Forums / Property Investing / General Property / Found four undervalued properties in 2 days

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  • Profile photo of Captain_PicardCaptain_Picard
    Participant
    @captain_picard
    Join Date: 2003
    Post Count: 27

    Hi all,

    Its been a while since I have posted, but I want to remedy that. I signed a contract for a property here in Brisbane two days ago, which was originally listed at $239K, but I bought it for $198K. The land value is worth $170K, and the house is two bedroom with a land area of 450 square metres. The kitchen needs replacing, and the carpets need to be ripped up and the floors polished, but apart from that, the property is in great nick.

    In the process though, I found three other properties earlier this week which look pretty good, but I dont have the means to buy them myself. The details are below:

    Property 2: Land value $390K, asking price $449K (negotiable). It is a 2 bedroom property with sleepout, 607 square metres. The house needs two restumps, but access under the house is very easy. The wallpaper is old fashioned and needs replacing, and the ceilings are flaking, but the house is in great condition apart from that. First time on market in 60 years.

    Property 3:This one was sold on Tuesday, but serves as an example. 2 bedroom house, 602 square metres, Land value $275K, asking price $320K negotiable. Both bathroom and kitchen are fairly old, and the steps needed repainting, but otherwise property in fine condition.

    Property 4:Land value $247,500, Asking price $310K. Great polished floors, nice kitchen, old bathroom, everything looks good. 612 square metres.

    I would like everyone’s opinion on these properties, especially if they think it is next to impossible to find property bargains nowadays. Obviously the above four will be negatively geared, but they represent good value for a renovator or a flipper. I have a lot of time as I only work four days per week, so if anyone knows of someone who would be interested in an undervalued property finder, please let me know.

    And please wish me luck on this property I have just signed a contract for, because it is my very first property purchase, and I feel nervous and excited at the same time at breaking out of my comfort zone.

    Regards,

    Captain_Picard.

    Profile photo of DazzlingDazzling
    Member
    @dazzling
    Join Date: 2005
    Post Count: 1,150

    Good on you Capt.

    Congratulations and welcome to the exciting world of investing.

    How does that weight feel on your shoulders ?? It gets comfy after a while….I’m told.

    Well done.

    Cheers,

    Dazzling

    “No point having a cake if you can’t eat it.”

    Profile photo of lupus1704lupus1704
    Member
    @lupus1704
    Join Date: 2002
    Post Count: 8

    Congratulations Cpt Picard. Looks like you have been busy on your path to success.

    Am about to start the next leg of my journey as well and start looking again. If you don’t mind me asking, where abouts were you looking? Sounds like you have quite a few deals :)

    Lupus

    Profile photo of voigtstrvoigtstr
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    @voigtstr
    Join Date: 2005
    Post Count: 176
    Originally posted by lupus1704:

    Congratulations Cpt Picard. Looks like you have been busy on your path to success.

    Am about to start the next leg of my journey as well and start looking again. If you don’t mind me asking, where abouts were you looking? Sounds like you have quite a few deals :)

    Lupus

    Perhaps he’ll bird-dog them to you :)

    More stuff on the voigtstr at http://users.bigpond.net.au/voigtstr

    Profile photo of lupus1704lupus1704
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    @lupus1704
    Join Date: 2002
    Post Count: 8

    Hahaha,
    Why the heck not :) Might as well start somewhere, and if the deals are there, why not look into them :)

    Profile photo of Captain_PicardCaptain_Picard
    Participant
    @captain_picard
    Join Date: 2003
    Post Count: 27

    I am happy to bird dog deals to you, as I come across them quite regularly. There is no way I can take advantage of them all myself. If I knew undervalued property deals were in demand, I will go out of my way to find them. I could easily find three or four good deals like the ones I described earlier every day here in Brisbane, as I have plenty of time to pursue it. I was taught how to find good deals when I was working for a property investor, and it is only now I have the opportunity and the time to be a bird dog.

    If you want to contact me, my email address is [email protected]

    Regards,

    Daniel.

    (Captain_Picard)

    Profile photo of JAHJAH
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    @jah
    Join Date: 2004
    Post Count: 5

    What is bird dogging? I am interested in knowing whether that means you will find undervalued property and then ‘sell’ the info to others for a price. Am I right?

    Also – how do you know when a property is under-valued or even good value? I think it is about location, what other comparable and close property has recently sold for, and what kind of cap. gain you can make, but reading the stuff on the forums, I am not so sure anymore.

