Huge Savings Of $60,000 Off The ‘Offers Over’ Asking Price.

How does buying a property for $60,000 less than the agents ‘offers over’ asking price sound? Well that’s exactly what we were able to achieve with the purchase for this client.

The Brief

Looking to grow his portfolio, we knew that this property had to be something special to help Keith (not his real name) achieve this. With a duplex project underway with our team already, it was important for this next purchase t0 provide excellent cash flow to help with serviceability – this meant a positive cash flow property was needed.

Along with this, we also needed to make sure the property was in a high demand area for long-term capital growth so that Keith could continue building his property portfolio. And we would need to buy it for under market value, so that he could create some instant equity. By achieving the ‘trifecta’ this will put Keith in the perfect position to enable him to purchase his next investment property sooner.

After in-depth discussions with Keith, we decided to use the strategy of a dual income property purchase. One of the greatest benefits of buying a dual income property is that you will have two rental incomes coming in each week, as there are two separate dwellings, but you’ll only be paying one lot of rates. The options with this strategy were a dual occupancy property, a house split for two residents or a house with an auxiliary dwelling such as a granny flat.

Due Diligence

With our brief set, it was time to commence the search. Knowing that this property had to achieve the ‘trifecta’ mentioned above, our search began within close proximity to Brisbane.

As there are many areas with flood zones and bushfire prone land around Brisbane, we needed to do our due diligence to ensure that any property that met the brief was not located within these areas. As well as this, we needed to ensure that the property was not under any flights paths.

Following our inspections, we had short listed a property that ticked all the boxes – a dual occupancy property. We then had to do further investigations to check the titling of the property and whether it was separately metered for water and electricity so that each tenant could be charged for their utilities.

With both units already tenanted, we requested copies of the leases to find out how long the tenants had been living there, when their leases expire and how much rent they were paying. This was then cross-checked with comparable properties in the area to ensure the rent they were paying was not inflated and that our client would achieve the same rent (or more) if either of the tenants decided to vacate once their leases expired.

Challenges

There were many properties that when you just look at the numbers, seem quite attractive at first glance but when digging further in to it, this quickly changes. Many of the properties were within flood zones, bushfire prone land and flight paths, which is not ideal for an investment property to achieve maximum long-term growth. These were quickly eliminated and the search continued.

A high yielding property in a good growth area can be quite challenging to find. In many cases, you will need to choose one or the other but we were determined to achieve both.

Negotiations/Acquisition

We had narrowed it down to a young dual occupancy property, located less than 15km from the Brisbane CBD. Positioned on a quiet street and within minutes to the local shops, schools, hospital, TAFE and train station, and in a suburb with less than a 1% vacancy rate, this property was in the perfect location to see some excellent growth over the coming years.

The property we shortlisted consisted a total of 6 bedrooms, 3 bathrooms and 2 car garages. Given the median price for 3 bedroom houses in the suburb was $560,000, you would need to spend over $1million to get two properties with the same configuration. And with a median rent return of $450pw, this would only return a 4.2% yield which would not achieve our goal.

This is the great thing about dual occupancy properties, it costs much less to buy than two houses, yet it still provides you with a dual high yielding income. This property was within our clients budget, with an original asking price of offers over $750,000 and returning $815pw with long-term tenants wanting to stay on.

In order for our client to grow his portfolio quickly, we knew that we had to get this property for much less. Even though they were asking for ‘offers above’, it does not deter us from offering less by utilising our expert negotiating skills to back up our offers.

Knowing the reason for the sale and how long a property has been on the market, can provide a great advantage when it comes time to put in an offer and that’s exactly how we approached this purchase. After a lengthy negotiating process that went on for days, we were finally able to get our offer of $690,000 accepted. This was a huge saving of $60,000 off the ‘offers over’ asking price and is positively geared at 6.2% yield. Only months later, our client has once again engaged in our buyers’ agents services to find his next property.

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