The property I was looking at was situated in a part of Manurewa that was not exceptionally good, it was located on an up-and-coming street. The house was well built and large with four bedrooms, one of which was enormous with its own en suite. The other bedrooms were also generous in size, and so too were the living areas, which included a downstairs rumpus room. A single garage with internal access plus a two-bedroom minor dwelling unit (in pretty average condition) at the front of the site completed the property.
The property was on the market for $399,000 and although I tried to negotiate the deal somewhere between $320,000 and $330,000, it just wasn’t happening. But when I discovered that the vendor had bought it for around $320,000 himself, I could see it was no wonder he wasn’t accepting my offer with any kind of alacrity.
However, I could see that the area was improving and that prices were starting to move, so I decided to nail the deal, even if it would only give me an 8% yield, because of the location and the size of the house. My reasoning was based on the fact that just 400 metres down the same road was a commercial area and therefore it was more than likely that in the not-too-distant future this part of the street would become commercial too, making the property worth a lot more.
The agent with whom the property was listed was from Papakura, which, although technically still South Auckland, is quite a distance from Manurewa. The property was tenanted and the agent was running open homes, which made me think she didn’t know what she was doing especially when dealing with investors. I asked her why she was selling it, and she told me that a friend of hers owned it.
After going to see the property (one of the few I have actually seen before putting an offer on paper) I decided I could justifiably pay $350,000 for it and then started building a relationship with the agent. This involved explaining my methods, after which I asked her for a sale and purchase agreement, telling her that I’d give $350,000 cash for it but would not pay any more because it was already breaking my specific investing rules.
In other words, this was a take it or leave it offer. By this time the property had been on the market for a couple of months and had gone stale so when she took my offer to the vendor, he accepted it. At just over 9% the yield was actually not too bad, but because it was under my 10% rule I needed to find another deal that would cancel it out, and it was this very agent who led me to it.
The above post is based on the book “The 15 Million Dollar Man” by Sean Wood, to read more click Property Investment and download 2 free chapters.
|For further reading on Property Investment NZ, click on the articles below:
Setting Goals for Financial Independence – click here
Tips for Becoming a Property Expert – click here
Buying Rules for Property Investment – click here
5 Tips to Add Value through Renovation – click here