A bit of fun for this week. I want you to play "Purchase or Pass" with me.
Take a look at the video above from my Sky News Business property show where, in this episode, I speak with real estate legend Tom Panos about an opportunity in Sydney's Eastern Suburbs.
Sure. I don't expect many of you to have $6.2m lying around, though when you consider someone could finance this with a fraction of that money down only 11 years ago, it's not a stretch to think that a group of buyers could have quite easily put this money together and obtained finance with the right joint venture.
We have many clients who could have easily done this themselves.
Think about it...
🏢 Property Breakdown (in 2012)
📍 Location: Sydney's Eastern Suburbs
🛏️ 9 x 2 Bedroom Apartments
🛏️ 3 x 1 Bedroom Apartments
🚗 Parking: All with garage or parking space
💰 Price: $6.2m
🏡 Rent: $5,500 to $6,500 per week
Of course, it's not without its challenges though. While the exterior was presentable, the inside told a different story. You'd probably need to be prepared to put more money into renovations.
Remember however, if you do the renovations correctly, you should be adding more value in equity than the money you spend on the renovations themselves.
There's also potential to increase value by adding strata title to the property. That's not a cheap or simple process either, though can considerably increase the value of individual units.
* Generally speaking, to strata title a block of units like this, you are looking at something around $200k to $500k.
Oh, one more thing... did you listen carefully in the video where I talked about a 5.5% rental return? Gee whiz, wouldn't that be nice!
That's absolutely unheard of today, though just another reminder that each part of the property cycle moves independently.
So if you could go back in time, what do you think?
⏩ Fast-forward to 2023
In today's market, a property like that - especially in Sydney's Eastern Suburbs - could likely be an eye watering goldmine.
As a strata titled block, with renovated units for individual sale, I'd estimate you'd be looking at a figure closer to cirqua $15m for an increase in value of almost $9m (excluding your expenses).
* It's important to note that these are all rough estimates and in no way reflect the actual current values of the units or the property. Current valuations assume a median price approaching $1.5m for each of the two bedroom apartments and $1m for each of the one bedroom apartments.
Still, who wouldn't want to have been even a part owner in that purchase 11 years ago?And that's after the knowledge that we would have had a pandemic, royal commission into banking and an uncertain economic climate.
So, what's the message in all of this?
Whether you're eyeing a single unit or an entire block for an investment, preparedness is key. So is keeping your mind open to creative ways of doing deals such as joint ventures in order to maximise profits through the best opportunities.
Understanding the intricacies of the market and the myriad of opportunities it presents is essential. It's not just about the here and now, it's about envisioning the long term potential and being strategic.
Then, when you are ready, all you need is access to deals such as these. Unfortunately, for most investors, they rarely see the light of day on the open market. For that, we can most definitely help.
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