Hi Guys,
My father is currently negotiating a deal for a multi-dwelling residence where aged people rent a room for top dollar. He sourced this through a buyers agent who has a couple himself around Brisbane. Here is the deal:
* $530,000 (brand new)
* Gauranteed rental return of $900 per week for 2 years
* Brisbane (about 7 km to the CBD)What should he be looking out for with these kinds of deals? Do they build the so called “gauranteed return” into the initial price to make the deal appear more attractive to the potential investor? Do any of you have any advice, or stories of success or failure with these kinds of deals?
Any information at all would be most appreciated.
Cheers
DannadsThat’s a lot of money for one property, and the return is not that great. It is about standard on a rental guarantee deal. Bank loans are up around 7% now. Too scary for me.
I prefer to spend that sort of money over a few properties and spread the risk a little.
The rent return is 8% approx – what is the going rate in the area without the rental guarantee? Check out other facilities to see what they are getting.
Is there even a market for this kind of residence in the area? It may be full of young professionals – not old people needing to rent.
Yes, the rental guarantee is usually built into the purchase price, which means it is probably overpriced.
What happens if your Dad gets into financial difficulty and has to sell it in the next 1-2 years? What will it be worth then? The exit strategy is just as important as the entry.
What are the outgoings – body corp, insurance, rates etc.
I would be doing a lot of price checking on similar EXISTING residences in the immediate area. The local council will have records of recent/past sales and how much. Local agents may also manage these so ring a few to see what they are doing.
Ask the buyer’s agent to show you his title deeds of the ones he says he owns. Look them up at the council to see what he paid (if he owns any at all).
This sounds a little ‘two-tier’ to me. Beware, and don’t be pressured into a sale. If your Dad doesn’t live in the area, or lives out of state, then I’d say this is what’s going down.
Last of all, ask the buyer’s agent if he minds if your Dad gets his own bank valuation done on the property, using an independant valuer (costs a few hundred but could save some heartache). If the buyer’s agent is not keen, or tries to direct you to his guy, you know you have to run a mile.
There is another ‘deal of the century’ tomorrow.Cheers,
Marc.
[email protected]Couple of immediate things jump to mind.
Ok the property is new so i assume it is an old Qlder converted and renovated as you would not build something new for that price.
Rent guarantees are also a worry – depending on the area usually means that the property is overpriced and the vendor is factoring the guarantee into the purchase price.
I own a couple of brick multi units in Brissie and these can be a great investment especially if you can strata title them and add value but I would be dubious over what you have described.
I am aware of a couple of developers who are selling such properties and if it is them i would give them a wide berth.
Feel free to PM the vendors details and I can give you a frank opinion.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
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