We Bought A House! (Part 3 The Journey And Numbers)

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How good is the end of the year eh, can’t help but feel relaxed as we wind it all down.

Hope we all had a wonderful Christmas with our loved ones. Feels like this year especially, everyone’s been doing our darndest to bring a bit of cheer to others.

Good for you Sydney!

We’ve been trying to get into the Christmas spirit as well, nothing like the intenseness of some houses mind you:

Anyhow, you didn’t come here to read about Christmas and cheer and all that goodwill.

Bah humbug!

You came here to read about our house-buying journey didn’t ya?

And so it continues…

The Journey

“And sold! To the couple at the back!” shouts the auctioneer enthusiastically, as he slams the gavel down.

I looked at MrsFrugalSamuari.

She looked at me.

We shrugged and slowly walked out of what must have been the umpteenth “dream” home we missed out on.

It was early October 2020.

The weather had put on a show recently, as only Springtime in Sydney can.

Yet our moods were darkening with each passing week.

Or rather, MrsFrugalSamurai’s mood, which of course, meant that mine couldn’t exceed hers.

“Don’t worry dear, we’ll find something by Christmas”, was my oft repeated statement.

It Begins

For many of you reading this, and who have gone through a property search to find your own place to live, you’ll know that it’s hard.

I think we started our search sometime in April, right in the middle of the lock-downs.

It would have been perfect timing, except we were looking for another place to rent.

Even then, you would not believe how competitive the rental market was (and still is).

Inner-city and CBD rental suburbs might be grabbing all the attention, but in the ‘burbs – rents were BOOMING.

We missed out on many, many prospective rentals back then… to the point where I realized that, despite all the negative headlines surrounding housing, and all the uber-bearish forecasts… housing in Australia, and Sydney especially, probably wouldn’t fall in value too much.

The demand was TOO strong.

The Change

This mindset shift ultimately meant we started looking for a place to buy, instead of rent.

Now, looking for a place to live, is very different to looking for a place to invest.

When you invest, it all comes down to the numbers.

What’s the yield, what’s the growth prospects, what’s the income growth of the local demographics, where’s the infrastructure being put in etc.

This blog is peppered with articles about what to look for when buying investment property (like here, here and here).

However with buying your own place, all of that goes out the window.

With buying, it all comes down to… where is MrsFrugalSamurai happy to live in.

And so, it was during this journey that I realized, what I am happy to live in, is very different to what MrsFrugalSamurai is happy to live in.

The Houses

Therefore, from about August onwards, we were officially looking for a principal place of residence.

Initially, MrsFrugalSamurai led the search and took the point on this task with MUCH enthusiasm.

We looked at a couple of houses in the first week, then a couple more the second… then we took a break because it was “tiring”.

Which meant by the 3rd week, the task of finding our next home, was down to me.

You would have been impressed dear reader, with the detailed planning I instigated.

Each week, I churned out a detailed spreadsheet with military precision:

To be honest, I just incorporated my template for inspecting interstate properties into our search.

The Tiring Middle

Anyone who’s bought a place knows that you don’t just buy the first, or second, or even fifth property you look at – even if you wanted to.

It takes a good coupla DOZEN properties before you find the “right” one.

For us, we had a very specific set of specs because one half of our elderly parents will probably move in with us – which meant we needed all the amenities on the ground floor, plus a separate area for us young ‘uns.

This required space had to fit within our budget, which then fitted the other criteria:

MrsFrugalSamurai criteria for own home:

• Well-maintained/modern-looking
• Natural light
• Space
• Bedroom + shower + kitchen + living area at ground level
• Adequate internet speeds
• Good neighbourhood
• Good schooling
• Low maintenance
• Split-system air conditioning
• Much more, but I have to sleep next to her, so will stop for safety reasons.

TheFrugalSamurai criteria for own home:

• Value

The “One”

So in late October, we stumbled onto a listing which had failed to sell the week before at auction.

