The client

A local Inner West family who were thinking about buying an investment property in the area. The long term goal was that potentially one day one of the children may live in it, but in the meantime, it needed to be a solid investment.

What was most important to the client

Strong capital growth potential
A rental yield where the rent was covering the mortgage
A house (non strata) to ensure capital growth through land value

The search

Coming out of the winter slow period in Sydney, there was not a whole lot of stock on market. However, there also wasn’t a lot of investors in the market at the time and so we were hunting for a property that right now had strong investor appeal.

With an initial focus on looking for properties that had the ability for dual income, we found one property that seemed to tick all the boxes. However, when we got into the due diligence, we realised that there was no existing Council approval for the property to operate as dual income. This would also mean there was a potential risk with insurance and liability in the future if my client continued to operate as dual income. We decided to walk away on that one.

The property

At a time when the Sydney market was starting to soften, I inspected a property that was on market with a sale price of $1,625,000. This was well above what my client wanted to spend and would be willing to pay. The owner had been on market for nearly three months and was keen to sell and move on. I inspected the property first, before advising my client it was worth their time to come and see it.

It was a gorgeous three bedroom semi with an oversized living area. There was an add on at the back which could also be used as a artist type studio (non habitable in the current form), plus a large private courtyard and garden at the rear.

With three double bedrooms, the estimated rental return was $1,000 per week.

For my investor client, it made more sense to buy a house and avoid strata, but finding houses in the inner west sub $1.5m with a high yield is tough. My client made a trade off to buy this property that is well located, but on a busy road. This was the key attribute that we used to negotiate a price well below market value.

It also made the deal complex with a lot of due diligence to understand. One key aspect was understanding the current land zoning, potential land zoning in the future of this and neighbouring properties, and what other opportunities might exist. I spoke with the neighbour (who owns the other side of the semi) about his future plans as well.

The outcome

The median price of a 3 bedroom home in Haberfield is $2,700,000 with a rental yield of 2.1%.

The property was listed for sale at $1,625,000 having initially had a for sale guide of $1,500,000.

We negotiated a purchase price of $1,475,000, and the valuation has it at $1,610,000. Not bad?! This puts the rental yield at 3.54% which is well above the suburb median, and the median yield of 2.7% for 3 bed houses across Sydney.

Purchased for $1,475,000 and valued at $1,610,000.

Learnings

If a property has sat on market for a number of weeks then the most common reason it hasn’t sold is because the price isn’t right. If it is the right property for you, then being in a position to put together a deal and achieve the right price outcome is worth having patience for.

Purchased for $150,000 less than the asking price