Here it is – property #6 at another Logan suburb! Why back to Logan, you may ask?

Trust me, I was trying to diversify at that time as well which is why property #5 was up at Murrumba Downs. And after property #5 I’ve also had a good and hard look out west – more precisely around Goodna, which is about 20km west from Brisbane CBD. I also had some interesting discoveries around Goodna….well I’ll leave that story for another day ?

So after all the due diligence around Goodna, while the yield stacks up but I wasn’t too convinced on the capital growth in short term. Basically there was too much land out towards the west, and also literally half of Goodna was prone to flood.

It was around that time this little Eagleby deal caught my eye. Eagleby and Beenleigh has always been on my investment radar, especially Eagleby – where I almost won in an auction back in 2015 for a 3 bed lowset house for $242K. Looking back it was seriously cheap at that time, but it was an auction and I already gone beyond my budget so I’ve called it a quit at that time (It ended up being only 1k difference with the winning bid).

Again, Eagleby back in 2015 had a bit of stigma like Logan Central, Woodridge and Kingston. The tenant were claimed to be rough and on the equivalent scale as the other stigma areas – hence the cheap price. But being an investor I don’t mind investing in low grade areas when purchase price, rent and other additional features stacked up and that’s what this deal was about.

What attracted me first thing is that it’s sitting on a 750SQM corner block – and that’s the biggest selling point for me, as I know in Logan shire:
– Anything over 1000SQM standard block can be subdivided (subject to council approval)
– Anything over 750SQM corner block can be subdivided (STCA)

So straight away it ticked my box of subdivision potential.

2 Mon - 2

Next, location. The Eagleby shopping plaza is within walking distance which has IGA, local chemist, bakery etc so enough convenience for the tenant. Eagleby South State School is very close by and also it is about 5 mins drive to Beenleigh CBD and train station. So not too bad – at least shops are available to provide good convenience to tenant and also may attract family with children who like their kids to be able to walk to the state school. So I gave location a tick as acceptable.

Third – the price range. It was advertised at $279,000 with an estimated rental of $310 to $320/week. So the yield is about 6% – based on the cashflow calculator at 5% interest rate repayment it will only cost me about $4000 pre-tax to hold which is also not too shabby! And for close to $280K I can purchase a block with subdivision potential later on – I really like that idea!

The seller was an old lady who has stayed there for the last 23 years and is looking to either move into retirement village or move closer to family. At the time of offer agent also indicated she may consider staying on for another 3 months so I was glad that I may not potentially have to look for a tenant from day 1 of settlement! What a nice deal I thought at that time. It’s a shame later on she decided not to stay so I did end up having to look for a new tenant, but that’s also OK.

So the initial due diligence looks good – straight away I picked up the phone and got onto my PM to arrange a pre-purchase inspection. Couple of days later PM came back with details on a couple of work required as it’s an old house, but also told me that the house is ideal for a granny flat at the back if I don’t want to knock down the house later on and subdivide. So there’s another potential option for the future – I’m getting more and more excited with what I’m hearing!

2 Mon - 3
Original Lounge – in decent condition
2 Mon - 4
Original kitchen – slightly small but acceptable and functional
2 Mon - 5
Original bathroom and again in acceptable condition
2 Mon - 6
Bedroom carpet could do with a new one – small cost but will have relatively big visual impact
2 Mon - 7
Enough side access for a granny flat to live out at the back – just need to knock down the shed ?

Now I’ve worked out the cost required to get the property into a state for tenant, it’s time to negotiate on the offer price! My initial price was $275K and the agent told me she had this offer on the first day the property was listed and the owner didn’t accept. So I countered with $277K and that’s when she indicated other offers are also now starting to come in so I will need to put in the best offer and sign the offer form. So on that day I’ve signed the offer form with $277K and she indicated I should go for a bit higher.

So when I got home I looked at the cashflow calculator again and remembered what I’ve missed last time during the Eagleby auction. I thought about paying the sales price at $279K, but then again thought if other offers are also at the sales price then I need to go slight beyond that to win.

On next day I sent back a revised offer form – final offer $279,250 but in exchange for a longer settlement period of 49 days (7 weeks)! Slightly higher than the advertised $279K but as exchange I’m asking for a longer settlement period in order to maximize the chance of securing a tenant before settlement ?

Keeping fingers and toes crossed….come next day agent emailed me to congratulate me on securing the place! I bet it must be the $250 has won over 3 other offers…probably just slightly though! ?

Looking back, the purchase timeline for this property is really short:
– Day 1 – property first list online, initial enquiry/contact made with the agent
– Day 4 – PM inspected the property, first offer made at $275K
– Day 5 – First revised offer made at $277K with offer form
– Day 6 – Second revised offer made at $279,250 with updated offer form and 49 days settlement
– Day 7 – Offer accepted and contract exchanged! Yay!

It goes to show that a good deal doesn’t last long – and sometimes you may just need to bite the bullet and pay for a bit more in order to secure a site with good future potential, because for the next buyer it will appeal to them with such potential!

Of course no deal is perfect. While this corner block does have subdivision potential the house is smack right bang in middle of the block – so if I do want to subdivide then it will have to be a complete knock down, subdivide and then rebuild. At this point I have no calculated such feasibility but the thought is will keep for medium to long term and assess what option suits best later down the track. Luckily the house is only weatherboard so knock down cost shouldn’t burn a big hole in the wallet.

The other alternative is to build a granny flat at the back to improve the yield of this IP. Granny flats under Logan council can be leased to a separate, unrelated party (unlike Brisbane City Council who insist on having to rent to a relative of the existing tenant). Of course, due diligence needs to be done on the vacancy and the dwelling type to determine whether there is such demand before going ahead. But at a conservative estimate, a 2 bedroom GF in Logan could cost between 100K – 120K and potentially rent somewhere between $240 – $270/week.

At this point in time both options are not viable and I’m happy for it to sit on a 6% gross yield. Plus I was lucky enough to have an angel tenant moving in pretty much after settlement who has been living for over a year and she doesn’t complain about anything….I didn’t even need to spend any money in replacing the carpet. Such tenant are not easy to find in Logan, so if you can find one make sure you keep them very happy!

In summary
Suburb: Eagleby, QLD
Advertised Price: $279,000
Purchase Price: $279,250 (May 2016)
Repair cost: ~$1000
Total cost (purchase price + repair/improvement): $280,000
Bed/Bath/Garage: 3/1/1
Land size: 751SQM corner block
Exterior: Weatherboard
Built around: 1967
Current rent: $325/week
Gross yield: ~6%

As always, if you have any questions feel free to contact me 🙂

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