22 June 2020

Successful Buy and Hold Property Strategy in Ferntree Gully VIC

Our second investment property, 1772 Ferntree Gully Road, Ferntree Gully VIC was purchased in 2005 for land value at $192,000.

 

The two-storey house on the 733sqm property was in an appalling mess due to tenants whom were behind in rent and had abandoned the property and their possessions. This coupled with the vendors situation which gave a quick buy-as-is sale, offered a great opportunity to add to our portfolio. We couldn’t possibly make it any worse with some cheap reno’s! It was actually a good mate of Ryan’s whom was in need of a place to rent quickly due to his family moving into the country which made Ryan even more eager to secure something and with the vendors also wanting a quick settlement, contracts were signed with only a 21 day settlement.

 

The house was then privately rented to Ryan’s friend, who moved in on settlement day while we began renovations. Throughout the 14 years this property was held for, it has always been privately rented and occupied, with Ryan living there for quite some time also. A great starting place to really learn a range of reno skills.

 

To make this house liveable, we replaced and repaired the kitchen, bathrooms, carpets, curtains, blinds, wiring, plumbing and gardens, plus added air conditioning and heating all on a budget of $40,000.  Ryan even managed to find a suitable Kitchen with all appliances included for just $2,500.

 

This kitchen was replaced and finished over a public holiday long weekend, which he removed from a home in Surrey Hills and installed into Ferntree Gully over a long weekend. The kitchen included all Smeg appliances! It was ‘U’ shaped and had to be reconfigured to the ‘L’ shaped space in the house. This was a great find and helped to counterbalance the double time rates of having a plumber on site on a public holiday. Not mention all the tip fees after removing all the rubbish left behind by the previous tenants!

 

Over the course of the 14-year ownership this property has been a great performing investment in our portfolio with a consistent 10-15% average capital growth per annum.

 

Plus, similar returns in rental income, giving an overall average of 20-25% return on investment per annum.

 

In 2018 we decided to value add to the site by gaining a DA for the title. The land with a DA to build two new homes would appeal to both developers and private investors alike or give us another project to step into. However, the DA was rejected, but after a quick hearing we were successful at VCAT and had our plans approved and stamped.

 

Last year, 2019, we made the decision to sell this property by analysing titles which were unencumbered and in turn, which investment sale would inject the most cashflow into a larger property project we were entering into.

 

Here is a brief break down of the purchase and sale figures on this property:

Purchase: $192,000
Renovations: $40,000
VCAT + Development Plans: $30,000

Total Investment: $262,000
Sale Price 2019: $700,000

Profit: $438,000 plus*

(*average of 20-25% ROI p/a when included with rental)

 

To secure the next investment property, we required a quick sale and sold below market value via a private sale which saved on agent fees and gave the new owner (one of our property students) an equity profit of $72,000 on settlement date. Also included in this sale were all DA approved plans to demolish the existing building and replace with two town houses if they so desired. This property represents a great example of the buy and hold strategy and also a win/win situation for both us and the new purchaser.