Property in a crap area

Hi All, I need some hive-mind advice to understand what to do with the following offer:

One of my friend is selling his investment property in Hebersham, NSW for 445k (700m2 block and old 3bedda). Bank has done their valuation and provided 460k (360k land and 100k house). I am quite keen to buy it, but I am totally confused, although I've done my math and I will loose around 550$ a month for this property with the current tenant. I am confused because all people around me express completely different opinions.
Pros:
Big block of land
Affordable price
Cons:
Crap area with crappy tenants
Very old 3 bedroom in awful condition

I assumed that in worth case scenario I will invest around 20k to completely renovate a house, considering that I will do most of work (painting, laminate, windows replacement, fence repair and etc.)

What did I missed taking into consideration that I never was investor before?

 

@DaveM - here's your mate from whirlpool.

pinkboy

 

You have to look at the zoning of the land to see if the land can be subdivided and how many townhouses, units you can build on it.

 

I don't think you can subdivide this land because it is not rectangular. The shape of the land rather trapezium. The best thing I can do probably build granny flat later.

 

Wouldn't bother

 

Can you please rectify your answer? Actually I don't mind to provide the address if required. This is very important thing to me, because I don't want to end up paying 30 years for crap.

 

Agree. Go find a good deal in a good area with good tenants that sees you 550 in front each month. Do your DD.

 

I can't afford good area in Sydney. 450k is my maximum probably

 

There is no need to buy a house from your friend just because he is your friend. If you search for comparable properties online you will see that the price isn't that good. There are a few properties for about the 450 mark with good condition homes. Blocks are a bit smaller (550-650) but you need to look at your strategy. There is no point going for a land potential when you'll out of pocket 550 per month. Get something to suit your budget for purchase price and something that you can manage regarding cash flow.

 

You need to do more research. Do yourself a favor and search "mount druitt" on these forums. You will find several recent threads advising people not to purchase in the area in the current market as it has reached its peak and prices are beginning to trend downwards. To give you an idea, a house in Hebersham with that description would have sold for $300k (or less) just 3 years ago.

 

This is good advice. I was a little bit blinded and it is really hard to negotiate with a friend.
I will go for few inspections this Saturday to review and may be will do few offers to see how is market.

 

My friend bought this house for 370 in December 2014.

 

So why would you consider buying the property off your friend for 20% more than what he paid just 12 months ago?

Personally I would also question the validity of the friendship if he was trying to convince you to buy it

 

Also when markets trend down or tank it is also much longer period than boom cycles.

Best to sit back and watch, West Syd has just started let's see how low it go, time on our side

mtr

 

I have no idea, because I was under impression that prices will not go down and will only rise.

Anyway he is not trying to convince me at all. It was me asking him about this opportunity, which doesn't look like opportunity any more.

 

OMG, don't buy anything, just start educating/researching otherwise you will most certainly lose money

 

The problem with the education is that when I bought my own house in 2012 for 387k everyone was telling me that prices will go down. However now my house costs 600k+. I am not sure should I believe to the people talks now?

 

This is one of the dangers of investing; there are no guarantees.

No-one wants a dud investment; this is why folks need to do a lot of DD, or they don't pull the trigger out of fear.

There are still some who do all the DD, have all the info, and still don't pull the trigger.

FWIW; unless the rent yield was really really fantastic, I wouldn't bother because the rent yield will help to sooth the pain of probable crap tenants.

 

There's a difference between ppor and investment property. Ppor is for living and IP is a business. Who starts a business with the aim to lose money?

 

No one starts a business with the aim to lose money but most businesses lose money when starting..