PJ's Rural Adventure update

From: Phillip Jacovelli


Rural Update,

A few months back I posted that I purchased of a block of six 2 bedroom units in Morwell, Victoria (Just under 2 hrs East of Melb) for 120K - Where some of the units had been empty for up to 3 years. Only 2 were occupied and talking with the current tenants would make you more depressed.

I basically ran my figures, put a deposit on the building, got an Engineers report for the structure for peace of mind and then faced the music back in Melb. Morwell? why the heck did you buy in Morwell?

Here is an update now that it has been settled for a couple of months

My reasoning to go rural was for the great +ve cash flow it would generate for some other Melbourne projects I have planned. Generally it’s not my strategy to go roving around the country side looking for rural potential’s, my rules are generally +ve cash flow for the investment to support itself and growth potential. In this instance I went for the good cash-flow.

All the work I have done to date has all been purely cosmetic – Tidied the garden, cleaned up everybody’s junk that was laying about. A paint job was like throwing a pot of gold inside the building! Got rid of all the mission brown, ESP’d the kitchen and put shiny new brass knobs on the kitchen doors after painting them a nice bright gloss colour. I have completed painting 2 units and they have been snapped up!

Thanks for everyone on this forum for you reno suggestions a while back. This forum is a brilliant resource!

In fact anybody who walked in while I was working would say wow! And one person was so eager to move into an unpainted unit, all I had to do was give it a thorough clean and he was happy with that! And I haven’t even started painting outside of the building!

I now have 5 occupied and one to go, which I plan to complete in the next couple of weeks. My return B4 expenses is 20% of which 10K is available cash flow after all costs. (Interest, Rates, Insurance etc etc).

The agent would like to on sell it for 200K. Which is promising if I would need to have it valued for more funds.

Moral of the story is that Morwell is a fairly depressed area with lots of unemployment with a lot of vacant properties, however when you look at the type of properties that are vacant – it’s not surprising. There is a shortage of clean bright functional, affordable places to rent.

My decision to buy was helped by these two saying's ringing in my head!!

The most often used word in Real Estate is “if”

If it’s a tree you want, you should have planted it 20 years ago!

..besides, spending some weekends in the country with the sun shining, the birds singing with a nice breeze blowing though the unit with some good music going while you are accomplishing something is kind of fun :eek:)

..that's what I call an excellent adventure!

Phil J
 
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Reply: 1
From: Nigel W


Great work Phil! Inspirational stuff.

Could you give us some more ideas about how you selected that town?

Cheers
N.
 
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Reply: 1.1
From: Phillip Jacovelli


Nigel,

Basically I knew that Moe and Morwell region was very affordable because the regions major employer the State Electricity Commission was privatised in the mid 90's. Compared to other regionals around Melb - ie Bendigo, Ballarat. Also I was quite surprised how expensive a place like Warrnambool is - over 3 hours from Melb at the end of the Great Ocean Road. Anyway, after compiling a list from the internet and making appointments with local agents, I had my eye on a Block of Units priced at 210K - then the agent showed me the one I eventually bought. The culture of the region is certainly different to Melbourne as local landlords don't seem to be proactive with their properties. I found that the agent worked very hard in order to make the deal happen as I could put up 10% no probs and the deal was not subject to finance.

rgs

Phil J
 
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Reply: 1.1.1
From: Darren B


Well done Phil. Dont worry what your friend think in melbourne. I get the same advice too, but all that positive cashflow I get from my reginionals, means I dont have to work anymore. I rescently bought a block of 5/1 bedders for $110k, that rents for $18k a year. After all expenses,$600 per month positive cashflow. Beats buying a house in outer melbourne for 150k, that rents for a measly 170 bucks per week and costs me $200 a month to keep.
 
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