Real Estate

We Bought Again! (Part 2)

Reading Time: 4 Minutes

Hello again!

Today’s post is the 2nd part of our latest purchase for the portfolio.

If you haven’t read part 1 – why NOT?!

Haha, read it here first!

So, last time I went through my reasonings for buying in Perth, and how the market is finally starting to move based on the ground research.

Mind you, I neglected to mention that initially I had my Sydney lens on when looking at property in Perth.

Image result for binoculars fail
Oh dear.

Ummm… No.

Sydney and Perth are vastly different markets.

I mean, one starts with a “S” and the other… what’s that? Get on with it?


OK fine.

In Perth, the Western Suburbs is where the best and most lucrative postcodes are.

Traditionally it’s the Eastern Suburbs of Sydney (and Melbourne).

Also, given Perth’s population base of 2 million, means that urban sprawl isn’t as spread as the larger cities.

So you can’t just expect going out 20km and expecting the same returns.

Compare apples with apples please.

That’s why most of the locals and agents that I talked to recommend no more than 10km from the CBD.

Of course, being an apple aficionado I had to take a look myself at the outer suburbs – and I tend to agree.

Image result for apples
Gobble gobble.

It’s not that you can’t get value or make money buying in the outer suburbs of Perth – it’s just that there is so much infill potential (vacant land) closer in, it’s going to take much longer for growth to be spread out.

So sub-10km is where I began to focus my attention.

The Suburb

I first chanced upon this suburb back in 2017.

At the time I had it on the shortlist because of its proximity to the CBD (sub-5km).

Annnnnd promptly discounted it because of the high percentage of renters (over 50% as of 2016 census).

I’m not a big fan of such a large transient population as it means a high churn of renters – which means a higher likelihood of increased property management fees and vacancies.

The suburb also has a bit of a hit-n-miss reputation as a grungy, down and out kind of place.

But, and this is where the difference between doing research online and doing research on the ground, each time I went and had a look during late 2018 and 2019, I could see that things, they are a-changing.

A lot of the older buildings were knocked down, replaced by shiny new townhouses and apartments.

There were also a significant number of young families and working professional types walking around.

Mind you, still plenty of… non-working types walking around too.

On the weekends, the main street was surprisingly full – cafe culture was out in force.

In a nutshell, it was (and is) gentrifying.

Gentrification – is a process of changing the character of a neighborhood through the influx of more affluent residents and businesses.

Income vs Gentrification

As an aside, if you wanted to know whether an area is gentrifying or not, one very good precursor which I use (as a rule of thumb), is income growth vs a benchmark (e.g. state-wide income growth).

This is what I mean:

Light blue (suburb) trend is increasing faster than dark blue (state).

You can see that in 1991, the income of the suburb was lagging WA, but caught up in 2001, and has been rising faster ever since.

The Property

Suburb aside, there were still an abundance of real estate listings within.

This is because as I said, most of the stock is still owned by property investors – who buy and sell more frequently than owner-occupiers.

Also, there were more units, apartments, villas and townhouses available than free-standing houses.

So naturally, in September 2019, when I went to view this property (2 Bedroom Villa), I discounted it because I thought the asking price of $279,000 wasn’t attractive enough from all the others listed…

Fast forward 3 months and SUDDENLY I happened to be browsing during Christmas.

I saw it again… only this time it was listed for $229,000.

Now this got me a little curious, because through all the research and viewing comparables I had thought that its value was probably around the mid-200’s mark.

Indeed, I could not find a listing lower than $249,000 for a comparable villa.

Why Was It Lower?

Yeah exactly, what was wrong with it?

Nothing… as far as I could tell, it was in the same condition as when I first inspected it in September. The owner even re-painted it.

As much as I tried to wrestle out a reason for selling from the agent, the official line was that “the owner is an investor… and doesn’t require it anymore”.

Well la di da to you too sir.

Image result for blow raspberry gif
How I felt.

The Offer

Now, remember from part 1 (here), I said that I was looking throughout 2019?

I was also making formal offers on other properties as well (probably around 6 or 7 last year).

Except my offers kept on being rejected. Either because of other offers being higher, or just TOO low (aggressive low-balling only works in a very depressed market, not when the market is moving).

So I didn’t want to go too hard here… because at this price level, I thought there would be some other interest surely.

Initial Bid

I put in a teaser bid of $210,000.

This was rejected straight away as being too low.

I let it stew for a few days, just in case the vendor changed their mind.

They didn’t.

I blinked first.

I raised to $215,000.

We formalized it on an official offer form.

The vendor thought about it…

and thought some more…

The agent said someone else put in a cash offer and whether I wanted to put in a best and final offer?

I wanted to raise by a couple of grand at first… then thought… fook it – $220,000 it is.

$220,000 sold.


To be honest with you, I have no idea whether there was another buyer or whether the agent played me.

I think there probably was one, based on our conversations and his reply to some of my questions.

But regardless, for $5k, I’m hoping the long term prospects will pay me back in spades.

Next time, I’ll walk through the detailed numbers, the pros and cons and my final thoughts on this one.

Until then!

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