As a property buyer’s advocate, I see all kinds of properties listed for sale, in varying levels of condition.
On first viewing, my mental checklist ticks over as I prepare an assessment to match the property to a prospective buyer.
But nothing prepared me for this.
When the agent told me he could not even hold an Open for Inspection for this two-bedroom apartment in Melbourne’s attractive inner-city suburb of East Hawthorn, I figured it must have had its problems.
But the state of disrepair was such that, when I had a valuer assess the property, he insisted it could not be valued.
His valuation: unvaluable.
That’s right. He literally could not put a figure on it, which of course made finance for my client impossible. I had not encountered this situation before.
If a picture paints a thousand words, I’ll add one more of my own: appalling.
The walls were crumbling, the back of the shower had leaked through into the hallway, the carpets all needed replacing and the bathroom was terrible.
My mental checklist was spilling onto pages two, three, four, and so on … this place required a complete makeover.
Yet the thing that struck me most about the opportunity was not the state of it, but the location.
East Hawthorn, just a short stroll to nearby Camberwell Junction. On a park, near the end of a quiet, leafy street, perhaps 15 minutes from the CBD. From the exterior, it was a nice, respectable building, with off-street parking and no suggestion that the remainder of the apartments had been let go like this one.
Frankly, it screamed opportunity.
If the valuer took some convincing, so too did my clients.
We requested a second opinion from a different valuer – they could not get finance, of course, without a formal written valuation – and arrived at a figure that seemed fair. Not long after, we had purchased the property for $265,000.
Next step was to make it livable, which is where our associated renovation company proves an incredible value-add to the buyer’s advocacy service.
Normally we spend around $35- $40,000 on renovations; such was the state of the place, we extended our budget to closer to $45,000.
Some structural issues we encountered with the water seepage into the walls were a major thing to address, and there wasn’t a room in the apartment we could leave untouched.
My goal with the project was simple: get my clients, a young married couple on their late 20s, to “manufacture” some equity by renovating their property – by adding value. I knew they would do well– but to be honest, this was a rare convergence of circumstances – and the results were amazing…
So, our new clients essentially bought the property for $310,000 (their purchase cost plus the cost of the renovation).
On completion of the renovation – which took about 6 weeks – their apartment was worth a figure in the high $300s (in nearby Hawthorn, where there is a significant shortfall in supply– we always consider what neighbouring suburbs are delivering – you would be looking at a price starting at $420,000).
Our clients chose Metropole Property Management to rent out and manage their new property. Pamela Yardney initially assessed that it could attract a minimum of $300 per week … a healthy return on investment from day one.
She was wrong – it is rented for $325!
The lessons from this story…
To outperform the general property markets, find properties to which you can add value.
Also consider leveraging your time and knowledge by using a professional buyers advocate. Remember, this property was never even listed for sale – our relationship with the agent gave us a rare chance to strike first, and experience told us this was a ‘can’t miss’ opportunity.
Yes, scenarios such as this are not every day occurrences, but at Metropole our property investment strategists get exposed early in the process to dozens of properties that offer great opportunities to our clients.
Who knows? Maybe there’s a diamond in the rough with your name on it.
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