    JAH

    Profile photo of Captain_PicardCaptain_Picard
    Participant
    @captain_picard
    Join Date: 2003
    Post Count: 27

    Hi Jah,

    To answer your question, I know these houses are good value, because the unimproved land value is close to the asking price of the home. The land value figures are accurate because I use the same database as Natural Resources and Mines, Australian Business Research and RP Data use. Comparable house sales in the area also gives me an indication. For example, the house I signed a contract for at Banyo is $198K, while the vast majority of houses in the area are in the high $200K’s or low $300K’s. That, combined with the high land value ($170K) tells me that I have a good deal, particularly when the difference between the contract price and the land value is only $28K. I am quite sure the house is worth more than that, having inspected it, and seen it is in fair condition.

    As to bird dogging, yes you are basically correct. I understand from reading previous posts that you need a buyers agent licence to do bird dogging, which I am willing to get before I do this.

    Daniel.

    Profile photo of voigtstrvoigtstr
    Member
    @voigtstr
    Join Date: 2005
    Post Count: 176
    Originally posted by Captain_Picard:

    Hi Jah,

    To answer your question, I know these houses are good value, because the unimproved land value is close to the asking price of the home. The land value figures are accurate because I use the same database as Natural Resources and Mines, Australian Business Research and RP Data use. Comparable house sales in the area also gives me an indication. For example, the house I signed a contract for at Banyo is $198K, while the vast majority of houses in the area are in the high $200K’s or low $300K’s. That, combined with the high land value ($170K) tells me that I have a good deal, particularly when the difference between the contract price and the land value is only $28K. I am quite sure the house is worth more than that, having inspected it, and seen it is in fair condition.

    As to bird dogging, yes you are basically correct. I understand from reading previous posts that you need a buyers agent licence to do bird dogging, which I am willing to get before I do this.

    Daniel.

    Another issue as far as value goes, is what would these properties rent for? Eg for the 170k property would a rent of $340 a week be way over what the area would support?

    Cheers
    Simon

    Profile photo of redwingredwing
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    @redwing
    Join Date: 2003
    Post Count: 2,733
    Originally posted by Captain_Picard:

    Hi Jah,

    To answer your question, I know these houses are good value, because the unimproved land value is close to the asking price of the home. The land value figures are accurate because I use the same database as Natural Resources and Mines, Australian Business Research and RP Data use.
    VGO ???
    Comparable house sales in the area also gives me an indication. For example, the house I signed a contract for at Banyo is $198K, while the vast majority of houses in the area are in the high $200K’s or low $300K’s. That, combined with the high land value ($170K) tells me that I have a good deal, particularly when the difference between the contract price and the land value is only $28K. I am quite sure the house is worth more than that, having inspected it, and seen it is in fair condition.
    Sounds great Captain..

    As to bird dogging, yes you are basically correct. I understand from reading previous posts that you need a buyers agent licence to do bird dogging, which I am willing to get before I do this.
    Maybe PM DD or Minimogul for advice on becoming a bird-dog..I think DD went and got a financial Licence??

    Daniel.

    “Money is a currency, like electricity and it requires momentum to make it Effective”
    Count The Currency With This Online Positive Cashflow Calculator

    Profile photo of Captain_PicardCaptain_Picard
    Participant
    @captain_picard
    Join Date: 2003
    Post Count: 27

    Hi Redwing,

    What is VGO? I use Queensland Valuations and sales to get information on a property.

    Daniel.

    Profile photo of grossrealisationgrossrealisation
    Member
    @grossrealisation
    Join Date: 2005
    Post Count: 1,031

    hi Captain_Picard
    I read with interest your post and the figures are very good and may keep your email and send you an email I’m not one for licenses I’m a if they can do the job good.
    they are not in my time line but I always look out side the square.

    here to help

    Profile photo of thefirstbrucethefirstbruce
    Member
    @thefirstbruce
    Join Date: 2003
    Post Count: 133

    Hi Captain,

    Re Banyo, that’s a suburb I know very well. IMHO, today’s asking prices are equivalent or a little softer than November 2003. Which means values have fallen around 5% in real terms in less than 2 years. i.e. this house
    http://www.realestate.com.au/cgi-bin/rsearch?a=o&s=qld&c=73700178&tm=1126225484&id=102535118&f=0&p=30&t=res&ty=&snf=rbs&ag=&cu=&fmt=&header=
    was up for sale in 2003 for more than what the current vendor is asking. (I signed a contract on it in Nov 2003 but pulled out after post building inspection haggling.)

    Re your 2 bedder purchase, I note you may be out of pocket 199k+9k(for in costs)+12k(reno) = $220K.

