[Portfolio Showcase Series!] David’s IP1 – OTP in Granville (Part 1)

For everyone’s benefit – I will create a portfolio showcase category and start migrating all the portfolio showcase & stories across from my blog “David’s Property Journey”. Hope that now everyone has had a chance to make progress towards their goal, you may be able to get something different from these property stories/showcase!

OK, so my property journey starts all the way back to start of 2010…let’s roll the clock back to when I was still a relatively young guy who started working for a couple of years ?

While my income wasn’t very high at that time, Being single and living at home, my expenses was very low so I managed to save a deposit. But I didn’t know what to do with it! So I discussed with my dad who made some money from his business and property investment back in Taiwan.

I didn’t think about starting a business back then as I only just started working! So he suggested I think along the path of investing in property as it’s long term investment. Well I can tell you, it wasn’t an “aha!” moment for me.

We went to a couple of property investment seminars, saw some OTPs including Meadowbank (NSW) ones by Ironfish…those were selling around $350K back then and some with Parramatta river view. That almost became my first IP except dad think it’s not a “bargain” as all their river view units were already sold out.

At one point in time dad saw some ads about Ipswich being advertised as the “Parramatta of Brisbane”, with new house and land package around 250K to 300K mark. So off we go, jumping on a plane for a weekend getaway to the sunny Queensland.

After driving 45 mins from Brisbane airport to Ipswich, to be honest we were quite disappointed. It was really far from Brisbane CBD, and Ipswich was far from anywhere close to as developed as Parramatta!

On top of that, as I stood on the proposed lot and looked around – there were vacant land literally everywhere! I’m glad at that time dad knew his game and seeing so much supply with potential further land release, he told me this house and land package is not a good investment. It’ll literally take years for the price to grow, and Ipswich is nowhere as developed/ready as what we would’ve expected.

That was an eye-opener for me as an investor newbie. But I learnt from that day on too much vacant land is never a good thing to property pricing.


2011-07-25 15.24.06.jpg
Back in 2010 when the unit is still being built – I was always excited to stop by and take photos of it’s construction progress ?

After the Ipswich visit we decided to focus back in Sydney as it’s closer to where we live. We visited a couple more seminars and sales office but I wasn’t passionate enough at that time to jump. I mean, who at 26 years of age would be looking forward to a 350K commitment and a huge debt?? My mates were all talking about partying, chicks and cars, and imagine how crazy I would look when I tell them “hey I want to get into property investing with a huge debt!”. That’ll give me a couple of “you’re insane” looks for sure ?

So I wasn’t passionate enough, until one day dad found an article about an OTP in Granville. It was advertising for $360K with 5 years rental guarantee at $450/week.

You guessed it – it wasn’t the price, it was the rental guarantee that got onto dad and I. To be honest, $450/week with 5 years rental guarantee is pretty much unheard of in 2010! In other words, even if they couldn’t get a tenant in the first 5 years, they will still need to pay me $450/week rent! Mind you, the average price for units back in 2010 was about $300K and rent was nowhere near $450!

After discussing with the salesperson apparently the concept behind this $450 magical rent is that they expect the first 2 years of rent would be below $450, by the third year (2013) rent would have reached $450 par so they can break even, and then the last 2 years they will be able to increase the rent to more than $450 to make up for the loss in the first 2 years.

(Well, whoever came up with this speculative model has proven to be very wrong. Because by the time the 5 years rental guarantee has finished my Granville unit was only renting about $430…so essentially they’ve had to fund the rent difference all the way in the 5 years managing the property)

Also even though the OTP has Granville postcode it’s actually closer to Merrylands. It’s about 10 mins walk to Merrylands station. And at that time dad and I also went to check out Merrylands surrounding and we were quite impressed with the dedicated bus lanes around Merrylands station, with Merrylands Stockland shopping centre being phase 1 completed and phase 2 still being built. We liked what we saw and believe this would help employment growth and the future for Merrylands is pretty bright!

Even though the property was a lot more expensive than the area median, the peace of mind of having rental guarantee is really what got me across the line. I get to enjoy rental guarantee whether or not there is a tenant, as well as enjoying the benefit of tax deprecation on new buildings. And no lifts, no swimming pool, no gym, nothing fancy so strata fee would be low. Therefore I bite the bullet and paid the deposit! And one year later here it is!

2011-10-29 16.58.15.jpg
Nov 2011 when the unit has been completed. I was thrilled as this is my first property!! It also has a nice small community feeling.

In summary, purchase details for IP1 – Granville OTP:
Purchase Price: $360,000 (Sept 2010)
Configuration: 2 Bed / 2 Bath / 1 underground garage
Rent: $450 (rental guarantee for 5 years)
Gross Yield: 6.5%
Strata: $400/qtr (Nov 2011)

So sounds like a good OTP investment? We’ll discuss more in detail in part 2 ?

Cheers,
David

Like this article? We've made it easy for you to share at your favourite platform!