Property investment is a difficult business. Finding the right property takes experience, and even so, not every investment will go perfectly. Like the stock market, investments can go up as well as down – and the investment is not particularly liquid. But using common sense at the beginning counts for a lot, reducing exposure and risk. Here are some examples of recent property investments we have been involved with. Some of them are our own. And, not all of them went perfectly,
Taylortown – bought for $55,000
This is a property we purchased. It needed a little bit of work and the photos didn’t really do it justice. We felt that it was ideal for a property rental and it was priced to sell quickly. We viewed it the same day and made an offer the next day. The sale closed about 4 weeks later. We spent about $2,000 on repairs and a refresh which was done in the first two weeks after closing, having been scheduled during the due diligence process. The property was rented within 4 weeks of closing for $800 per month. This is nearly $10,000 per annum in revenue, and $9,000 after costs. ROI, 16%. The key here is that we knew what we were looking for and were able to close the sale quickly.
Pinehurst
This is a lovely 3-bedroom family house that had been on the market for 10 weeks for no obvious reason except it looked a bit tired inside. The owner had moved out and wanted to sell, so were able to negotiate a price of $160,000, significantly below the mortgage appraisal price. The property was repainted throughout for $2,500 and rented to a military family within 3 weeks of being on the market, for $1,400 per month. This gives a ROI of 10%, assuming no additional repairs needed, which so far, is the case. A property that should be easy to sell quickly if needed.
Small apartment block – center of Pinehurst
Any property with more than 5 units is considered commercial and more difficult to insure. This property was bought for cash at a much reduced rate. Steady maintenance on the units has been required as tenants have left. Utilities are building-wide, so rent includes electricity and water. This is a disadvantage and needs to be addressed over time. Some of the units could be considered for vacation rental. A decent investment but with a current ROI of 6% as the units are upgraded, but should be closer to 10% within 2 years.
FSBO Fixer-upper
The property was part of an estate and had been on the market for some months. It also needed substantial renovation. A bit of a risk, but it came with land which could accommodate two additional houses. The property was bought for $115,000 with $40,000 estimated for renovation. It is currently valued at 180,000, so a reasonable profit, although the work too longer and costs overran by about 10%. The current ROI is predicted to be 10%, assume it rents for $1,300 per month, but this does not take account of the opportunity cost of managing the renovation. If the two plots are built, the rent could increase to $4,000 per month, for a total investment of 320,000, giving an ROI of nearer 15%.
The objective of these case studies is to demonstrate that we have good experience in finding properties and making them ready for rent. If you would like to talk to us about property investment possibilities, please contact us.
