22 June 2020

Cashflow Positive Investment in Langwarrin VIC

‘Langwarrin’s Cheapest Unit’ was the inbox headline that caught my attention and intrigued me to investigate this piece of real estate.


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.


What made this ‘Langwarrin’s Cheapest Unit’ was the rare and desperate situation the vendors were in. This unit had been sold to two separate buyers with values ranging in the mid $400,000, but with the difficult market, unfortunately finance fell through both times!


After two failed sales, the owner was now under pressure and needed a 28 day cash settlement or end up in court for failing to settle the new property they were under contract to buy and had already extended. Their retired parents were also their guarantor, which meant that their property could also be at risk if the vendor of the property they were buying was successful in court. 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.


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.