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Capricorn Life | Buyers Agent

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

CENTRAL QUEENSLAND

1800 543 328

24/7 Customer Support

Mon - Fri: 9:00 - 17:30

Exceptional Customer Care

Case Study – Investors Zoe & Darcy

First time investors based in Brisbane. Zoe is in Marketing and Darcy is a trady. They were 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 Zoe, 

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 Brisbane, busy professionals. This transaction is going to be your first investment property however you do currently have a PRR with a lot of equity in it. At this stage it appears that your budget may not get you into the better suburbs of Brisbane hence why you are now looking for alternatives. The goal is for the property to be the first purchase as you look to build property portfolio over the next few years. Given you guys are 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.

At present, your brief is as follows:

  • Positive Cash-flow (Yield is important)
  • Established Dwelling (House)
  • Low maintenance (Doesn’t require major upgrades or renovations)
  • Good location (Desirable Suburb)

Primary suburbs of interest:  

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

The Purchase:

Address: 4 Forbes Avenue, Rockhampton 4701

Asset Selection: This property was listed on realestate.com and generated interest and offers from a number of different parties. The listing agent knew that we had a highly qualified buyer due to our previous transaction with them and opted to take our offer over the others. We made it clear that our client was pre-approved with finance and would be swift to achieve an un-conditional contract in just 14 days.

Offer & Negioation: The property was listed as offers between $390,000 – $420,000. Once we established whats sold in the area and ran comparables we quickly got to substaniate the value. Our first offer was accepted without hesitation by the vendor.  

Our 6 Strategic Investment Principles for asset selection:

  1. Does the property appeal to owner occupiers? *YES* it can be converted into a single unit dwelling that would.
  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* Dual Occupancy in an area where this dwelling type is now prohibted
  6. Can you manufacture growth through renovations or development? *YES* certainly scope of further renovations and value add in future.

The Numbers:

Purchase Price                                                                                             $396,000

Deposit 20% $79,000
Stamp Duty $7,400
Building and Pest Report $650.00
Solicitor Costs* $1,700
   
Total $88,950
   
Purchase Price + Purchasing Costs $405,750
Gross Annual Cashflow Return ($530 per week x 52) $27,560
Expenses (Interest, Rates, Management Fees) $17,800
Net Annual Cashflow Flow Return $9,760
Yield on Property 7%

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

Deposit Needed = 20% + Costs $88,950
Return on Equity (Pure cashflow return) 10.9%
   
Return on Equity with 5% Capital Growth Rate 22%
Return on Equity with 7% Capital Growth Rate 25.9%
Return on Equity with 10% Capital Growth Rate 37%

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