Reading Time: 3 Minutes
Hey everyone!
Writing this on a crisp Sunday morning surrounded by a whole ragtag bunch of no-gooders I call my friends.
What a whirlwind weekend we had – it was the joint birthday of a couple of the gang so we did the annual pilgrimage to a tree-change location a few hours outside of Sydney.
Cue laughter and drinking amidst the poker sessions, board games and non-stop sports streaming…
An AMAZING time.
So amazing that I didn’t notice that the property deal I talked about last time (read here), was stolen right under my nose.
You might remember I vaguely talked about a sub-division opportunity which I wanted to crunch the numbers on.
Here’s the online listing (here)
Editor’s note – depending on when you click this, the link may have expired, it’s a 3x1x1 house on 903sqm of land.
What
If you look at it, at first appearances – it just seems to be a standard house with a big backyard.
But what I liked about this one is that it was previously sub-divided before with plans already in place.
This naturally piqued my curiosity…
When I got there…
So of course, I put it on the shortlist for properties to inspect.
Funnily enough when I got there, the agent kept me waiting… and waiting… and waiting…
In fact, he forgot our appointment and arrived almost an hour later – I had already finished inspecting another property nearby.
Background
Excusing his faux pas, it was time to grill the agent after a quick viewing.
Why are they selling?
Because the vendors are in financial trouble.
Why didn’t they finish the sub-division?
Because the vendors are in financial trouble.
What offer do you think they’ll accept?
Probably around $360,000 (bearing in mind it’s advertised for $379,000), because the vendors are in financial trouble.
Hm… methinks a pattern is emerging…
The numbers
After I left, it was time to crunch the numbers.
Now this is where it gets a bit tricky, seeing as I’ve never completed nor attempted a sub-division before, but luckily I managed to “borrow” a spreadsheet from a former work colleague who’s bread and butter is real estate development and sub-division.
Thank goodness for excel right!
So here goes…
It’s a pretty rudimentary spreadsheet, but back-of-the-envelope enough to fill in the numbers to see quickly whether there is a deal here or not.
I assumed that I would be selling this project with a total 18 month completion date from purchase to sale.
Basically, having called the local council regarding their costs as well as the solicitor and accountant to get an idea, it appears that there’s a deal here – even with my conservative numbers.
In fact, the most important figures are on the RHS under “profits”, more specifically “% Return on Equity”… 200.91%? That just about doubles the initial cash investment excluding taxes.
An overall gross margin of 15% is a bit on the skinny side. As a beginner would love this to be 20%+ for any blow-ups.
But even as a buy and hold for medium/long term, there is some value here…
What next?
So this is where the you snooze, you lose comes in.
Because evidently someone else thought there was money in this as well, and came in before I even got a chance to make an offer.
ARGH! Annoying but what can ya do!
Also a little bit miffed that the agent, who knew I was interested – didn’t give me a chance to make a counter?
Ah well, there’s always another one as they say.
Just goes to show that in investing, be quick, be decisive and most of all, believe.
Back to square one I spose, sigh.
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38 Comments
TweenselMom (@TweenselMom)
Investing is indeed so much like gambling. You just don’t invest money, but time, emotions and a lot more. It’s so unique that you get to share these kinds of stuff.
The Frugal Samurai
Yeah too true! The time commitment is probably the most intensive seeing as you can’t place a value on it, just have to make it worth while, thanks for reading!
Joanna
Maybe there is a reason why it wasn’t meant to be. Maybe soon you will get an even better opportunity to buy a house.
The Frugal Samurai
Thank you for your kind words! I hope so as well, NEED it ok – thanks for reading!
Backpackingcouple
Oh we know this game and it’s so frustrating how fast things are going on this market. You have to be so fast in deciding although it’s such a big and life changing decision
The Frugal Samurai
It is, although being an investment… makes sense to try and crunch the numbers right?
Lohas Canada
I like seeing the spreadsheet! That is frustrating that the offer went through right away but I guess if the owners are in financial issues then it will go fast for a lower price for a quick sale. On to the next project!
The Frugal Samurai
Thanks! Yeah I know, that’s very astute of you to pick out! Sigh, agree agree, next one it IS. Thanks for reading.
Michael David Oyco
Still a lot of factors to study with. Not really a fan of such details but I like you are targeting big profits even though you just started.
The Frugal Samurai
Yeah heaps to consider, when you say not a fan – do you mean not a fan of the spreadsheet or the multiple of factors in general?
amayszingblogs
Aw so sad to hear about Losing property opportunity but at least you’ve learn on that experience that can improve your skills 🙂
The Frugal Samurai
I know! Pretty bummed but oh well… thanks for your kind words!
Kuntala
Ok so if I understand properly, the message you want to impart through your blog is to be careful while dealing with agents while looking for properties. For that reason I never deal with agents. I connect with big marketing firms for properties
The Frugal Samurai
Um thanks for reading although dealing with agents wasn’t quite what I was going with, it’s a small part of the message? Boy, really need to work on my writing skills I guess! Thanks for pointing it out 🙂
Krysten (@WeirdGirlBlog)
Huh, very interesting. I’ve never had to deal with something like this before, do this post was super helpful in case I ever do encounter this. Thank you!
The Frugal Samurai
Here’s hoping that you don’t! Bloody nerve-wracking as it is hahaha, thanks for reading.
Mary Traveler
All those numbers woah then a not really good agent, good thing I have never experienced this yet.
The Frugal Samurai
Hahaha what can you do right, just part and parcel of property investing!
Emily Fata
I’ve been getting more and more invested (no pun intended) into different avenues of investing. Properties are next on my list, once I save up enough money for a downpayment!
The Frugal Samurai
Good for you, awesome to hear – please keep us updated with your journey! All the best.
Ching
It totally makes sense to try to crunch the numbers. I really things go the way they ate meant to be. Something better will come along!
The Frugal Samurai
I’m hoping so! And you’re right… maybe just not meant to be aye
The Captain
property hunting is a nightmare…. such a massive task
The Frugal Samurai
Haha tell me about it! A lot of moving parts really…
jeannette9712gmailcom
Realty and buying/selling homes is like another world. Tips and tricks are all over the place and nerve recking.
The Frugal Samurai
Oh yeah but it can be so fun!
mudpiefridays
For me, it is important that we have a direct contact with the property owner and not just with the agent.
The Frugal Samurai
Very true and wish it was that easy here in Oz to do!
Bindu Thomas
Yes, excel is a great tool. And yes investment, you needs to be quick and decisive. Great post.
The Frugal Samurai
Thank you, and for agreeing with me hahaha
Fatima D Torres
Investing on properties can be tough. I know because someone once told me they were looking to do so and it wasn’t easy when they began the research process.
The Frugal Samurai
Nah it is incredibly difficult! How are they going now then?
owengigg
I think the saying is “The early bird catches the worm” – I like your version of “Snooze and lose”. Yes, you need your wits about you, particularly when anything has monetary value or somebody else will fill the vaccuum.
The Frugal Samurai
Oh yeah, early bird does catch the worm! Nice one, I’ll remember it next time!
Pink Frenzy/Öku Möku (@Pink_Frenzy)
Too bad about losing the property opportunity. Thank you for interesting read.
Laura
https://pinkfrenzymissl.blogspot.com/
The Frugal Samurai
No problem, thanks for reading!
twinspirational
Oh I get it. Sorry to hear that you lose that one.
The property sounds so interesting.
The Frugal Samurai
Yeah, it was a goodie! But onto the next one right 🙂