My latest Geelong purchase - Go Newcomb!!

Hi all,

Just want to share a bit more detail on my recent purchase as I've had a few people asking me about the deal and now that I've got all the quotes too so can give everyone a better idea on what you could get as a deal in Geelong nowadays!

My first trip to Geelong was after months of reading up various threads on PChat in particular all the Geelong related thread. At that time I was gearing more towards Corio/Norlane due to low purchase I was able to get closer to 5.5% or even 6% yield. So my initial inspection list was full of Corio/Norlane properties....with a couple around Newcomb too as at that time this property was really 56 Portarlington that attracted me to the area due to it's cheap purchase price:
56 Portarlington Road, Newcomb, Vic 3219 - View Sold History & Research Property Values - realestate.com.au

Boy oh boy, I knew it was going to be a major reno...but not until I see asbestos literally throughout the place myself! And location is just terrible as it's on a main road. So I walked out after checking the place out in about 5 mins and ruled the place out straight away.

Thanks to 56 Portarlington though, by luck I've also included my latest Newcomb place on the inspection list on the same day. It was advertised online for $269K to $296K so my initial thoughts was "that's a relatively steep price for a 2 bedder". But since I was around the area I thought I might as well check it out and gain some local knowledge from the agent too.

It was a relatively old house - built around the 60s, in reasonable condition but nothing really stood out on first sight. Then I noticed on the brochure it had a floor plan which they didn't include online - and lounge has been exceptionally big in size and in a rectangular shape, and then I realized the potential of adding a third bedroom... and that certainly got me really excited!!



So I went back to the lounge, and noticed it still had the top beam which showed previously there must be a wall here, and all I needed to do now is to restore the wall and add a new door then bang! I'll have a third bedroom

That was the aha moment! So I took the opportunity and started the low ball process and in the meantime organized for a building report to be done. The report showed a number of defects so I've put aside approx. 10K and a 5K for getting the third bedroom done. And I was also able to negotiate with the agent on sales price due to couple of major defects to settle the price at 272K. Now that I've got all the quotes I was very happy total came down to about 10K in total including new carpets and also getting the third bedroom done!

The only challenge now is that PM is trying to set my expectation for a lower rent. My original estimate was about $300/week after turning into 3 bedder with all the cosmetic tidy up, given a nearby place rented recently around $310. However now I see the nearby places are advertising for $270 to $280 instead, so the yield may not be as stellar as I initially thought out to be. Though I have to admit I'm very happy with this deal given how the prices in Newcomb is going in last couple of months and I was able to manufacture some equity by simple transformation of 2 bedder back to 3 bedder

The plan is to hold long term (10+ years) and one day I might be able to knock down the house and do some subdivision myself given it's a corner block!

In summary for IP6:
Suburb: Newcomb, VIC
Advertised Price: $269,000 - $296,000
Purchase Price: $272,000 (March 2017)
Repair/Improvement: $10,000
Stamps & Legals $13,000 ** inserted by mod based on OP requested total cost **
Total cost: $295,000
Bed/Bath/Garage: 2/1/1 -> 3/1/1
Land size: 527SQM corner block
Exterior: Brick/Concrete Tile
Built around: 1960
Estimated rent: $270 - $280/week
Gross yield: ~5%

Cheers,
David

 

What's the minimum land size for subdivision in newcomb? Push the rent to $320 per week. I find that some PMs just want easy work.

 

No Minimum lot size if compliant with Rescode...

 

In regards to rent - I think it might be difficult given current comparable on the market are only advertising around 260-280 a week. Don't think it'll attract much potential tenants at $320 a week. Might have to stick with the lower figure and then slowly bump it up.

 

I think always start at a high price and if there is no interest/few interest then reduce it, even if it just a week or two. If I had listened to my PM I would had been $30/week worse off over two IPs. Your tenants will still be paying less than $100/person which is awesome for the proximity to the city I would think.

 

Nice! That's a fair amount of difference so good work! I'm curious though how were you able to rent $30/week more than others? Could you share a bit more detail @Pentanol?

 

We were keen on Newcomb last year, but ended up in Belmont. There are good buys in lots of parts of Geelong, so well done. (We are still "believers" in Newcomb, but can't afford another one right now. )

We had a similar issue with rent; initially were expecting ~$380, but ended up having to get someone in @ $350, but it's going up in a couple of months.

BTW, I reckon you need to include stamps and legals when calculating your yield.

 

At our Loganlea property our PM told us that we should go for $440/week but I told them to start on $460/week and got a tenant the week after settlement for a six month contract - Will be increasing it again to $470 when it expires. Good to start them on a six month contract if you can at the start because this allows you to see whether they are a good enough tenant and also allows you to increase rent again which especially helps with the accelerating IO interest rate increases. For our Corio property (most recent one) our PM wanted us to take $320/week as they were advertising it for that. I refused and told them to put it up to $330/week and reduced the management fees from 7.7% to 5.5% with GST Manufacturing extra cashflow is great! That's how we were able to get an additional $30/week.

