Hi All,
Finally - I get to join the ranks of those who have made a "my first deal" posting. Sit back and enjoy. (This long posting is dedicated to revdev
)
On Saturday I rang my agent to ask her to show me through a property I had seen listed - 990m2 section, house towards front, good area of Hamilton. So of course I thought: subdivision possibility. We met around there to find - a PYLON in the back yard. Never mind, next deal. While we were standing around my car commenting on how the photo on RealEnz didn't do justice to the pylon, my agent remembered a deal that was about to come on - 8 bed house, rented for $680pw (let per room). I said "show me the money", and off we went. So here we are, in the dark, staring over the fence of the property. Looks good, I thought. Especially because there's no Agency sign on the fence yet. (At the end of this post, you'll see how fresh the deal was.)
Next day I went around, knocked on the door, and got the tenants to show me through. Looked good, so after a bit of DD I put an offer in last night. As soon as my agent told the listing agent a deal was coming in, he got a deal on the table. Multi-party, but I didn't mind. I also offered asking price. Again, I didn't mind. Why?
Because I will be getting a 12% gross, and 12.4% net yield in year one. Here are the numbers:
Purchase price: $299000
Current rent $680
Current occupancy rate: 90%
I will spend up to $20K on new carpets, repainting rooms, replacing two windows, perhaps installing quality gas heating (will keep power outgoings down), and a smoke detection system (not mandatory, but so that I can sleep at night).
Rents have already been creeping up for that property - there are two tenants ready to get in at $100pw, in its current state. I will get it to a better standard, raise the expectations, and let it at $100 per room +$120 for largest room.
The revised figures are:
Purchase price: $299000
Renos: $20000
Occupancy rate: 90%
Annual rent $38376 (takes into account 90% occupancy) Gross yield (against $319K borrowed) = 12%
Pre-tax positive cashflow = $35 per week, projected to climb to $160pw in year 10.
In obtaining these figures, I have met with the current management agency, who forecast no problem letting the improved property at this rate. They also project occupancy rates close to or just over 95% - I'm being conservative in my figures and sticking with historical rates.
Costs (annual):
Interest: $22743 (IO, 7.75%)
Rates: $1500 PA
Insurance: $450 (have quote from my fire broker)
Maintenance $2700
Management fees: $3200
Utilities (incl. phone + sky): $4000 (I have phoned Genesis and confirmed last 12 months power and gas usage on property)
I won't go into the depreciation figures here, except to say I have probably been a bit light on the chattels depreciation side. The house has been sold furnished - fridge, dishwasher, washing machine, 6 beds, desks, table, chairs, TV, vacuum, cutlery, dinnerware, microwave...
Anyway, to cut a long story short (which I'm loathe to do), the figures stacked up nicely on an offer at asking price. I didn't want to risk someone else getting in for $500 less, so I made sure my price would be the best price. The offer went in last night, and I received verbal confirmation it had been accepted this morning, including all of my conditions (including finance and a long solicitor's approval clause). I went in to finalise the contract this afternoon, and after the vendor and I had signed the important bits, the "listing" agent whisked away the vendor so that he could sign the listing agreement! The deal was so fresh it hadn't even been listed. The deal goes unconditional next Tuesday.
So I'm happy with my first deal. I've been asking myself: "How did I land this?" Well, in my case it came down to two things. 1. Building a relationship with the agent I am working with. (I've talked about this on another thread.) 2. Acting very quickly once I was passed the deal.
If you've managed to make it this far (hi revdev
), thanks for indulging me. I'm feeling pretty good about my first deal - its nice to be able to share this with others who enjoy property.
Finally, and MOST IMPORTANTLY, I'd like to thank everyone who has taken the time and energy to answer the many questions I have had on this forum to date, and to all of those who have posted on other threads, the information on which has allowed me to get to this stage. And Donna, a special thanks to you for creating and hosting such a valuable site.
