won't pay the extra $500 if you think it's good value and intend to hold long term ? I've played this game in the past and lost out on teriffic buys because i was being stubborn over a few thousand bucks. Don't forget the time and energy you are putting into this. Is it really worth $500?

lol A terrific buy returns at least 5% after interest and expenses.

Maybe you should step out your front door and look around because those average deals you call "terrific" (like this one) are everywhere.

 

[MsAli]

Piston, how do you calculate the return after expenses and interest?

The rental yield for this one is 7.74% + (calculated by yearly rent / purchase price) [slightly lower when you factor in the LMI, Stamp Duty and Solicitor's fees]

 

[NedKelly]

My take on this is that if the gross rent is $350, by the time you have taken out some management fees, landlord insurance, some maintenance, etc. you will be left with about $315 gross, deduct the $38 body corporate and you will be left with $277 per week. Will that pay your loan?

 

[MsAli]

My take on this is that if the gross rent is $350, by the time you have taken out some management fees, landlord insurance, some maintenance, etc. you will be left with about $315 gross, deduct the $38 body corporate and you will be left with $277 per week. Will that pay your loan?

No it wouldn't. I've never thought of it like this. Thanks for pointing it out! Might have to find something crazy to be able to do that

 

[Piston Broke]

Piston, how do you calculate the return after expenses and interest?
The rental yield for this one is 7.74% + (calculated by yearly rent / purchase price) [slightly lower when you factor in the LMI, Stamp Duty and Solicitor's fees]

eg:
Those fees are part of your capital outlay and are part of the purchase price.

I like to work on yearly figures and allow for 20-25% for expenses.
Rent = 18200 - 25% = 13650 (262.50 wk, 1137.5 mth).

$13,650 is ebit (earning before interest and tax) and depreciation.
13650 will pay interest @ 6.8% for a 200k loan.

So if your loan is 200k, then your cashflow is neutral, and earnings after interest and expenses is Zero.
You will get back some tax from depreciation, but you will also have repairs & maintenance over the years. Depreciation is a real expense.

The other very important factor is being able to read between the line of the bodycorp minutes for large expenses that may be looming.

My personal eg:
Price = ~170k
Rent = 17K ebit (avg over 5 yrs)
Loan = 112K
Given the low LVR it was cashflow positive ~80wk. Not "terrific" but still good.

But these are very hard to find when most think a "terrific" investment sub 250k costs $80 per week to hold.
But the market will eventually weed them out, that's just how it goes.

 

[Property Meister]

im in a similar situation as to you,

asking price $180k, on the market 2-3 months,
offered $163k, got rejected,
final offer of $166.5k,
another party has offered $165.5 or $166k unconditional,

agent said that vendor will most likely take either, they have plans for an extension and will do the extension if they dont sell.

now apparently they've been made aware of a similar property very close by that sold for $175k recently (which I cant find), however, there are 2 properties in the last 2 months that are better and have sold for $140 and $150k, which I made them aware,

oh well, ive made a final offer and moved on to the next one

 

[shuggy]

lol A terrific buy returns at least 5% after interest and expenses.

Maybe you should step out your front door and look around because those average deals you call "terrific" (like this one) are everywhere.

One buy i missed out on was a 3br unit rented for $320pw. I offered $152k and they counter offered with $155k but i was too stubborn to pay the extra. In hindsight i should have because it sold 5yrs later for $440k. Do you now comprehend what a teriffic buy is?

 

[pennyk]

In the end, it is the sellers decision whether they accept an offer which is lower than their asking price. But you are under no obligation to "cover their liabilities" or offer anymore.

I would let the agent know that you intend moving on and looking at other properties unless your offer has been accepted by 5pm tomorrow. At the moment, you are letting the agent manipulate you into paying more.

I also dont think you should speak to the vendor directly. That is what the agent is there for.. to be a "gateway". We had someone come to our door and try to pressure us into selling to them after we'd already accepted an offer on our PPOR. It was a big turn off and we felt somewhat attacked by this person - it was an intrusion into our lives. It also made them look desperate.. I think you need to come across as being "cool" and detached from the sale.

and if it doesnt work out, there are definitely plenty of other opportunities in the current market.

 

[MIW]

MIW, actually I believe that the vendors purchased it expensive at the peak of the market. Plus it is the best in the complex. They purchsed it renovated - so no wonder they paid that much. Currently in the area 2 BR modern units are selling around $225k - $230k. Hence I saw the value in this....but doesn't seem like it will give much equity even if it was purchased for $231k. The upside was the rental which is around $350 per week...I haven't called the agent back. I guess you can say the purchase is around $220k given the condition of the property. But again defeats the purpose of equity

That's what I presumed, perhaps being purchased above the amrket value in first place. I would stay firm with your offer and start looking for another one....just in case.

 

[willair]

That tells you a lot upfront,the vendors are desperate,and the agent can't even lie straight in bed let alone look you in the face and tell the upfront truth,just play the game backwards and say that's my final offer you have 48 hours then your number goes in the waste bin,..

 

[MsAli]

Thanks Piston, I need to be mindful of this...I've thus far ignored the expenses when calculating the rental yield. But I never knew people did? You must have some crazy deals to be able to get 7%+ yield AFTER expenses (or are you saying 5%+ is good after expenses - as long as it covers repayments after expenses?)

Penny, I'd feel the same!

No calls from the agent today. I didn't call either - the offer expired at 6pm this evening. The one next door (needing $10-$15k renovations - possibly more if bathroom is replaced) has been on the market for around 7 weeks now. I saw it mid Jan prior to going on 5 weeks of holidays. I had put an offer of $213k and then $215k back then which was rejected (asking price is $230k+!!)

Tonight I put an offer of $210k, which has also been rejected. The listing agent is on holidays, however the agent that I spoke to was least interested in negotiating and she referred me to the ad which suggested 230k+...No way it will sell for that price. I'll keep hunting. I don't get why vendors have so much attitude even in this (apparently slow) market!