At first, I inspected it with MrsFrugalSamurai’s parents. I think we were all a bit luke-warm about the house initially.

Then I took MrsFrugalSamurai back for a second viewing and she really, really liked it.

It was also at this time, that there was increased rumours of the RBA cutting rates in the November meeting.

I had a sneaky feeling that this needless rate cut will juice up asset prices – so, having met my set criteria, I thought why not put an offer in, and see where it ends up.

The Numbers

Sigh, I was reluctant to post this, but for the sake of full transparency here are the numbers and timeline of events:

• Originally the house was listed for sale last year, for $1,795,000.
• Of cos, COVID-19 reared it’s ugly head and the owners pulled their listing.
• In October 20′ it fell through at auction, with the highest bid at $1,750,000.
  • However, the owners wanted more, with the reserve I later found out at… $1,795,000.
• The owners were still negotiating with the highest bidders when we inspected the property.
• There was a fair amount of interest, with a number of groups at the first viewing (with MrsFrugalSamurai’s parents), and the second (with MrsFrugalSamurai).
• The agent called us after the 2nd viewing and said four offers were now tabled to the owners, and if we were interested, for us to put our best step forward.
  • “Well, what are the other offers then?” My natural response.
  • “You need to go over $1.7m”.
  • Personally I didn’t think I needed to do anything, but again, I have to sleep next to MrsFrugalSamurai, so I put in an offer at $1,695,000 which I felt was fair value, based on all the inspections, research and comparables we had looked at in the last few months.
    • Now, if this was an investment property, I would have put in a stupid offer of say $1.5m and see what the agent says, then move on to the next property if it was rejected. But this wasn’t.
  • And two days later, surprisingly… our offer was accepted.
    • It might have been less in terms of price, but I think was most attractive in the offer conditions.
• It didn’t stop there though, one of our conditions was a building and pest inspection… which found many niggling issues (it’s an old house), some we knew, some we didn’t know.
• On the basis of the building and pest, we managed to knock-off a further $20k from the contract price, for a final settlement price of $1,675,000.

Now I know many of you may gasp at the numbers involved.

What kind of “frugal” person, Samurai or not, spends that kind of money for their own home?

Unfortunately, this is the price of buying a house in Sydney, in an area which we find desirable.

No wonder out-of-towners and our international friends shake their heads at Sydney house prices.

Believe me, I was shaking my head through most of the home opens. Personally I cannot fathom why prices are so high, for a bit of dirt and some bricks.

But the market pays what the market pays.

I don’t think we got a bargain, but don’t really think we over-paid either.

The House

The house itself, like I mentioned, is old with plenty of issues.

Coupled by the fact the previous owners didn’t take proper care of it, meant that it was in a neglected state. Nothing crazy – just aesthetically unpleasing.

The main issues (and what’s taken up most of my time), is an urgent need to re-stump a section of the downstairs (see pic) and also fix some leaks on the roof.

MrsFrugalSamurai also wanted to rip up all the carpets and install proper hardwood floors (Blackbutt).

Also had to drill a couple more ventilation vents for the sub-floor to battle rising damp:

You can see more pics in the previous two posts (here and here), but all of these mini-renos, mixed in with re-painting and other odd jobs, meant that literally have not had a moment’s rest these few days.

Although we kinda just treated the $20k reduction in price as our renovation budget, and probably spent about $15k – to spruce the place up.

It’s not all finished mind you, however I’m glad to report that there should be a decent uplift in this “creation” of equity.

How much?

No idea.

$20k? $50k?? $100k???

It doesn’t matter, we are not selling.

~~~

So I’ll leave it here for this post, I hope you found it mildly entertaining and somewhat informative, I’ll wrap it up next time with some key lessons which I took away from this, which hopefully can help you with your home buying journey.

But for now, I spy a patch of wall that I missed.

Until next time!

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