I have nothing to do with this property personally, just thought I would share the details as it's possibly one of the better deals I have seen around lately. Equivalent properties were selling in early/mid 2008 for $330-350k (as per sales history I have at hand).
I attended the auction for the property last Saturday (just out of interest as recently sold in the same suburb). Bidding started at $250k and rose to $305k before stalling. Vendor engaged on the phone by agent, agent speaks with bidders, I overhear that the vendor is looking for $330k. No further bids (e.g. passed in at $305k). Now advertised for sale @ $335k.
Here's some details, the property is currently listed as 3 bedrooms, you have to read the fine print in the article to note that it has a granny flat, in my opinion they should have listed as 4 bedroom to catch attention of those looking for this type of property. The granny flat is built in under the roof of the house, but access only from a door to the back of the house. There are some large cracks in some of the walls (e.g. not just hairline fractures), so I suspect structural check worthwhile. So long as it passed building inspection then I would think $15k spent on a cosmetic reno would bring this up to standards (interior a bit daggy) making it appeal to students. Further to this the lounge could probably be split off into a 5th bedroom quite easily (has separate dining for a common area which you could probably use as small lounge, 4x3.6m). Flinders University is barely a couple of kilometres down the road and for those not familiar with St Marys it is only around 10km from Adelaide CBD.
From experience it would not be hard to find student tenants to fill these rooms if you were keen to self manage and rent them individually and I suspect following $15k reno you could rent for:
3 x bedrooms = $300 ($100 each)
1 x converted lounge = $110 (larger than bedrooms, 4.8x3.9)
1 x granny flat = $130
So say if you managed to purchase for $325k, $15k reno, $340k outlay (+ other costs obviously depending on your situation). $540pw rent would give you $28,080 or around 8.25% yield, even if you went conservatively and said 1 room always empty and only 4 rented at a time, ($540x.8) still 6.6% yield.
- Property is outdated and cracks do subtract from interior, however as mentioned building check and reno would counter these issues.
- Too close to south road for my liking (however this is probably a + for students studying nearby)
Anyway, if you've read any of my recent posts you would note I am not particularly bullish on housing for the next few years, but this is perhaps a deal that could work without capital growth for the right investor.
P.S. If someone from here buys it, tell the agent he owes me a cut
Yield is to low IMO for something so management intensive.
I don't know the market their but 10kms from a major CBD for mid 300's does sound pretty good. This would be something purchased for potential CG of course after further DD
"Not particularly bullish" - Ha!
$100 per room, by the room, would be too cheap? Would've thought you could get more than that.
bene313 said: ↑
$100 per room, by the room, would be too cheap? Would've thought you could get more than that.Click to expand...I rented out rooms for around $130-140 per week, but that was fully furnished (very basic, single bed, study desk, chair, bed side table and small shelf set) and included utilities (electricity, gas, internet), that was 12+ months ago. I suggest you could charge closer to $150pw per room for a more micro managed service where you provide everything and you could build more profit into such an arrangement (e.g. charge more than it costs)...
Ridin-High, personally I would say CG would be somewhat limited due to lending and other macro economic factors I have discussed elsewhere. Also the house is set nearby South Road (near major intersection), across road from old mitsi factory, not a peaceful location for most people, just convenient for students, so I would be wary of expecting strong capital growth.
Probably not such a great deal if it lacks a good net cash flow and cg prospects
Ridin-High said: ↑
Probably not such a great deal if it lacks a good net cash flow and cg prospectsClick to expand...Even a flat 6% yield is approximately 50% more than most capital averages at today's prices (most sitting around 4% yield for houses). It's not fantastic considering cash can return higher (gross), however it's better than most others on the market and could return higher with the right person managing it. Capital growth wise I would say it has as much potential as other properties in the metro area (which I feel is limited and more likely there will be downside).
Feel free to post your own examples of a better deal
The flat appears to be self-contained (not sure about access issues). Couldn't you just let the house and flat separately? Similar yield but without the headaches of rent-per-room.
Dunno about yields in the area but for exmple:
House - $300 pw
Flat - $160 pw
Gross yield on 340k spend is 7%.
Judging by the advertisements for rooms around uni (University of Adelaide), there is a lot of capacity available and as such a bit of price slashing has been going on. Most seem to be around $100-125, but these all come furnished and around $75% cater to asian students.
Just an incite into the market from one angle.