Most readers know that at Metropole we source investment properties which have development potential for our clients.
The properties we buy are usually older established houses in great positions, typically in Melbourne’s bayside, eastern and southern suburbs.
Using our criteria, we buy properties where land makes up a large proportion of the purchase price. This is because land goes up in value and the dwellings slowly decrease in value over the years.
The properties must also fulfill our other buying criteria including being close to amenities and they must be highly sought after by owner occupiers and tenants, plus they must be in areas where there is a high proportion of owner occupiers.
By obtaining development approval for townhouses on these sites, our clients add considerable value to their properties. Most then go on to develop their project using our development management services, but some just make a quick profit by selling the site with permits (DA).
When clients ask us why they should use our services to find their investment properties (either as a buy and hold strategy or those with development potential) we often explain that we buy properties that they wouldn’t have access to.
We get first pick of many of the great properties.
This happens frequently and happened again last month when I purchased a property for Glen.
Glen already owns a number of investments and now wanted to more actively participate in the growth of his investments by becoming involved in property development.
The way it worked was that I was approached by Chris, an agent from whom we had bought a number of properties.
As you can imagine, when you build this type of relationship and you are know as a serious professional property buyers, selling agents will speak with you more honestly and tell you the truth which gives you a better insight into what the vendor really wants. This greatly helps us in formulating a negotiation strategy.
In this case an elderly couple needed to sell their house as they had just been accepted to enter a retirement village. Being elderly, the couple wanted a “hassle” free sale with settlement on a particular date that would allow them to move.
While price was important, it was not the most important factor in the equation.
What was even more interesting was that they had not as yet appointed a selling agent. They had approached a number of agents for marketing proposals, including Chris who rang me about the property.
As it happens, we know the suburb of Bentleigh well. I have bought a number of properties in the area for clients, and Metropole is undertaking a number of town house developments there for clients. We were not really interested in the old house on the property, just in the great block of land it sat on.
So we had all the ingredients to snare our client a bargain – a motivated vendor, needing to sell and a motivated agent, trying to get a listing. We devised the strategy that our client, Glen, would sign an unconditional contract of sale to settle on the date the vendors wanted but at a below market price.
I can imagine that when the other agents presented their proposals to the vendors they told them of all the buyers they had on their books. When Chris arrived, he had a signed contract of sale and a deposit cheque. The elderly owners would have no “hassles” or worries and could move on the day they wanted. They would have to compromise on price, but a certain sale was more attractive to them than a promise of $30 or $40,000 more. The sellers countersigned the offer and Glen got himself a bargain.
I should point out that prior to offering the property to Glen we assessed the development potential of the property, did our feasibilities and recognised that the property was a great 2 townhouse development site.
The house is in fair condition and will be rented out for a year while we get development approval for a 2 townhouse development.
Glen will then be able to refinance against the extra equity he has created and proceed with his development using Metropole as his development manager.
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