Join Australia's most dynamic and respected property investment community

OK, so what am I missing???

Discussion in 'General Property Chat' started by Ghoti, 15th Aug, 2016.

  1. Ghoti

    Ghoti Well-Known Member

    Joined:
    10th Jun, 2016
    Posts:
    124
    Location:
    Melbourne
    Still looking for my first IP, and will probably make an offer tomorrow.

    The property is an old housing commission place (1970's build perhaps), fully reno'd 3yrs ago, located on a quiet street opposite a park. reasonably sized block, close to schools, shops, bus etc. A couple of unit developments done in the same street, but predominantly run-down commission homes. Tenants have just signed up for their third 12 month lease, low end of the market rental. Area has seen some growth, though given neighbouring suburbs are hot I figure this one has to warm up too.

    Got the S32 and find the Vendor is an investor (company as trustee for a trust of similar name). My first thoughts are why are they selling? Have they taken all the available profit and getting out? Is there something I am no seeing? Or is it as simple as a vendor consolidating profit?

    B&P will discount any structural problems, but what else should I be looking out for?

    Methinks perhaps I am thinking to much :)

    Cheers,
    Scott
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,563
    Location:
    Sydney or NSW or Australia
    Maybe it's no longer negatively geared ;)
     
    Jamie Moore likes this.
  3. Otie

    Otie Well-Known Member

    Joined:
    26th Mar, 2016
    Posts:
    289
    Location:
    Vic
    Have you checked the overlays and zoning? Maybe it is no good for splitting or developing
     
  4. Agent30yrs.

    Agent30yrs. Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    156
    Location:
    Brisbane
    Maybe they're buying a zoo ?!

    I went to a zoo the other day .
    The only animal in it was a dog
    it was a Shih Tzu

    methinks you thinks much too much ;)
     
  5. Joynz

    Joynz Well-Known Member

    Joined:
    5th Apr, 2016
    Posts:
    828
    Location:
    Melbourne
    What area?
     
  6. albanga

    albanga Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,114
    Location:
    Melbourne
    So because they purchsed in a trust they are an investor? And because they are selling it they are a good investor and know how to time the market perfectly??

    Back your own judgement
     
    wylie, Gmikes and Cactus like this.
  7. Cactus

    Cactus Well-Known Member

    Joined:
    18th Jan, 2016
    Posts:
    992
    Location:
    Melbourne
    The beneficiary of the Trust may be retiring, sick, dead, over the investment, moving on to another investment, or any multitude of other reasons that have nothing to do with wether or not it's a good investment for you.
     
    wylie likes this.
  8. JesseT

    JesseT Well-Known Member

    Joined:
    29th Jun, 2015
    Posts:
    80
    Location:
    Sydney
    I have asked agents before why they are selling and usually get what sounds like an honest answer, you could give that a shot if your curious, also check the sales history, you may see they have had it for 10 years and it's already doubled for them.

    End of the day though it shouldn't effect your purchase, It doesn't really matter why they are selling, if it's an area your Research has lead you to and the house checks out, go ahead.
     
    Luke T likes this.
  9. Dean Collins

    Dean Collins Well-Known Member

    Joined:
    21st Feb, 2016
    Posts:
    221
    Location:
    New York
    I've often wondered the same thing, eg just because someone doubled their money in 10 years.....why the heck are they getting out.

    Unless you know you are going to die early of terminal illness in the next 10 years.....
    Are 70+ and only have 10-20 years left to spend the profit......
    Or think the market is going down........ - then why sell??

    Basically lets say you sell now and the market goes sideways for 4 years and then you buy in for the next "rapid leg up" you are still going to be paying the same rate to get in as you "got out" today.

    Eg. I have friends that have sold their IP's and gone "you ripper I made 200k" my answer is yeh you made $200k now but so what.....you still could have made more instead you are going to be paying another $30k in stamp duty to buy back in again later.

    In all serious @Ghoti just judge it on your "own requirements" if you've got a 3rd year tenant unless you think they are about to have another baby etc and move out sounds like you've got a stable tenant so go for it.
     
    HUGH72 likes this.
  10. Ghoti

    Ghoti Well-Known Member

    Joined:
    10th Jun, 2016
    Posts:
    124
    Location:
    Melbourne
    Thanks folks.

    Zoning checks out OK - big enough for two but irregular shape. Agent says he doesn't know why its up for sale, but happy they are selling it for the third time:
    • They sold the property to the renevators
    • Renevators did it up, leased it out and sold within 12 months.
    • Current vendor purchased the property 18mths ago, now asking for $50K+ more.
    Cashflow is not quite what I was aiming for. Rent hasn't risen for 3 yrs but current rental is top end of market for the area. Cap growth is good though, reported at 10%ish. Plan is to buy and hold.
     
  11. Tony Fleming

    Tony Fleming Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    539
    Location:
    Sydney
    Sometimes people sell for random reasons
    -nagging spouse
    -they read a newspaper stating the market would crash
    -Bigger and bolder purchases(remember with APRA they may be selling off the ones holding them back from more purchases)

    At the end of the day the numbers need to stack up. Numbers don't lie. Good luck and let us know how you go :)
     
  12. Otie

    Otie Well-Known Member

    Joined:
    26th Mar, 2016
    Posts:
    289
    Location:
    Vic
    Maybe they are flippers?
    Stupid ones though to only sell for 50k more though considering there would be next to no profit after covering Reno costs, stamps, loan setup costs and CGT
    Maybe a divorce, maybe can't afford to hold it as you said the yield is lowish.
    Who knows:)
     
  13. melbournian

    melbournian Well-Known Member

    Joined:
    2nd Sep, 2015
    Posts:
    1,325
    Location:
    melbourne
    people sell for variety of reasons, my recent purchase which settled a month ago was due to divorce. It made no sense to sell the place as the vendor who was a environmental scientist had put in close to more than 200K+ of improvements over the last 8 years which included 6 water tanks, custom granny flat, full solar, outdoor spa, double glazed windows, 6 ACs etc etc.