SA First IP in Mawson Lakes - Off-market (family deal) - yay or nay?

Hi all,

First time posting, long time lurking.

I am yet to own my first home (and not keen to move out yet), but have been actively looking for an investment property here in Adelaide.
My grandpa is in the process of cashing out of a few of his properties, including one in Mawson Lakes I've told him I'm interested in (and he is happy to help out).

It's a 4 bedder, double story on ~350m2, built in 2008.
Its a nice, simple house, in a good pocket near the highway and station, and he has had it leased out for ~ 10 years to a family who've been good tenants (paying $480 a week now, no property manager).
Their kids are still in high-school nearby, and they aren't looking to move out any time in the next ~ 5 years.

He's willing to sell it to me for $600k, but I won't be able to kick out the tenants/live in it myself until 2025. I don't think he's overly keen to sell this one and is happy to just keep holding it himself as it's cash flow positive, but we are quite close and he has helped research/inspect houses/look at opportunities over the last 18 months.

I have 150k for a deposit and in terms of strategy my 1st priority is to be cash-flow neutral/positive, 2nd priority is capital gains. However this property may not cash flow but I think the potential gains might make it worthwhile. My cost of living is very low (live at home) and I can easily cover the mortgage payments for this property + another in the future.


What are everyone's thoughts? I like the area, and think it will grow in value, but its a weird set of circumstances.

Cheers!

 

Rethink this. By aiming for cf neutral / positive, what are you gaining? (Cashflow, obviously). What are you losing out on? Beware of your brain clutching at a smaller 'now' return versus a longer term 'possible' return.

Clearly you can save, so you don't need the cashflow. If you have a long term plan in mind, capital gains should be a priority.

 

This is Mawson Lakes property prices over the last 10 years. Zero growth.

Inflation over this period is up 16.4%. So effectively your Grandpa lost 16.4% over the past ten years.

What makes you think it will grow in value? It hasn't in the last ten years.

 

Standalone houses in Mawson Lakes are fantastic. The apartments / townhouses there not so much because there's a big supply of them = lots of competition when renting it / selling it in the future.

4.1% Yield is not fantastic, but okay. I havent seen it to know what condition its in or what features it has, but if it has 2 bathrooms and 2 garage spaces, then 480 might actually be under market a little. If he wasnt using a property manager then he probably hasn't done the proper lease renewals and market reviews each year.

You can do this any time you wish really, assuming they don't actually have a 5 year contract?

 

I would have thought mawson lakes is a desirable place to live, it may not have had much growth in 10 years as it has been filling the vacant land but it is full now. I would have expected reasonable growth in the next 10 yrs, at least aligned to the general Adelaide growth.

 

Yeah, I'd think so. Its quite nice in comparison to nearby suburbs, and i think the figures of previous would be negatively affected by the new construction which has now completed.

 

He does have a contract to 2025, and end of this year there will be annual market rent reviews on it, so it should increase from 480.

It is 2 bath/2 garage, and from looking around online it is a definitely a bit under market.

 

I wouldn’t be putting my 600k in Mawson Lakes. Much better opportunities at that price point in my opinion. CG first would also be my opinion.

 

Seems very high for a small block like that. I don't think you will have a hard time finding a much better deal.