Proof that buying off market saves you money in Newtown
The client
First home buyer couple who were renting in the Inner West. They were looking for guidance on the process of buying a home, understanding the risks and issues and keen to avoid dealing with real estate agents. They were working and had active social lives; not that keen on spending their weekend looking at properties.
They were looking for a property to move in and call their own. However, they were also off travelling in six months time, for a two/three month window, and had the flexibility to buy as an investment property now and move in later.
What was most important to the client
A 2 or 3 bedroom house (no townhouses)
Parking was really important as their dog was a rescue and they wanted easy access to get him in and out the car
Good size kitchen
Avoiding busy streets
Good outdoor area (for the dog and also for entertaining)
Minimal flight path noise
The search
Stock was very limited and their budget effectively priced them out of a three bedroom with off street parking. However, I was confident we could find a large two bedroom with scope to easily renovate in the future.
We considered the key suburbs in the Inner West which they really wanted to live; Newtown, Camperdown and Enmore, plus the border suburbs which they were open to.
We seriously considered three potential properties:
A large two storey house in Petersham that was pre-market. It had a bit of a disjointed floor plan although had potential. I knew though we would be priced out and it wasn’t worth our time to continue pursuing it so we let it go. It went on to sell outside our budget at $1,910,000.
An off market house in Marrickville which had great charm, but also had an unapproved loft extension the owners had done themselves during covid. While council approval in retrospect is possible, it just wasn’t something my clients wanted to take on. The house went on market but didn’t proceed to sell.
A pre market opportunity of a large block with an older style house in St Peters. The house was a little dark inside, although this wasn’t a deal breaker. Unfortunately the property next door had an approved DA to do large scale works which would potentially overshadow and make the house even darker. It also had more flight path noise than we wanted. The house went on market and sold for $1,800,000.
The property
After a thorough search, we came across an off market Newtown gem in the exact pocket where my clients wanted to buy. In fact, it was on one of the few streets they had specifically mentioned as “the dream”.
A solid two bedroom brick home on 200sqm with one existing car parking space out the back and space for a second.
The potential on this is another reason why it made sense;
An existing storage attic that is above the front half of the house;
Rear lane access allowing for additional parking and/or a studio out the back with precedent set by neighbouring properties to do this
A functional kitchen and bathroom with scope to renovate
Why was the property off market?
The current owner was pursuing renovations on another property and currently used this as an investment. It had a fixed term tenancy with seven months to go. The tenant presented the property in poor condition and was difficult about open home access. While the owner wanted to free up money for their other project, they didn’t want to spend money marketing and trying to sell a poorly presented property.
The outcome
Buying off market AND with an existing tenancy in place is the best way to save yourself money. You have limited competition and competition is what drives the price up.
In our case - we had no competition!
We inspected the property twice. Firstly to get a feel for it, and secondly along with the building inspector. We completed our due diligence on neighbouring properties, development applications and pricing.
Even though my clients would have preferred to move in straight away and stop paying rent - we’d factored this into our offer, and they would have the added benefit of being able to collect rent while they went travelling.
A tough negotiation over a period of a few days and we had ourselves a signed contract. Then came the icing on the cake…
The proof four days later that we got ourselves a bargain
A few doors up there was another house currently on market and scheduled to go to auction four days later. However, it was absolutely unliveable. It was the same land size (although no official off street parking on this one), and a similar internal footprint (if you were sure the walls weren’t going to fall down).
You can’t see in the photos, but the floor was as uneven as a jumping castle. It definitely needed restumping.
All up, the house needed a significant amount of money spent on it. I’m no builder, but I’d say circa $300,000 - $400,000 to make it a modern, liveable two bedroom house, with one bathroom, and one parking space. If you wanted anything fancy, then easily $500,000 +.
It sold at auction, for just $20,000 less than what we paid for a modern, liveable, solid floor house four doors up!!
Sold results from Street Report on Domain.com.au
Learnings
If you are buying an investment property, or a property that you can have as an investment in the short term, then absolutely look to buy a property that has an existing fixed term tenancy in place. This will turn off owner occupier buyers and these are the people who get emotional and drive the price up.
Fixed tenant properties don’t come up for sale that often on the internet and this is why the majority of them sell off market.
