Got an interesting one…. looking at an IP, priced well under market value – by about 20%
went on market today
real estate description states that: "warning, the long term tenant (14 years), collects things and the unit seems crowded, but its an indication he will be staying put for a long time. he is always ahead on his rent" – i will be asking some key questions today
the calculations i get are its positive case flow – 10% return… buy and hold with a possible reno a later stage when some capital growth is achieved. This is a 2 bedroom unit.
Can anyone identify any issues with a 'hoarder' or 'collector' – assuming it is no food or anything illegal?
i have read that you shouldnt buy on emotion, rather on numbers and the numbers certainly stack up..
Also do you get pest and building inspections on a unit even though you pay strata to maintain it etc?
thanks in advanceDWolfeParticipant@dwolfeJoin Date: 2009Post Count: 1,253
It is interesting. A hoarder will hoard anything. Newspaper, pots and pans, rubbish, tin, wood, anything. They may have kept animals inside the property with them also and there may have been other animal infestation such as mice and cockroaches because of the amount of "STUFF" in the property.
Now. How do you figure out if it is worth it? Firstly can you go there and see it for yourself? If it was me and I was really considering it, I would go and check out a hoarder. Scruffy, nup probably wouldn't care, but you need to know how much there is to get rid of.
There are a lot of questions you need answers to. How much will it cost you to get rid of all the stuff? They will not take it with them, it will be your problem. Will the bank lend to you on this or will it come in way under when being valued? Can you give the tenant a 120 day notice to vacate (no reason specified) and move them along and fix up the property? You may have trouble getting them out if they have stayed for 14 years. Then do you care? If you get the property very, very, very cheap, I am talking way under what the vendor is asking and you get a tenant who is in front with the rent, do you care that they collect garbage? Probably, but it may be still worth looking into.
Yes you get pest and building inspections (especially if they are hoarding) but the inspector will only inspect things that are visible. They will not look under furniture, or lift carpets or climb around junk. If it is a two bed unit there may be a limit to how much junk they have at least they wont have much yard to fill with scrap metal .
Go there and see it first then make sure all the numbers stack up, then make sure you have an exit strategy for if it goes pear shaped.
Please let us know how you go, good lesson for all of us.
DducksterParticipant@ducksterJoin Date: 2004Post Count: 1,674
Hoarding stuff can mean a fire risk. I have seen on ACA where a person can hardly move between the hoarded items in the yard or in the house.
Council may contact the owner any time into the future to have the eye sore removed that would mean the Landlord not the Tenant.
The tenant does not have to clean it up the Landlord has to if directed by the Council.
Thanks for the advice…
I will inspect to check for damage / fire hazards. But yes if its under market value then i would look at the rental history to make sure its not lies then either keep him as he is ahead in rent or kick him out and find new tenants….
Shall keep you posted
so here is the update, i went and saw the agent, the unit sold for $20k above the asking price on the 2nd day of its listing…. the agent tells me he was BOMBARDED with investors wanting a very positive cash flow property.
So the unit sold for $140k, rent is $200 a week, 14 year tenant who pays his rent each and every week – i saw the ledger!
Bugger… then i get a txt from him 20 minutes ago saying he has another unit in same block for roughly same price which is vacant which could get $200 a week in rent… but i am kind of upset i missed the 'hoarder' one as he pays his rent!!!
A new tenant could be like playing russian roulette as the area is very low socio economic status with crime a little high… BUT the railway station is 300m away – which is getting a $2mil upgrade shortly and a new medical facility is about to be built with all bulk billing doctors… so could still end up with a positive cash flow unit…DWolfeParticipant@dwolfeJoin Date: 2009Post Count: 1,253
Good for you for getting in an finding something that was obviously a good deal. Maybe have a crack at the other apartment see if you can get it for a good price make sure the tenant is locked into a lease when you buy and see how you go. One of ours we bought with a tenant who isn't really into a fixed lease, meanwhile he is still there and still pays rent on time.As long as you are aware of the risks and you have strategies in place to mitigate these risks then you will do fine.
Good luck with the hunt!
DRandJParticipant@randjJoin Date: 2005Post Count: 14
go for it goldie !! do the checks and balances but its a goog buy,.. 140K is not much really for a $200 rent…
laughin so long as u get good tenant.. bring strict !!!
Thanks for the positivity guys. There are a few people on these forums who like to bring you down a peg and i really feel i have read enough books and done enough research on this one for it to be my first IP.
We had a broker over last night – and yes we did our homework with him too! he was the 3rd one we 'interviewed' and we are going with him. He is getting our house valued in 2 days, then our pre approval then it shopping time. the 2nd unit in the complex is available to look at until 3rd july so we have a bit of time to get finances right
Shall keep you posted!