B Invested

THE VAULT – TERMITE DAMAGE IN AN INVESTMENT PROPERTY, SHOULD YOU BUY IT?

In this edition of the Vault, we track mid way up the Blue Mountains, west of Sydney, to uncover a house with termite damage that has since made more than $200,000 for its owners.

IT WAS THE RIGHT TIME TO BUY

The original owners of this place paid $330,000 during the wrong time of the market. We stepped in when the market was on its way back up and purchased this termite-riddled house for $250,000.

PURCHASE PRICE + TERMITE DAMAGE RENOVATION = STRONG POTENTIAL

The buyers of this property performed due diligence and had the property professionally inspected and assessed for structural and pest damage. The report found a degree of termite infestation and damage and the buyers estimated it was going to take between $20,000 and $30,000 to renovate this property and kill all of those termites. When this cost was factored into the overall purchase price, it would make a total cost of around $280,000. We identified that the property value would be between  $350,000 to $370,000 once the renovation was complete, meaning that there would be a quick profit of almost $100,000 in it for the buyers.

 

PRICES HAVE ALMOST DOUBLED SINCE PURCHASE

This turned out to be a clever investment decision for the buyers and this out suburban area has grown rapidly. Today, comparable sales in the market are worth around $550,000. The owners of this property have made around $270,000 since the initial purchase.

BUY CHEAP, UNDER VALUE WITH A GOOD CASH FLOW

When you purchase at the cheaper end of the market, below market value and with a good cash flow, you are minimising risk, maximising the upside and making money going into the deal. A lot of people wouldn’t even go near a termite riddled property, however, in this case, the numbers stacked up really well for our clients, and the deal has paid off nicely in the medium term.

Have you ever gone through with a purchase despite the presence of termites? Please share your experiences in the comments section below.

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