A little while back, we ran a massive race. It could be said it was the grand prix of property purchases. You see, I found a really, really fabulous development site for my client and there was no time to waste as I realised that the property was way under priced!
It all started with a call from the agent. “I’m listing a property you might be interested in Jo” she said. The grin on my face broadened as I asked a few crucial questions...what were these questions?
There were five:
What is the land size? I was told 1,000sqm (it was actually 1,039sqm)
How many rooms does the house have? FOUR (most houses in this suburb are 2-3 beds)
What’s it renting for? $265 per week (ears prick up...WOW this is way under rented!)
Where is it? Did I hear you say “on the corner”?... YES, it was a corner block!
What is the listing price? $270,000...hmmm I knew a four bed house on 500sqm (more than half the land) had recently sold for $272,000 a few doors up and it was not a corner block.
As I asked these questions and even though I actually received some incorrect answers, my heart was pounding. I knew this was an extraordinary property. As luck would have it, I was going to be in the Hunter the very next day so I could check it out immediately.
I sweetly asked the agent... “Can I inspect the property tomorrow?” After a few hours wait, the answer came by email....No, not yet as the contract had not been received, although they had a signed agency agreement. I picked up the phone and after a few minutes chat, I had gleaned the address of this property.
The next day I could think of nothing else as I hit the freeway. My curiosity was soon satisfied as I stood at the fence, peering through the bushes to grab photos of the property we were soon to secure for our client.
Had I not had a good relationship with this agent, I may not have been able to get the address. But she knew that my clients were always strong purchasers. As part of our process, before a client even signs up with Property Bloom, we ensure they have done THREE things:
Sought independent financial advice to ensure property development is the right strategy for them.
Had a preapproval from their lender on figures relating to the type of development we’d be project managing for them.
Discussed the correct structure to purchase under and tax implications with their accountant.
So we were able to move quickly, before this property had officially hit the open market. We had a two day head start. We knew the property would hit the internet sites and be advertised in the local newspaper very soon, so time was of the essence.
I took lots of photos and rang my surveyor. Had he done a survey on this property in the past? Sometimes I find this to be the case and we can obtain a copy of an old survey. But, today he said “no, he had not”.
I rang my client and told him my feelings about this property. The house had a lovely Federation style with wrap around veranda. The large corner block was a no brainer. BUT...even without seeing the contract, I knew that the zoning for this suburb was changing to low density under a proposed Draft LEP. In the past we could have lodged a DA to build a duplex behind the house and complete a two lot Torrens Title subdivision. But I knew this was no longer an option. I had developed in this very street before, so I knew where the sewer main ran. I knew rental demand was strong. Most importantly, I also knew that being a corner block with kerb & guttering on just one boundary meant that council would condition kerb & guttering to be completed on the other boundary as part of the DA consent if we were to lodge a DA for a subdivision. Whilst the block was large enough to subdivide, this cost of approximately $30k - $50k for 50m of kerb & guttering including the bitumen sealing of the very wide road shoulder, could kill the project. This was the deciding fact for me. An inexperienced punter, not knowing the local council requirements, may have easily found themselves in hot water.
The answer for this site was a strong yield creating development strategy and we would build a two bedroom granny flat to supplement the four bedroom house. This would not over develop the block and leave adequate outdoor living space around each dwelling. We would not be asked to upgrade the road as part of this Complying Development. The property was opposite a school, the four bedroom house would rent to a family with kids needing some yard space and the two bedroom flat may well be rented by a retired couple of a single parent.
So with a little freshen up renovation, paint and new carpet, the house will rent for $350 per week. Remember we paid just $270,000 for it (full asking price was our very quick second offer, before the property was ‘officially on the market’). It will cost us $90,000 to build our granny flat and this will rent for $270 per week. The result is a 9% gross yield for my client.
By this time, we were well and truly sprinting to exchange. I knew as soon as this property hit the open market there would be mega interest in it. Little did I know, it would also be the catalyst for some very unscrupulous agent activity. We later found out that one local agent who DID NOT have a sales agreement with the vendor, tried to gazump us by talking directly to the vendor telling them he could bring them a buyer above asking price. You can only imagine how the listing agent reacted to this!
That’s why we were sprinting. Within 5 days we had received three crucial pre-purchase documents:
Pest & building report
Bank valuation and unconditional loan approval
My client’s conveyancer had to hound the vendor’s solicitor to make them act fast and move to exchange as quickly as possible. They didn’t know what had hit them. Usually it’s the other way around with the vendor pushing to exchange. My job was to keep all parties fully informed so everyone knew that my client was moving as quickly as physically possible to exchange. This communication process was crucial in the success of the deal. The vendor had told the agent to keep the property on the market until it was exchanged. So if for one minute, the agent thought we were moving too slowly, they could well have taken another offer to their vendor.
My message from this experience to you is....run loudly and fast...don’t ever let things go quiet! Manage the process till the end if you want to ensure you buy that property. As they say...it’s not over till the fat lady sings or in other words...until you sign the contract and exchange takes place!
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