22 June 2020

Successful Buy and Hold Property Strategy in Ferntree Gully VIC

Our second investment property in Ferntree Gully, located in Melbourne’s outer eastern suburbs at the foot of the Dandenong Ranges was purchased in 2005. The rental property was advertised for $240,000 but the current tenants has abandoned the place, their possessions, left and appalling mess and were behind on rent. They were also being pursued by the Police. This coupled with a separation between the vendor’s meant that the offer for the property changed as a quick sale was required. 


The property was offered ‘as is’ including all furniture, fixtures and a whole lot of junk. Our unconditional offer of $192,000,  a $2000 deposit and 21 day settlement was accepted. Now it was time to get to work!


The two-storey house on the 733sqm property needed a lot of work but we figured that we couldn’t possibly make it any worse with some cheap reno’s! The house was then privately rented to Ryan’s friend, who moved in on settlement day while we began renovations. Ryan also spent time living there and this was a great starting place to learn a range of reno skills.


To make this house liveable, we replaced and repaired the kitchen, bathrooms, carpets, curtains, blinds, wiring, plumbing and gardens, plus added air conditioning and heating all on a budget of $40,000.  Ryan even managed to find a suitable Kitchen with all appliances included for just $2,500.


This kitchen was replaced and finished over a public holiday long weekend, which he removed from a home in Surrey Hills and installed into Ferntree Gully over a long weekend. The kitchen included all Smeg appliances! It was ‘U’ shaped and had to be reconfigured to the ‘L’ shaped space in the house. This was a great find and helped to counterbalance the double time rates of having a plumber on site on a public holiday. Not mention all the tip fees after removing all the rubbish left behind by the previous tenants!


Over the course of the 14-year ownership this property has been a great performing investment in our portfolio with a consistent 10-15% average capital growth per annum. The property was also privately rented and occupied throughout this time. Plus, similar returns in rental income, giving an overall average of 20-25% return on investment per annum.


In 2018 we decided to value add to the site by gaining a DA for the title. The land with a DA to build two new homes would appeal to both developers and private investors alike or give us another project to step into. However, the DA was rejected, but after a quick hearing we were successful at VCAT and had our plans approved and stamped.


We made a pivot in 2019 and made the decision to sell this property by analysing titles which were unencumbered and in turn, which investment sale would inject the most cashflow into a larger property project we were entering into.


Here is a brief break down of the purchase and sale figures on this property:

Purchase: $192,000
Renovations: $40,000
VCAT + Development Plans: $30,000

Total Investment: $262,000
Sale Price 2019: $700,000

Profit: $438,000 plus*

(*average of 20-25% ROI p/a when included with rental)


To secure the next investment property, we required a quick sale and sold below market value via a private sale which saved on agent fees and gave the new owner (one of our property students) an equity profit of $72,000 on settlement date. Also included in this sale were all DA approved plans to demolish the existing building and replace with two town houses if they so desired. This property represents a great example of the buy and hold strategy and also a win/win situation for both us and the new purchaser.