We’ve recently concluded our 7-part Brisbane Buyers Agent Case Study with one of our clients, Luke. If you missed out on our series, we rounded up the posts here for you to catch up on.
Brisbane Buyers Agent Case Study — Luke Part 1 — Introducing Luke
Brisbane Buyers Agent Case Study — Luke Part 2 — The Buying Criteria
Brisbane Buyers Agent Case Study — Luke Part 3 — Location Funneling
Brisbane Buyers Agent Case Study — Luke Part 4 — Target Location Analysis
Brisbane Buyers Agent Case Study — Luke Part 5 — Property Analysis and Inspections
Brisbane Buyers Agent Case Study — Luke Part 6 — Making an offer
Brisbane Buyers Agent Case Study — Luke Part 7 — From Purchase to Settlement
Meanwhile, here’s a video summarising the process we undertook in purchasing Luke’s investment property.
Hi, it’s Karen Young here from Property Zest. I’m here today to present to you a case study of a purchase that we made for our client, Luke, in Brisbane.
Now Luke’s an aircraft engineer, he lives in Adelaide and he’s married to Lisa his wife and has two kids. He has principal place of residence; he also has one NRAS property that has tenants in currently. He has another NRAS property being built off the plan.
He’s quite well-read and researched when it comes to investing; but he just has no time and logistically it’s very hard to manage a purchase interstate and get to feel like you’ve thoroughly investigated and inspected properties when you live along their way. So that’s why he contacted Property Zest to help him with his purchase.
The first thing we do with the client is to discuss the brief. We want to get a shared understanding of what it is that we’re looking for, and this makes sure that we’re all on the same page and we’re all in agreement on what we’re actually looking for. It makes the search much more efficient and effective. We go through each of the process to really narrow down our brief with our clients.
So initially with Luke he had a budget of $350,000 and he had mentioned interest in Brisbane, Moreton Bay, Toowoomba, Gladstone, Townsville, Mackay, Roma, Emerald, Rockhampton–these are all potential locations discussed.
He was looking into new or newish property and it is going to be a long-term buy and hold in his self manage super fund so he’s looking for growth potential.
Now with all those locations to choose from we obviously got a lot of choices there and we really need to narrow down. So what we did was we took the locations we discussed with Luke initially and we split them into two groups—the Brisbane location and the regional location. And then we conducted a high level analysis of these locations against his criteria to try to present to him what we thought the pros and cons were, and what areas we thought were best suited.
So we presented two reports—the first was location analysis report on the Brisbane locations. Now what we found in Brisbane was that looking for new to newish properties at $350,000 there were a couple of key locations that we could find in those sorts of properties. One is Fitzgibbon in North of Brisbane; another is in the Moreton Bay area particularly around Rothwell North Lakes area; and then another was in the Ipswich area where there were newer properties within our budget.
So we presented our reports to Luke and he looked at those and then talked about them together to come up with what we thought would be best potentials within that. Then the next thing that we did was present our regional report. We looked into Gladstone, Mackay, Rockhampton, Toowoomba, and Townsville and we assessed which location was best suited to the criteria once again. We came up with Rockhampton, Toowoomba, and Townsville. We presented that report to Luke as well and had a talk about it.
Now from there we went back and then looked at our brief and revised our brief. Luke decided after weighing up the pros and cons of these areas and discussing them with us and our recommendations, he decided to focus on the Brisbane locations, particularly Fitzgibbon, Rothwell, and North Lakes.
So his buying criteria was able to be narrowed down to those locations. So we’re looking into new to near new, 3-bedroom-plus house, neutral to positive cashflow, at 70% LVR within his SMSF. You can say our brief is becoming a bit more focused.
The next thing we do was we looked at those three locations (Fitzgibbon, Rothwell and North Lakes), we conducted a more detailed analysis on these target spots, and we presented a target analysis report to him and discussed it.
