My Green Ugly Duckling - #3

Hi guys,

I hope you are all well. Even though I haven't been able to contribute recently as much as I would have liked due to work commitments, I just thought I'd pop my head in and share a deal I've recently gone unconditional on. I call this my 'Green Ugly Duckling'.

In terms of a brief background on myself, I'm 24 and this purchase is Property #3. My journey has been well documented on the forum, and links to my initial two property discussion threads can be found below:
* Property 1. 2 bedroom unit, St Marys NSW: http://somersoft.com/forums/showthread.php?p=1048574#post1048574
* Property 2. 2 bedroom townhouse, Waterford West, QLD: http://somersoft.com/forums/showthread.php?p=1135957#post1135957

I know seeing young investors achieving success certainly motivated me in the very early stages of my journey, so hopefully one day others can track my story and gain some inspiration to take action themselves.

So...

The Property:
* 3 bedroom high-set house with a hardwood frame located in Waterford West in the Logan City Council area of SE QLD.
* Built in 1980; with 1 bathroom and 1 lockup car port on a 761sqm block.
* Quiet street with lock up front gate, fenced side access both sides of the property, and street parking.
* Walking distance to shops - Coles/ALDI/Chemist/Takeaway Shops
* Walking distance from Marsden High School and Marsden Primary School
* Close to buses and a 5 min drive to Loganlea train station (which runs express trains to Brisbane CBD/Gold Coast)
* Has been owned by Owner Occupiers who purchased the property in 1981 for $35,000

The Numbers:
* Purchase Price: $242,500
* Expected rent post settlement/renovation at $330pw (day one yield of 7.07%). Rental income monthly = $1,430.00.
* 97% LVR inc LMI capitalised - total loan: $237,067.00 from Westpac at 4.84% = Monthly repayments of $956.17
* Other expenses: Council rates ($233.33pm or $53.85pw), Building & Landlord Insurance ($72.15pm or $16.64pw), and Property Management fees ($109.69pm or 26.18pw).

Total Cash Flow Pre-Tax:
Income: $330pw or $1430pm
Expenses: $316.46pw or $1371.34pw
= +$13.54pw or +$58.66pw

Work Required:
* Internal / External Paint - neutralise/change the ugly green colour externally, and standardise internal paints
* Replacement of carpets with polished floorboards
* Rectification of rear down pipe which has separated from the guttering
* Removal of exterior garden bed and earth soils that have accumulated up on the eastern side of subfloor
* Rear stair handrails are loose, rusted and show signs of material deterioration - is potentially a safety hazard at present so needs replacing.
* Replace silicon at the back of the sink in kitchen & bathroom, and in shower
* Bathroom & Kitchen general cleaning

Quotes for the renovation have come in at approx $10,000 for all of the above.

Rationale behind the Purchase:

I've been doing a lot of research in the SE QLD area and have seen 3 bedroom houses in Kingston, Eagleby and Beenleigh selling for $255-$260k+ on smaller blocks. My estimation of the market value of this property (in current condition), to be approx $265-275k. I consider Waterford West & Crestmead to be a slight step up from these suburbs and also a step up from Logan Central. Additionally, there is another 3 bedroom high-set house across the road at number 9 that is renovated (internal/external paint & polished floorboards), which is advertised for offers over $299,000 currently. It will be very interesting to see what that sells for. Link is here: http://www.domain.com.au/property/for-sale/house/qld/waterford-west/?adid=2011255852&sp=7

Given where my portfolio is at currently, #3 had to be a 12 month equity play. The strategy moving forward for this property is to set and forget once cosmetic work has been completed, and revalue / top up in 9-12 months time with the expectation of a valuation in the high $200's/early $300's depending on what happens with the market over that period. That will allow me to pull my initial capital out again, leaving a self-sustainable asset that's paying for itself. The plan is to buy #4 before March 2015, and #5 before the end of 2015.

Further Long Term Upside:

An additional bonus with this property is that given the side access, plus size and zoning of the block, my initial research/conversations have been positive about putting a granny flat at the back in a few years times if required. It's not a major consideration in my purchasing decision (and no guarantees from a council perspective), but somewhat of a bonus if it materialises over time. There are no major infrastructure (underground power, gas, sewers, storm water pipes, waterworks etc) that would affect digging. On face value, looking positive, but I'll re-look at this when I reach the consolidation phase of my portfolio.

I'll upload some pics later tonight. Special thanks to RPG for assistance throughout this deal.

Happy investing,
Nixba.
 
Nice analyses, did you use BA with this purchase?

Also, I notice you have purchased 2 sites under this area, what is your expected growth here?
 
Btw who's RPG?

You mean what's RPG?

rpg-7-launcher.gif
 
Thanks for the kind words guys.

I went through Right Property Group (RPG) again for this interstate purchase. I really like their strategy as it fits very much in line with my risk profile and long term aspirations. I'm still very hands on in terms of due diligence/crunching the numbers, but again work unfortunately made it very difficult for me to travel there etc. I'd rather focus my attention on maximising my income potential at work and let RPG look after the negotiation/dealing with agents piece.

In terms of Waterford West, it wasn't as if I was JUST focusing on that area. I had my eye on the overall SE QLD market, and was intending to buy wherever there was value. I feel like I've bought well comparative to market, with an upswing on the way, and that the area will experience some steady growth over the next 12-18 months. The growth won't be as sharp as what I have experienced on my NSW unit. The cash flow on this buy is also strong, and I've got time on my side so I was really looking for that 'immediate' equity gain to recycle after 12 months and move onto other purchases. Once I move on, the asset is self-sufficient and covers itself including all expenses.

Many thanks again,
N.
 
Well done again Nixba...Good to see a company that actually delivers.

You definitely have your head in the right direction.Good stuff!
 
Good buy. It looks like a number of rooms like kitchen and bathroom have had some updating already so you don't have to worry about that.

The most expensive thing will probably be getting rid of the green but I agree that it's necessary.
 
LOL by those pics Nixba,my house is pale green(suits the surroundings) and i have darker blue in 3 rooms...Will i change it?...Not yet,maybe later.
 
Thanks for the kind words Westminster, Spades & Moneyman_85. It just proves that age is just a number - if you want it badly enough you will make the sacrifices to make it happen. If you don't, you'll make excuses as to why you can't or won't be able to do it. If I can do it, anyone my age can.

I'm actually flying up to QLD for the settlement (Wed 24 September) and will be assisting with the reno. I'll post some update pics of how it's looking!

Kind Regards,
Nixba
 
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