Since the purchase of property 3 in Slacks Creek I’ve been very happy and excited with the outcome. Yield has been fantastic since day 1 and my strategy in buying site unseen has been proven that it works!
So keeping the momentum going I’ve started searching for the next deal, again the similar Logan area in the hope for another close to 7% yield ripper deal.
And it didn’t take me long to land the next deal in a nearby suburb close to Slacks Creek – Woodridge.
If you recall in my post previously, Woodridge is one of those suburbs with a crappy reputation along with Logan Central, Kingston and Eagleby. That’s how I can get a low purchase price and achieve decent rental yield.
Again I applied the 4 purchase criteria which I established myself as a baseline:
1. Good Yield – Gross yield of 6.5% or more
2. Excellent Location – close to good school/public transport/major shopping centre/infrastructure
3. Contains scope for value add – such as cosmetic renovation, granny flat, build out downstairs
4. Has subdivision or development potential
So for example the Slacks Creek property ticked the following boxes in my criteria:
1. Good Yield – it was achieving 6.7% rental return
2. Location – closer to Underwood part of Slacks Creek and only a short drive to Springwood
3. Contains scope for value add – downstairs has room for adding value to increase rent
It ticked 3 out of the 4 boxes which is why I jumped in.
Now, after weeks of research and building rapport with agents, the due diligence for property #4 has ticked the following boxes:
1. OK Yield – Gross yield of 6% to 6.2%
2. Contains scope for value add – potential ability to build out downstairs (by looking at the floor plan), and an established shed in the backyard which has potential to transform into granny flat later on (Logan council allows granny flats to be rented out separately but not in Brisbane City Council – one of another reason why I was buying in Logan!).
Yes, not as many tickboxes as the Slacks Creek IP. But what really attracted me this time is the potential ability to build out downstairs into a complete separate living space. And highsets average price are starting to creep beyond 300K while this one is still under 300K. So I’ve contacted my PM to organize pre-inspection for the property.
The result was surprisingly positive – yes downstairs can be built out later on if I wanted to as half of downstairs is legal height but the other half isn’t. Also the shed in backyard contains power so can be transformed into granny flat later on easily!
Downstairs is also not blank canvas – existing owner has done some simple partition so there are currently two rooms which can be used as is – extra space never hurts!
Based on the rental estimate I have received from PM, current return looks to be about 6.2% with a bit of tidy up required. The list I’ve received from PM indicates:
– Fence were collapsing and will need to be replaced on both sides – about 4 to 5K
– Rear stairs were removed and is a safety concern. A new set of rear stairs are required – about 4 to 5K
– Kitchen and bathroom can do with a cosmetic reno to help boost rent – about 20K
Keeping these in mind I’ve made the offer of $295K with expected rent of $350, with the expectation I can slash price further after B&P. Offer was accepted and on B&P day I flew up to see the property for first time as well as go through the place in person with the B&P inspector. Since then I was able to go back and negotiate the price further to $292,500. I was really glad – every little bit helps!!
Organizing for repair and cosmetic renovation
Oh, it’s also worth mentioning during this visit I have also asked PM to bring one of her tradies so we can discuss the repair work and potential fit out and cost of building downstairs to turn it into dual-living.
So it was a 4 way party on the day – B&P, PM, builder and me. Getting all required people together to achieve something great – don’t I love this game!!
Along with the PM and builder, it was a very productive meeting. I’ve got some rough figures on how much it’ll cost to be able to get the place tenanted, plus building out downstairs.
I’ve compared the scenario of building out downstairs now vs later and came to the conclusion I want to save the equity in order buy more properties so will leave downstairs work for now.
After more discussion and negotiation with the builder we’ve agreed the scope of work are as follows:
1. Install new rear deck and stairs
2. Install new kitchen upstairs including oven and cooktop
3. Renovate bathroom upstairs to modern standards
4. Install new fence on both sides of the property
Altogether this comes to about 14K which I’m comfortable with – in fact comparing with a number of quotes I’ve received elsewhere from other builders it’s such a bargain! More importantly, I was really keen to get the scope and price agreed so work can commence asap in order to get a tenant in there! And as this builder is recommended by my trusted PM (who has done a fantastic job for me so far) and I heard other investors are also been using him so I didn’t have too much doubt at that time.
So I signed the Work Order and paid the deposit. We agreed on the date work will be carried out (pretty much one week after settlement) with a duration of 3 weeks. Learning from past experience with the cash-job tradie, I’ve also asked PM to commit to check-in on the progress every couple of days.
So all dots aligned and teeth crossed ready for a successful renovation! In part 2 I will cover in more detail on my first remote reno and things to watch out ?
Until then, if you have any questions about any of the above content feel free to leave a comment or contact me via the contact page.