    If you get rent of $220 a week
    (http://www.realestate.com.au/cgi-bin/rsearch?a=s&cu=&s=qld&ss=&ag=&t=ren&snf=rbs&tb=banyo&u=BANYO&is=1&pm=&px=&pme=any&pxe=any&minbed=&cat=House&p=30&o=p)
    for this 2 bedder, that’s a gross ROI of 5%. For you to make money on the house, you’ll have to find a buyer who is happy to take it for much less than 5% yield. IMHO, that won’t be easy, as 5% yields are very easy to find all over Brisbane. I actually don’t look at anything with less potential than 7%. But then you might find a wood duck out there.

    Personally, I wouldn’t rely on UCVs to decide what’s a good deal. UCVs are contingent on the market, and can go backwards.

    It is much more realistic to set value based on yields and market sentiment. Currently we are in a flat market, with no sign of that changing for some time. And shares and managed funds are easy to get >15% pa after tax returns when leveraged, and shares don’t have the high in and out costs.

    NEvertheless, the one upside I see to your purchase is that you can get in and do your reno, then potentially get a bit of extra equity (if the valuer sees it), and the market doesn’t stay flat or soften, which is a real risk currently.

    Good Luck

    Bruce
    Mooloolaba, Qld

    Profile photo of Captain_PicardCaptain_Picard
    Participant
    @captain_picard
    Join Date: 2003
    Post Count: 27

    Hi, thefirstbruce,

    I found yields to be not that great an indicator of a house’s value; a better one in my opinion would be cash on cash return. However, this property, along with the others I found, and still find regularly, are negative cash flow, so even that does not apply. $220 per week for rent is probably more than what I would get, even after I replaced the kitchen and polished the floors, so you are correct – it looks like not that great a deal by looking at the yield alone.

    I know it is a good deal, not just by the UCV (which is respected by any valuer, and the contract price of the house is very close to the UCV) but also by my own observations of similar houses in the area. They are $20K to $50K higher, and most of them need renovations as well. Keep in mind the original asking price was $239K, and I got them down to $198K.

    Daniel.

    Profile photo of thefirstbrucethefirstbruce
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    @thefirstbruce
    Join Date: 2003
    Post Count: 133

    Hi Daniel

    Hmmmmmm….can you expand on why you think yields don’t indicate price realistically….From what you are saying so far, your logic seems to be that the definitive resource is the UCV, as that is what is taken seriously by valuers.

    You also seem to be saying that asking prices are a reasonable guide of value.

    Can I caution you to remember that the amount negotiated off an asking price varies considerably over time. During a boom, it is hard not to pay the asking price. During the recent slump, many report getting 15-20% discount off the asking price. And you managed to get 17% off.

    I suppose good value depends on what your expectations are too. Personally, I expect IPs to pay for themselves and average growth >5%pa, as I can do that with Oz and US equities.

    Anyway, you should do ok with time. Banyo’s got a lot of upside ahead of it. What street is it in?

    Bruce
    Mooloolaba, Qld

    Profile photo of blogsblogs
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    @blogs
    Join Date: 2005
    Post Count: 418

    Undervalued…..based on what???

    Remember value has nothing to do with what someone DID PAY, it is dependant on what you can sell it for. So if you cant sell it as the price you want then its not undervalued is it, its worth what he market dictates…….

    Profile photo of regbenregben
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    @regben
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    On the subject of the Banyo area. Does anyone know how the mozzies are around there?

    Profile photo of Cabo WaboCabo Wabo
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    @cabo-wabo
    Join Date: 2005
    Post Count: 117

    Captain Picard,

    It was with great delight and humour that i viewed your call sign… nice work dude.[biggrin]

    I’ve a question. I am greatly interested in what database you are using, and how you gain access to it. (as u said, the same one RP data, aust business research, and nat resources & mines use). Whats it cost?

    Very interested indeed.

    ..engage………

    Cabo Wabo

    Profile photo of Yogesh_AlfaYogesh_Alfa
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    @yogesh_alfa
    Join Date: 2005
    Post Count: 1

    Congrats and all the best!!

    Yogesh

    Profile photo of MillyMilly
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    @milly
    Join Date: 2004
    Post Count: 288

    I live two burbs away from Banyo at sandgate. Last yr Dept of Natural Resources sent me a letter saying my land value was 510k. This year they sent me a letter saying it was now worth 475k.

    Earlier in the year I had the house valued by a real estate agent who told me I would get between 400 and 500k if I sold it. This with the house, a huge renovated squeenslander, included.

    Now either the DNR value is inaccurate or it is the real estate agent’s estimate (and god knows that was broad enough!)

    I think the value of a property is in the eye of the beholder until it is sold for a price that someone else values it at.

    But for the record Captn I agree its a great deal. Anything under 200k on the northside is a great deal. Best of luck
    milly

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