Was considering Newcomb and Belmont but by then it was well above 300k with a smaller land. So we went with Corio as it has very low vacancy rate (1.1%) and opportunity to develop one day.

 

Thanks for your kind words. Belmont has had even better growth than Newcomb since last year though, so I'm sure you're very happy now! See it as blessing in disguise

I will take Pentanol's recommendation and see if I can slot in around $300 for a week or two and see how the market reacts....fingers crossed!

Good point about the stamps and legals - will add that in. Thanks!

Wow that's a great story @Pentanol and great negotiation skills! Which PM are you using? Seldom hear that PM will actually allow you to cut back their fee to 5.5% with GST! You must have been playing hard balls lol.

You need to post more of your stories, too many quiet achievers on this forum!

 

Yep - quite happy with Belmont...
10+% growth in 12 months

I reckon it's even gone up measurably in the last 6 months.

 

I actually am starting to feel the other way..
My new and previous PM's both started higher and it cost me a couple of weeks vacancy time each time before it was lowered to secure someone (which is not a small amount of money).

I wondered if I need to try and spruce up my property a little but I don't really know what to do with it. I asked the agent last time when it took a few weeks if I should do something to make it better inside somehow or just drop the price and he said just drop the price. I have a feeling that it would be worth improving something but I am new to being an owner so I have no idea.

But from those 2 times, I feel like it is better to start from a higher price only if you can start advertising with plenty of time before it is vacant, like if you know someone will be moving out in a month or if you will settle in a month, you have time to start high. If you evicted them or had a quick settlement with no time to advertise, I think starting high has more of a risk.

 

Good idea.
Would this be specific to any particular factors? ie would there be some situation where you would want to start with a 12 month right off the bat?

 

How did you go in the end? When is settlement? It depends whether you're going for gross or net yield - most people here quote gross anyway.

Haha happy to share my stories in person! Not completely comfortable with having private information on the internet, similar to @RetireRich101! Haha I always like to haggle, skills honed over years of visiting Ladys Market in HK! I went with Buxton as I dunno which PM is good in Geelong so I'll see how they go. They were much easier to negotiate than I thought, should had tried 4.4% with GST

 

It all depends on how long your settlement is. If there is no current tenants when contract is signed or prior to settlement like my previous one, I ensured that I added a clause that would allow me to advertise the house and have inspections once the contract goes unconditional and more importantly, two months minimum settlement to ensure tenants are in place from day 1 and also gives you time to drop initial asking rental price if there's no interest. Definitely not worth having one week of no tenants as that wipes out what you would gain anyway.

I had the B&P done and sent it to my PM to see if theres anything I needed to do before prospective tenants inspects it. My PM actually feel in love with the place when she checked it out for me.

Well you can't exactly force one good prospective tenant to do it if they don't want to. But if there is plenty of applicants to choose from, then why not? I can only see positives from starting this way if possible.

 

zip it and show me what you got

 

123 Boundary Road Newcomb Vic 3219 - House for Sale #125853662 - realestate.com.au

Will be very interested to see what this gets. Corner block in Newcomb, don't have the capacity so thought I'll share it with you guys

 

I'm looking at areas around boundary road as we speak.

Looking good so far!

 

For those interested - I have also written up the story about my property #6 which is a corner block with subdivision potential in Eagleby:
Conquering Property #6 – no one can resist a good corner block with subdivision potential!

Hope these stories and lessons on my blog help those who are beginning their journey to avoid some costly mistakes

 

Hi David

New investor here. I am looking in Newcomb and Thomson right now. What do you think of these place currently?

https://www.realestate.com.au/property-house-vic-newcomb-127365606

6 Winstanley Road Thomson Vic 3219 - House for Sale #127402358 - realestate.com.au

Newcomb a weird block but I was wondering what you could see done with it. I thought perhaps small reno and rent for a few years and as value increases perhaps sub divide into two townhouses? I am learning. yet to dip toes in investment but Geelong will prob be where we settle. Cheers for any insight you may have. Kind Regards Michael

 

Hi Michael,

Sorry for the late reply - just saw your question now.

Newcomb one is indeed on an irregular shape, and with the house smack bang in the middle of the block I don't think you can subdivide it easily without a knock down. That alone will pretty much eat away your profit, not to mention the width of the block may not fit Geelong's subdivision criteria.

The quick wins on this one could be:
- Change to new laminate floor on the kitchen area
- Repaint on the kitchen cabinets and maybe replace the handles

Other than that, not much quick wins you can do really. I couldn't see the bathroom, so maybe that's another area you could tackle with small renovation.

Thomson - renovated, so will be limited in terms of your value add and I doubt you can pick up at an "investor price". When a place looks new and shiny someone is guaranteed to go in, fall in love with this place and then decide to pay big bugs to own it.

Also note the house in general is quite small. Only one lounge, kitchen is shared with meal/dining so there is no separate dining. Suits small family but in general the size of the house is very limited in terms of what you can do from value-add perspective.

Hope this helps

Cheers,
David