We looked at things like the style of housing, the prices of housing available, the median house prices of the suburbs and the surrounding suburbs. We looked at all the numbers relative to the growth of the area overtime, rental yields, etc.
We looked at sample properties from each of these areas, we looked at services and amenities and the major projects and we presented all that to Luke in our target locations report. And from that, we again revisited our brief and narrowed them.
So we’re now focusing on Rothwell and North Lakes and it was at this point in time that we actually hit the net, hit the phone, and hit the streets to do research on actual properties in the market.
So we did a lot of inspections in Rothwell, Mango Hill, and North Lakes over a period of time and we always put all of our information into spreadsheets that we can share with Luke and discuss the cashflow of the area of the properties we can discuss, you know what land size they’re on, the estimated buying process, the rental yields, all that sort of thing.
So from our initial set of inspections, Luke decided that he wanted to focus in on the North Lakes area. Rothwell had very good yields and new style housing that meets the criteria but we decided that the North Lakes was more of a family demographic with a bit of growth potential. And so Luke chose North Lakes out of the two locations. So we now have a very focused buying criteria that we could work with.
So then we really got to know North Lakes very well and did a lot of work in terms of understanding the location and the facilities and services existing in plan. We looked at best pockets and best streets in the area, we inspected—either drive by or internal inspections—over 50 properties. We developed a shortlist and then we began negotiations on the top property that we like from our inspections and research.
So the property that we actually picked as our top choice was a 4-bedroom, 2-bathroom home built in 2004. It was on a 429 m2 block. It was in a more established part of North Lakes, at the end of a cul-de-sac so a really nice position. It was an ex-display home so it has the high ceilings, quality finishes and had a really good tenant who was keeping the house in an immaculate condition. It was tenanted at $400 a week.
Now the property had been on the market for 90 days with no offers, which we’re really surprised at. It was listed initially at $399k, offers over $399 then recently dropped that to offers over $389k.
This is the property here; as you can see really nicely presented home, both internally and externally. Nice dining, kitchen, lounge areas—just really well presented.
In terms of the numbers we assessed the numbers both outside and inside the SMSF and as you can see on the left there, if you were holding this property outside of Super at a purchase price of say $375 and renting at $400/week on a 100% LVR, we’re looking at about – $75 a week.
Inside of Super, the LVR would be different so 70% and also the tax rate would be different as well so 15% tax inside super. So we’re looking at different cashflows here, looking at about $21/week inside of Super.
Now we did a lot of due diligence on the property. We looked at zoning, rental yield and lease that was in place, we looked at past recent sales in the street and the immediate location. We looked at flood maps, drainage, insurance quotes, council plans, and predictive growth for the area.
And then we commenced on negotiations with an offer of $370k. note that our budget was initially $350k but after discussion with Luke we decided that the quality of home we were finding at $350k mark was a bit older so Luke decided to up the budget a little.
We had a counter offer from the vendor. We had a little bit of discussion, negotiation over a period of a week or so. And in the end we secured the property for $375k, which was great because beyond that we would’ve walked away and gone to the next property on our list.
The Settlement Period
Now in the settlement period you know there are lots and lots to do. We had solicitors looking at contracts conducting property searches, building and pest inspections, finance had to be arranged and Luke was super organised in terms of getting the documents back to the bank. But the bank still slows us down here and forced us to delay settlement by 2 days, which was always a nerve-racking situation.
We looked at insurance quotes, we had a quantity surveyor which Luke actually wanted to use to do depreciation and we conducted property manager interviews.
So the house is settled now, which was fantastic,. Good little location, great little property and Luke was very happy with it. We’re now on purchase number 2 with Luke, which was fantastic. He’s looking at Ipswich or Toowoomba areas.
Now we’ll be interviewing Luke coming up soon on Everyday property Investing podcast so stay tuned for that. And I hope you enjoyed this case study.
Of course if you like assistance with purchasing property in Queensland, both in Brisbane or regional areas, feel free to give me a call, I’d like to chat about it with you. See you next time.