Paul.
Finally - I get to join the ranks of those who have made a "my first deal" posting. Sit back and enjoy. (This long posting is dedicated to revdev
)On Saturday I rang my agent to ask her to show me through a property I had seen listed - 990m2 section, house towards front, good area of Hamilton. So of course I thought: subdivision possibility. We met around there to find - a PYLON in the back yard. Never mind, next deal. While we were standing around my car commenting on how the photo on RealEnz didn't do justice to the pylon, my agent remembered a deal that was about to come on - 8 bed house, rented for $680pw (let per room). I said "show me the money", and off we went. So here we are, in the dark, staring over the fence of the property. Looks good, I thought. Especially because there's no Agency sign on the fence yet. (At the end of this post, you'll see how fresh the deal was.)
Next day I went around, knocked on the door, and got the tenants to show me through. Looked good, so after a bit of DD I put an offer in last night. As soon as my agent told the listing agent a deal was coming in, he got a deal on the table. Multi-party, but I didn't mind. I also offered asking price. Again, I didn't mind. Why?
Because I will be getting a 12% gross, and 12.4% net yield in year one. Here are the numbers:
Purchase price: $299000
Current rent $680
Current occupancy rate: 90%
I will spend up to $20K on new carpets, repainting rooms, replacing two windows, perhaps installing quality gas heating (will keep power outgoings down), and a smoke detection system (not mandatory, but so that I can sleep at night).
Rents have already been creeping up for that property - there are two tenants ready to get in at $100pw, in its current state. I will get it to a better standard, raise the expectations, and let it at $100 per room +$120 for largest room.
The revised figures are:
Purchase price: $299000
Renos: $20000
Occupancy rate: 90%
Annual rent $38376 (takes into account 90% occupancy) Gross yield (against $319K borrowed) = 12%
Pre-tax positive cashflow = $35 per week, projected to climb to $160pw in year 10.
In obtaining these figures, I have met with the current management agency, who forecast no problem letting the improved property at this rate. They also project occupancy rates close to or just over 95% - I'm being conservative in my figures and sticking with historical rates.
Costs (annual):
Interest: $22743 (IO, 7.75%)
Rates: $1500 PA
Insurance: $450 (have quote from my fire broker)
Maintenance $2700
Management fees: $3200
Utilities (incl. phone + sky): $4000 (I have phoned Genesis and confirmed last 12 months power and gas usage on property)
I won't go into the depreciation figures here, except to say I have probably been a bit light on the chattels depreciation side. The house has been sold furnished - fridge, dishwasher, washing machine, 6 beds, desks, table, chairs, TV, vacuum, cutlery, dinnerware, microwave...
Anyway, to cut a long story short (which I'm loathe to do), the figures stacked up nicely on an offer at asking price. I didn't want to risk someone else getting in for $500 less, so I made sure my price would be the best price. The offer went in last night, and I received verbal confirmation it had been accepted this morning, including all of my conditions (including finance and a long solicitor's approval clause). I went in to finalise the contract this afternoon, and after the vendor and I had signed the important bits, the "listing" agent whisked away the vendor so that he could sign the listing agreement! The deal was so fresh it hadn't even been listed. The deal goes unconditional next Tuesday.
So I'm happy with my first deal. I've been asking myself: "How did I land this?" Well, in my case it came down to two things. 1. Building a relationship with the agent I am working with. (I've talked about this on another thread.) 2. Acting very quickly once I was passed the deal.
If you've managed to make it this far (hi revdev
), thanks for indulging me. I'm feeling pretty good about my first deal - its nice to be able to share this with others who enjoy property.Finally, and MOST IMPORTANTLY, I'd like to thank everyone who has taken the time and energy to answer the many questions I have had on this forum to date, and to all of those who have posted on other threads, the information on which has allowed me to get to this stage. And Donna, a special thanks to you for creating and hosting such a valuable site.
Paul.
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