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or higher rental return down the track.
“ It could be something as simple as, can
I convert it into a higher use, for example
student accommodation?” he says.
“ It could be something as simple as
lifting a house or adding bedrooms.
In our part of the world (Brisbane) you
can go to five bedrooms with unrelated
parties and rent room by room. So I’m
looking for a property that has that
upside potential in an area that’s either
close to a university or close to a hospital.
With hospitals you’ll find nurses who
want to rent room by room, and of course
student accommodation is something
that I love and that can be rented room
“ When I say ‘look for something with a
value-add’ it could mean a three-bedroom
house that could be lifted and turned into
maybe another couple of bedrooms and
a bathroom and become a five-bedroom
reno. Also look near an airport, where
you’ve got a lot of training and facilities
and people who come and go on short-
Not only will this kind of value-add
increase your cash flow, but it’ll also boost
your property’s value.
Just be mindful of the regulations in
place for room by room rentals.
“ Each bedroom has to have hardwired
fire alarms, they have to have locks on
all the bedrooms, and fire services and
fire escapes have to be (to standard)
and (there are) minimum room sizes,”
Eslick agrees that a property has to have
stronger potential for equity growth or
rental income in order to be considered
“ I’m not going to buy a property if it’s
got a stock standard return or a below
average return,” he says.
A GROWING POPULATION
John Potter, author of A Property
Investor’s Guide to Negotiating, believes
investors should be focused on areas of
“ T he last place you want to be buying
is in cities where your population is
decreasing,” he says.
“ As an example, a lot of Tasmanian
towns have populations that are
depleting. What comes with a depleting
population is high unemployment, and
what comes with high unemployment is
vacancies, followed by decreasing rents
so your rental structure starts to collapse.
They’re the last places you want to be. ”
Look for growth corridors instead, he
says, with improving infrastructure and a
variety of amenities.
“I f infrastructure is provided in the
form of public transportation, it’s
always a reason why demand for rental
accommodation rises because a lot of
people don’t have cars anymore. If you
can be around a new train station, like
for instance around the other side of
Melbourne where you’ve got those new
areas like Clyde and Officer – they’re
well out of the city but their population is
growing all the time and the train line is
being extended to them.”
Potter also advises investors to know
an area like the back of their hand, “so
much so that you can just walk into a
home that’s open for inspection or an
apartment that’s off the plan and you
can say ‘we should be paying $7750 per
square metre for this apartment off the
plan because that’s what the market
dictates it’s worth today’, or ‘we’re
looking at a new home that’s open for
inspection, we should be paying no more
than $615,000 for this’ . ”
Unearthing a bargain in a hot market
can be near impossible; competition is
fierce and sellers wield the negotiating
power. That’s why Potter recommends
straying from the herd and finding your
To illustrate his point, Potter uses Varsity
Lakes on the Gold Coast as an example:
a suburb with good demand, good quality
housing and a market on the rise.
“I f you go to an open inspection on
a Saturday at Varsity Lakes and there
are six couples all lining up at the gate
waiting for the one o’clock start, it’s
probably not a good time to be making a
silly offer, is it?” he says.
“Timing is everything. Pick something
that’s been auctioned and hasn’t sold.
That’s what I like to do when I’m buying.
“Go through the auctions that never
eventuated because some of those
people are realistic about selling but their
expectations may have been too high and
they’re prepared to drop their expectations
dramatically because everyone has moved
on to the next auction. So unless the sellers
take it to auction all over again, there’ll
be no interest because everyone says ‘oh,
they want too much’.”
Potter used this strategy himself just
a few months ago on a harbourfront
house in Sydney that had been
“ I went through it the second time
and their expectations were about
seven million and it wasn’t there. Their
expectations were about a million dollars
too high. It should’ve been in the early
sixes. So when I went and saw it I offered
them $5.2 million.
“ T hey said ‘that’s not enough’, and it
wasn’t enough but I just left it with them
for two weeks.
“ All the other agents had kind of lost
interest. The owners had started blaming
the agents, saying they should have done
a better job, so I got them together in the
same room and said ‘look, I’m here now’
and they said ‘but you’re at $5.2 million
and it’s six million’ .
“ See, that was a huge drop. If they’d
been at six million on the day, they would
have sold it. So I met them at $5.5 million.
“ I’ve got six months to pay and I gave
them a five per cent deposit. So that was
really $800,000 (below what they were
originally prepared to take) because
of timing. ”
A PROPERTY THAT HAS HIDDEN
POTENTIAL OR A ‘TWIST’
The first factor Eslick looks for when
scouting for a good investment property is
the potential or “the twist” that not even
the agent knows about.
“ I buy a number of properties that are,
for example, zoned for development yet
the ad has absolutely zero mention of
development in it. Usually the site will
be worth more as a development site
than as a straight house. I call it buying a
development site at a non-development
price,” he says.
“ We had a client who early last year
bought a site for $460,000 that had failed
at auction in Kedron (in Brisbane). It
was advertised as LMR (low to medium
density residential) but it was just about
to be approved under the Chermside
Local Plan as MR (medium residential).
We actually purchased two in the same
week in the same street, both identical.
The first one we paid $460,000 , went and
got approval for nine units on the site and
on-sold it about eight months after they
purchased it for $875,000 .
“ T he other one we paid $460,000 , spent
$2500 on the house just to make it a bit
more livable for tenants and then sold
it without an approval for $965,000 12
months and one day after they bought it
FEATURE // DEAL OR NO DEAL
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