Back in 2010, I was looking to buy an investment property for myself and help a few friends do the same.
It turned out to be a crazy month. My friends and I all bought properties and all of them turned out to be far from normal. In this case, a professional agent turned against the owner of the property and helped us out as the buyers.
The bottom line: a fried chicken helped us get an incredibly low price.
The Story
The property
I was looking for properties around Lakemba because there was a good train line, a thriving local economy and the area was improving rapidly, yet the suburb had a bad name. This made it a great area to invest in.
While inspecting a property in the area I asked the agent if he had any properties that he was having trouble selling. He said he had one but I wouldn’t be interested. That was music to my ears and I asked him to tell me a little more.
He immediately told me everything that was wrong with the property: it was on a main road; the owners were getting divorced and they had to sell; and worst of all the owners were absolute pigs and the property was a mess!
Great! And before you call me a nutcase, the fact is the agent was probably telling the same thing to the other buyers which means no competition.
A fantastic mystery
When I had a look at the property online I could see that the address was shown yet there were no photos showing the inside. That’s great!
Good as new.
The property had been on the market just over seven weeks. This was a great time to make a low offer because the initial surge in interest has passed.
A Clever Solution
And then came the fried chicken…
My friend and I went to have a look and we were amazed, but not in a good way. Seriously, these vendors had some issues!
There was junk everywhere! Toys, papers, clothes, you name it.
Best of all, there was a fried chicken lying on the carpet as we walked into the bedroom. Wow, incredible. Any other buyer would have been turned off but not us.
Here’s the thing: the property was at the back of the block so it wasn’t affected by traffic noise.
It was also on the edge of Lakemba so it had the stigma of being in a bad area but actually it wasn’t such a problem.
And it was huge! It was around 150m²! The kitchen and bathroom were great and wouldn’t even need to be renovated. In fact, the building was only seven years old.
Make an offer they’ll probably refuse
We figured that the property was worth around $310,000. It had been listed for a quick sale at $319,000.
We made an offer for $230,000 because we knew they were under pressure to sell and there was no competition.
That was way too low but it didn’t hurt to try. The agent wasn’t happy and said the property would go to auction. In hindsight, we should have been more reasonable.
Save this date! Oh, wait…
The agent told us the auction was on the 29th of that month but his assistant had stuffed up when they updated the online ad and the 9th was advertised instead!
By then that date had already passed and nobody else knew the auction was on. When we showed up we saw that there was only one other person registered and they didn’t really know what was going on.
The bidding began and soon hit $250,000 with the other buyer refusing to go any higher. The agent then made a vendor bid of $260,000.
Guess what? If it is you versus the vendor bid then you don’t have to worry. Just stay put! And that is exactly what I told my friend to do.
He waited and the property was passed in because, quite simply, the vendor can’t win their own auction! Some buyers get jumpy and bid against the vendor, which is kind of silly when you think about it.
We then began negotiations with the vendors. They wanted $300,000. We played hardball and were prepared to walk away. After going back and forth we agreed on $283,500 and the contract was signed. What a bargain!
Keep in mind that they originally purchased the property in 2002 for $250,000.
Blockheads, eat your heart out!
The renovations were easy. The carpet came out and the floating floor boards came in. That cost less than $7,000. We cleaned up the property and painted the walls ourselves for less than $2,000. All of the renovations cost less than $10,000 and were over in a few weeks.
That’s the advantage of fixing up a place that only needs cosmetic improvements as opposed to fixing structural problems. It takes very little time and money yet you can add a lot of value.
A Happy Ending
Sittin’ pretty
We just revalued the property in July 2013 for $380,000! Now that’s a bank valuation so the real value should be a little higher.
On top of that, the weekly rental income is $420 a week.
Considering that my friend owes only $226,000 at a rate below 5% he is paying less than $220 a week in interest. After strata fees, council rates and managing agents fees he is way ahead.
How you can be awesome as well
Let me be clear: we’re mortgage brokers not buyers agents. However, we can guide you through the process of buying a home.
If you would like to apply for a home loan, call one of our expert mortgage brokers on 1300 889 743 or complete our free assessment form today!