Capricorn Life | Buyers Agent

Rockhampton, Gladstone, Mackay, Airlie Beach, Emerald, Bundaberg, Yeppoon, Agnes Waters, Whitsundays


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Case Study – Investor Kristoffer (First Purchase)

Investor based in Sydney. Kristoffer comes from the IT sector.  His looking for a great asset that was going to be longterm positive cashflow and primed for capital growth in the short and long term.

Exact Summary of brief sent to client:

Dear Kristoffer, 

Thank you for connecting. I really enjoyed chatting and understanding more about this important purchase in the broader context of you and Darcy’s current and future plans.

I have spent further time considering your situation, objectives and requirements and have noted these below. Please take time to review and let me know if I have missed anything; 

You guys are based in Sydney, busy professionals (IT & Nursing). This transaction is going to be an investment property. You have decided to investment in the Bundaberg area because of the recent Heron Todd White property clock. The goal is for the property be an asset that allows you to keep building a property portfolio, with the intention to also reduce your overall taxable income. Given you guys are still in the asset accumulation of your investment journey you’d like the property to have a combination of growth and positive cashflow. This type of property will enable you to extract equity, maintain your serviceability and purchase another investment in the future. Positive cashflow is important however not necessarily vital in the short-term 1-2 years. You see this as more a set and forget type investment.

At present, your brief is as follows:

  • Positive Cash-flow (Yield is important in the medium/long term 5-7% desirable)
  • Established Dwelling (Something that will outperformance the averages)
  • Low maintenance (Doesn’t require major upgrades or renovations)
  • Good location (Desirable Suburb that has the combination of Positive Cashflow & Growth whilst being low risk)
  • Property that ticks investing fundamentals

(Let me know if you’d like more specific information in the brief)

Primary suburbs of interest:  

Looking for the best asset your money can buy across this region. 

Kristoffer (Second Purchase)

Location: Bundaberg 4670

Property Description: Low-set brick 4 bedrooms 2 baths 2 Car.

Asset Selection: This property was on the market and attracted a lot of interest from home buyers but because there was a long-term tenant in there it deterred many away. The long-term tenant was also not paying market rent in fact up $150 less per week then market value. This also deterred non sophisticated investors. The agent tipped me off that the tenant had a change in circumstances and needed to break the lease and move on. We were the first to know this and jumped on the opportunity.

Offer & Negotiation: The property was listed for offers over $450,000 we got it of $441,000. We also got a additional $2000 worth of upgrades paid for by the vendor after examining the Building and Pest Reports.

Our 10 Strategic Investment Principles for asset selection:

  1. Does the property appeal to owner occupiers? *YES* In a suburb with a large percentage of owner occupiers above 85%
  2. Is the property below intrinsic value? *YES* Significantly below the average price of homes located on this street
  3. In a suburb with a history of growth and stability? *YES* very solid growth and stablity due to desirablity and demographic
  4. High Land to asset ratio? *YES* Very high land content value being an established property in leafy green estate
  5. Does it have a twist? *YES* Massive block almost 1000m2
  6. Can you manufacture growth through renovations or development? *YES* certainly scope of further renovations and value add in future.
  7.  Is the purchase in the optimum buying window for Capital growth? *Yes* brought at the right price at the right time of the cycle
  8. Good rental price trend? *Yes* Rents across the suburb increase year on year
  9. Is it immediately surrounded by homes of higher value? *Yes* Homes on this street are worth up to 600k so 200k more than the property we purchased for Kristoffer
  10. Close to lifestyle drivers? *Yes* Job hubs and good private schools

The Numbers:

Purchase Price                                                                                            $441,000

Deposit 10%$44,100
Stamp Duty$13,860
Building and Pest Report$650.00
Solicitor Costs*$1,700
Gross Annual Cashflow Return ($500 per week x 52)$26,000
Expenses (Interest, Rates, Management Fees)$22,600
Net Annual Cashflow Flow Return$3,400
Yield on Property5.8%

Now – Let’s look at the Cash-on-Cash Return

Deposit Needed = 10% + Costs$67,534
Return on Equity (Pure cashflow return)5%
Return on Equity with 5% Capital Growth Rate32.6%
Return on Equity with 7% Capital Growth Rate45.7%
Return on Equity with 10% Capital Growth Rate65.3%

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