Setting your limit

[JohnA]

Potential IP is for auction in a few weeks. The agent gave me the rough guide of 240-260k. At the open house I heard him tell someone else 230-260k. Background info is last sold in 2007 for 184k add 20% growth (4 % x 5 years reported growth in area) is 221k is the figure I have come to as what the property is worth.
There has been no value adding to the property - no recent painting, bathroom update, kitchen etc.
I believe it is in a good location and that it will always rent well. It is promoted as a 2 bed 2 living but is easily converted to a 3 bed and would come up a treat with a cosmetic reno, updated bathroom. Definately potential to value add - but do I pay for that in the original price?
It was advertised previously with offers invited. It is also no longer on realestate.com so I can't view how many hits it has had.

How do you set your limit? If it is in a good location then do you go the extra 10k?

 

[andrew_de_a]

Look at what similar properties are selling for

 

[Jake Milne]

If the auction quote is 240k - 260k you have buckley's chance of buying the property for 221k unless it is passed in.

At the moment a lot of agent's are adhering to the phrase "quote it low, watch it go" when selling via the auction method.

I'd say there is a higher chance that she will sell either in or above the quote range.

Also, if offers were being taken prior and the listing is now removed from realestate.com.au I dare say that the property is now under offer. It's unlikely that an agent would remove the auction advertising unless they were very confident that a deal was going through.

 

[nhg]

Depends

For a buy and hold, I look at how i can rent it and for how much it would rent, and work backwards from total rental.

eg. I want 8% yield and rental would only be $10k/year.
$10k/0.08 = 125k
Then 125k/1.05 = 119k to account for stamp duty and other legal costs.
That's my upper limit unless I see good growth in the very near future.

If it is a reno, I look at comparable sales and also use the above mentioned formula. I then deduct my profit margin, and estimated reno + time costs.

Finally I look at financing, if it is a zoning requiring >10% LVR it may not be as valuable to me as it will prevent me from moving forward to the next purchase quicker.

I'm just starting and rarely see a property that scrapes in, tho it keeps me above water

 

[matto_]

Look at comparables in the area (treat it like an off-line valuation).

what area is it BTW.