We found a great investment opportunity in the coastal suburb of Langwarrin, south of Melbourne on the Morninginton Peninsula. The property was listed as ‘Langwarrin’s Cheapest Unit’ and as such, definitely worth investigating this piece of real estate further.
The three-bedroom unit was in great order both inside and out, but as an investment it didn’t have any subdivision or renovation potential which is one aspect I’m generally looking for when we invest in property. The property had had two previously accepted offers of around $450,000 but in the difficult market, the finance for both potential buyers fell through. During this time the vendor had already committed to buy another property and had needed to extend the settlement date twice because the sale of their place had fallen through.
This unfortunate situation with the vendor under pressure and requiring a 28 day cash settlement to meet the contract of their new property purchase resulted in the heavily discounted unit now for sale. The vendor’s retired parents were also their guarantor, which meant that their property could also be at risk if the vendor couldn’t meet their settlement agreement. They were desperate to sell and as much as we wanted to help them out, we also had to ensure that any investment would also be of benefit to us.
We researched similar units in the area and found one that was similar in size and layout in the same block which was sold in December 2017 for $487,000.00. For this investment to work, I needed the property to be cashflow positive. This brought the amount we could offer for the unit down to $372,000.00, when the vendors had heavily discounted and were now looking for $400,000.00.
Our offer was the only cash offer on the table and was accepted. The vendors took our offer, some $28,000.00 less than what they originally had discounted down too. This allowed them to fulfil their settlement on their new property in time and save themselves from the possibility of losing everything, not to mention all the legal costs.
And we now have a cash flow positive rental investment which delivered over $100,000.00 equity profit on the day of settlement. The property is now valued at $490,000.00, with $42 per week positive cashflow and an equity position of $118,000.
In this situation the seller avoided going to court and was able to meet the settlement for their next property purchase. Our tenants also found the home they were looking for and we have our cashflow positive investment.
The advice we can offer is to always keep a look out for cashflow positive opportunities, but keep in mind that you also need to be ready to act on them, once found.
