So we have been looking for our next investment property and we have found a run down house in an up and coming area.
It's priced between $349k and $370k. Best offers by COB Monday.
The agent like us agrees it's really just land value, however the other interested party (yep the agent said there's only 2 of us) are tradies and want to renovate it.
But land value, comparable properties average out at $577 per square meter, but that puts this house/land value at $279k.
Thing is, we could either subdivide and build 2 townhouses or just knock down and build one house and at $349,000 (lowest end of advertised price which agent says is their bottom line) we would still make between $60k and $120k.
So my dilemma is - what do we offer? Ignoring there's another party interested as that won't sway us to up our offer, would you offer close to the 'bottom line' of $349k as the agent told you the seller won't accept less (factoring in he could be lying / exaggerating) and we can still turn a good profit,
Or offer closer to the $279,000 because technically the house / land isn't worth much more than that based on comparable sales???
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25-07-2015 19:58 #1
WWYD -Property Question
25-07-2015 20:23 #2
the vendor will take the highest offer so regardless of comparable sales, they're going to take the sweetest deal for them. depends how badly you want the property I guess.
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25-07-2015 20:32 #3
The only problem is if it's just come onto the market you would think the owners won't drop too far under their bottom line yet - what's the market like and what is the average days on market and demand like?
So based on recent sales they are asking $70k more ? If it's just an investment offer what you can afford and what you think it's worth so you can make a profit - as long as you don't mind losing it if the other people go slightly higher
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25-07-2015 20:48 #4
It has been on the market 2 weeks and the agent said there's not been much interest. There is a bit of development happening in the area - mainly subdivisions. It's a popular area with probably 6 weeks on the market (at a guess I don't know the exact figure).
I don't mind if we lose out to anyone else, we won't pay above what we think it's worth, but we are having a hard time putting a value on it that's a balance of market value and potential profit for us.
25-07-2015 22:32 #5
essentially I would go with the 'potential profit' valuation. If its that much profit to you, it will also be seen as that much profit to others as well.
allow yourselves a reasonable contingency though, dont forget cost of funds etc, and a good profit ...
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26-07-2015 08:03 #6
There's a bit of a risk involved too, we want to apply to subdivide it and that might not happen which is why our profit projection is so wide.
So if we pay closer to the lower end of the range if we can subdivide that's a good price to pay, but if we can't, we've paid over the odds.
It's a relatively relaxed council with their development plan and there are other smaller blocks similar in surrounding streets/same residential zone.
We are normally pretty good at figuring out what something is worth. I mean we have figured out what the market value should be - it's just well below the sellers expectation. Unless of course the agent is playing funny buggers and pricing it high with a short 2 week campaign on purpose.
26-07-2015 08:38 #7
We are normally pretty good at figuring out what something is worth. I mean we have figured out what the market value should be - it's just well below the sellers expectation. Unless of course the agent is playing funny buggers and pricing it high with a short 2 week campaign on purpose.[/QUOTE]
You'd be surprised how many owners don't listen to their agent and want to put higher prices on as they think they know best , I've turned down many properties with unrealistic owners , many don't though, but in this market we truly have no idea!
26-07-2015 09:21 #8
This is a very valid point actually as the house seriously is a wreck I would say no one has lived there in 10 years at least - it's hideous! So perhaps the owner wants to sell it for their retirement or to buy something else and they need $349k to move on. Doesn't mean it's worth that.
On a side note I saw that the median house price in Sydney has hit $1m and prices went up 8ish% the last quarter. That's insane!!!
26-07-2015 12:33 #9
The prices here are just insane, buyers are just going crazy, we sold one yesterday for $1,380,000 - 4br house , nice yard , single garage, the owner bought a villa so wanted to down size, her bank valued her house at $1,050,000 based on recent sales - which we thought was high ( she was hoping for $1 million ) we upped her reserve to $1.2 based on our highest offer and that buyer paid nearly $200k more at auction
We seriously have no idea anymore what things are worth!
26-07-2015 14:05 #10
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