This is our most asked question on Property Investors minds. How can my property increase in value while I have the funds to cover the cost of holding the property. In this case study we show you how we guided one of our clients to do exactly this.
Sharon is a single lady in a very big career, she wants to make the most of her income earning potential to set herself up for future wealth. Whilst she can afford to have a negative cash flow she wishes to purchase a number of properties over the next few years and neutral cash flow is best for her at this stage.
We worked with Sharon on strategy, her tailored solution was for a long term purchase looking for growth and yield with the potential to increase equity down the track with a small renovation.
The property that we found for her had previously been on the market a year before for a period of 4 months without any contracts. This property was overpriced and was withdrawn from sale. When it was placed back on the market, the owners circumstances had changed, they now had a sense of urgency and decided to go to Auction.
Our appraisal placed the purchase price at the $650,000 mark. With a great number of attendees at the Auction and other competitive bidders we secured the property for $636,000 and negotiated to release the property back to the sellers at a rental price of $560 per week. Our client was very pleased not only to buying the property undervalue and therefore having equity straight away but also to be gaining income immediately.
Where are we now?
12 months down the track in a steady Brisbane market, the sellers have moved out and our Property Manager has released the property with only 3 days vacant in the change over.
Purchase price $636,000 - Current appraisal $676,000
Rental Yield - 4.57%
8km from CBD
High income professional area
Majority owner occupiers
High demand for rentals
Potential for addition of decking to add further value
Annual review of the clients situation shows her strategy to be current, with her property well cared for. She is almost ready to accumulate the next property.