Real life example of buying under market value

I wonder how many times this has happened, investors on PC both going for the same property?! Probably more than anyone realises.

 

So true, I think people who think for real it was taking advantage (not including those joking about it) need a reality check.

These smithfield plains properties are soo cheap, that the cost of rectifying individual defects is such a large percentage of the building value that the risk is an issue for anyone who does not want to knock it down.

Who's to say she didn't know about the hidden issues, maybe she did and the agent covered them up. Even if she didn't know about the issues, at the end of the day the market will decide and it did.

This situation is exactly as DT says – a win/win for all concerned.
She got a sale, an unconditional sale.
DT got a revaluation and a property that can be developed long term, and rented out in the short term.
I got to exit a sale that didn’t really suit my goal (trouble-free high yield play).

It was on the market for quite a while (at too high a price initially), so Somersofters really are the people who saved the day here and got her the money in time.
If it was only owner occupiers, and not investors, she would have been waiting a long time..

 

True!
All you have to do is look up recent sales in Smithfield Plains to see that it was a fair price. E.g this 3x1x1 house on a 629sqm block just got sold for 160k a couple of weeks ago http://www.realestate.com.au/property-house-sa-smithfield+plains-119196799.
So considering the old lady got 155k for a house with a collapsed ceiling she can’t complain. The only freestanding houses that ever get sold for 200k+ are brand new houses in Smithfield. Looking back in the past 3 years old freestanding houses like the one D.T purchased have all been going for 150-180k.

 

Dan Dan he's our man, if he can't do it... DT will!

 

It's a bit emotive to use language like "ripping off" when it comes to something like this. We've only been presented with a summary. If the house was bought and the hot water unit fell through the roof a month later would the little old lady be accused of ripping off the poor property investor?

I live in regional QLD and there are plenty of houses for sale because of death or old people going into homes. They didn't buy them two years ago and are starving for capital growth. They've been living there for a long time and went right through the boom! Getting $30K off some potential maximum market value is the least thing on their minds.

Good on you for making a great deal.

 

A couple years on, still the original tenant in there. They got a bit cranky when i developed next door but thats all sorted out now.

 

One of my friends parents were moving out of their family home and into a nursing home or village

Their property was valued at about 530 to 550k

Someone found out there were termites and eventually it got sold for 350k

Were they ripped off? Probably

But they needed to sell in a not so great market.

Isnt that what those people whose ads say "we buy your house with cash urgent" do?

 

Great deal, Dave! I need to find deals like these.

 

So what is the potential for CG on this deal??

The Playford is just not moving up in price...but agree about a great CF play.

I would much prefer to pay more ..and but in places like Parafield Gardens and other Salisbury where the market is warmer...

 

Has it increased further in value since then?

 

Playford is great for reno potential and CF. I'm very happy with mine, I make money and the equity covers my next buy. It's win win

 

@D.T. , @Corey Batt can you elaborate on what how the loan was setup at 80% with valuation based on contract? How did you avoid having a valuer going out to the property? This has caused me some issues in the past.

 

Some lenders have policies which do not require valuations at 80% LVR's (some even at 90% in certain circumstances). This is where strategically planning your finance is incredibly important to avoid roadbumps in your investing plans.

 

Can you explain what you mean by " I topped it up to 90 % " please?

 

@D.T. Great read for anyone looking at property whether experienced or not. Fantastic example of what can be done with a little outside the square thinking.

 

$147000 purchase price x 80% LVR at purchase = $117600 loan, ie put in $29400 of my own money plus stamp duty
$171500 revalue by bank x 90% LVR at topup = loan increased to $154350 minus $117600 existing loan = $36750 extracted and back in my account... ie I got the property for free (got back my own money put in)

Hope that makes sense?

 

Thanks DT. Wouldn't have thought of doing that. I will now though!

 

Nope does not make sense...lets look at the numbers:

1. Deposit on 147k purchase with 20% deposit is $29,400
2. Stamps and legals - about 8k
3. Repairs - 3k
4 LMI approx. 3.6k

So the total is 44k...so total spend is $161,400...that gives profit of $10,100

Sorry this deal does not make sense.......I am used to 50k in the deal or something which will offer CG over the long term.

Only my opinion...what would I know about the SA market...I only own 4 there....

 

Wonderful story. With property, timing is very important.
To the Little Old Lady, it could be worse, it could be better. Who knows. Hindsight is a wonderful thing.
We come we see we concur.

 

More like 5

0, it was 80 lvr

Stick to markets you know then?

Not sure how anyone can possibly go wrong with a free house that's spitting out cash every week on a redevelopable block. Most people going heavily into the red for that.