[THE VAULT] MT DRUITT 2BEDROOM UNIT GENERATED $100 IN ONE YEAR
This edition of the Vault proves just how important it is to do our own research as property investors – and take what the real estate agents say with a grain of salt. In this case the real estate agent and owner underestimated the value of this Mt Druitt 2 bedroom unit.
UNDERVALUED BY ITS OWNER
This two-bedroom unit is located at Mt Druitt, in Sydney’s far west. PIA purchased this property for a client in late 2014 for $310,000. At the time, there were apartments selling in the same complex for $330,000 – however, the owner at the time claimed its market value was $310,000. The owner was a real estate agent. (Huh?)
HISTORY OF THE MARKET
Ten years ago, when this complex was built, apartments were selling for around $300,000. The market tanked and prices dropped as low as $200,000. When PIA sourced this unit, older red-brick apartments in the area were selling for $320,000 and newer apartments were going for $340,000. The market was on the rise once more.
Currently, apartments in this complex are going for more than $400,000. The PIA client who purchased this property has made $100,000 in one year. They are currently renting it for around $360 per week.
ONE PIECE OF THE FOUNDATION PUZZLE
This apartment is one important piece in the jigsaw that makes up its owner’s foundation portfolio. As an investor, it is important to have a mixture of properties from different markets that you have purchased in-line with your goals. Once you have built a strong foundation, you can move up to buy more and more properties in order to create wealth through a strong net-worth and strong cash-flow position. This property is an example of one pivot point that helps to set the foundations straight.
THE IMPORTANCE OF DUE DILIGENCE
The real estate agent who sold this property sold himself short. If he had researched further into the market as a whole and held off selling a bit longer, he would have made much more money than he did. Most real estate agents are not investors or investment experts. It is not wise to base your understanding of property value on what estate agents say. Make sure you do your own research into the property market so you have better leverage to negotiate.
Have you ever bagged a cheap property due to the selling agent’s lack of market knowledge? Please share your experiences in the comments section below.