Buying a House Below Market Value (and You Can Too)

in today's video we are going to be breaking down a recent client purchase here in southeast Queensland we'll be discussing how we were able to buy below the bank valuation which is unheard of and save our clients over $20,000 throughout the buying process we're also going to talk about the levers that the clients were able to pull through both short-term manufacturer value and longer term cash flow potential on this property so my name's Luke and I run a buyers agency here called purpose property that covers greater Brisbane myself and the team help both owner occupiers and investors purchase here in the greater brison market so if you're interested in having a chat with myself head over to purpose property.com to book in a free session now let me give you a little bit of background about this purchase before I take you through a walkthrough now my clients were a middle-aged couple who were growing their property portfolio they had the big rock in the jar they got their own home already and so they were looking to expand their Investment Portfolio and we were looking for a property between 450 and $650,000 now my clients did have the capacity to buy a far more expensive property up towards the million dollar Mark but given their overall strategy and where they're at in their portfolio Journey they were looking for more of a cash flow asset with some manufactured value potential that they could in the long term also add a granny flat so we had a few levers there manufactured value in the short term and then adding a granny flat as the next lever in the longer term now this property that we're going to talk about today was quite unique it was for sale by the Public Trustee of Queensland land who generally sell deceased Estates or even sometimes bankruptcies uh back onto the market in an open Forum now 9 times out of 10 the Public Trustee of Queensland is going to sell a property by auction Emily and I have been actually lucky enough to buy a property from the Public Trustee of Queensland and renovate it and you may have seen that here on the YouTube channel before in the baby queenslander renovation series which we shot a few years back and we've also been successful in the past in securing properties from the Public Trustee it just comes down to buying the right property for the right price in the right location so without holding you out any longer let's take a look at some of the photos and talk through this recent client purchase so as you can see on the screen here this property does look a little bit untidy from the front facade it's a large Block it's over 900 sare M and it's located roughly 25 km on the south side of Brisbane in a suburb called Bean Lee now as you can see from the aerial shot here it is on a very large parcel of land the home is located somewhat to the right hand side of the property and there's currently no fence giving this property its own boundary on its current Street Frontage so that was the one of the things that we discussed with my clients was adding a fence in the future to actually make this land usable for tenants and then you can see on the left hand side here there's a carport now if my clients were to knock down a carport here on the left hand side they could build a two-bedroom one B granny flat for somewhere between $150 and $250,000 so let's say for about 180k they were able to build that Granny flat that would probably rent for between $350 and $450 per week now the house that's currently on this site is just a two better but we're going to walk through the floor plan a little bit later and discuss how that could be rejigged to get more value out of the home now you can see some shots of the inside of the home here it looks rather untidy there's muck on the floor it's a bit greasy it's a bit grimy and that's what you get when you're buying a property at this price point now I will reveal to you very soon that price PR point because we were able to buy below the bank valuation for this sale so this was a deceased estate this had been someone's home for a long period of time and unfortunately they passed on and the home was up for sale by the family this is another aerial shot you can see here the real estate photos are really leaning into the value being more land value than the home having much value at all so again this is just the inverse view where you can get a good shot of the roof line you can see there's some trees in the backyard that need to be cleared out and trimmed back to protect the roof but all in all the roof's in quite good condition for the age of the home and it's a very good block size as you can see and very comfortably you're going to fit that Granny flat on the right hand side down the track again looking at an aerial shot of where the property sits within Bean Lee on the south side of Brisbane and this is again a front shot of the home so it's a low set brick veneer home on a concrete slab uh cabon roof which is in reasonable condition apart from the leaf litter that's on the roof line it needs some Paving out front it could do with a little bit of concreting and Pathways and fencing but all in all neat and tidy low set brick home from the exterior this gives you a perspective of the onr view of all this land that could be used as yard space for the home currently it's unusable because it's not fenced in and wouldn't allow the tenants to use this space you can see in the back rightand corner of this shot on screen that that's where the current yard is for the property but if they brought that fence line out a bit towards the boundary of the property they could add a lot more usable yard space for this home and then create a separate yard space for a granny flat in the future so this is that Granny flat side where the carport currently is and more fence line you can see the side of the house does need a gurnie and a bit of a cleanup and this is another shot of the inside so again tiled floors if this was all sugar soaped and all cleaned and repainted it's got an airon you'd probably put in a new fan for about $250 to $350 full repaint inside could cost you somewhere between 6 to 10 grand for this size home and so for about 15K you're really tidying up the inside a lot and adding significant value this is a shot of the master bedroom which is again needs a full deep clean and maybe some new curtains new fan otherwise it's got good bones this is the bathroom so you could put a toilet in the middle here and that's part of the future plans for this property which I'll reveal to you in a second um but otherwise pink tiles cream get rid of those colors really tidy it up as much as possible with spending the minimum amount of money as possible because as an investor you want to add value to the home but you don't want to over capitalize just another shot of the bar bathroom here giving you a different angle and then moving into the other bedroom so this is the second bedroom uh this is the smaller of the two rooms in the current property and the master is way too oversized for the current home this gives you a shot of the backyard so you can see there's a good amount of space here and again you run your fence line along this patio here out towards the back fence line to create separate spaces for the house and Granny flat this is a shot of the the Shar the hills hoist lots of trees so a lot of yard work and clearing could could be done here um we have a great arist here at purpose property that we recommend to clients and so if you're looking for someone to help you along that Journey we can do this for clients in the case of our clients in this scenario they were experienced investors and they were willing to tackle these Renovations themselves to add as much value as possible and again another shot of the back of the house this gives you a much better view of the kitchen that it does need a lot of work and so you probably want to put in a new kit kitchen here you could do the Shere Barber method of you know sending all the cupboards back if you really wanted to to do it in a budget fashion but I think for about 5 to 15K you could get a fairly new kitchen if you're doing some of the label yourself or on the higher end of that 15K Mark if you're just getting a very basic kitchen put back in in this place now this is the real exciting stuff here so I wanted to show you the floor plan so this property in beanley had a lot of potential it needed a lot of work but for about 30 to 40 Grand my clients could get this into a great position and tenant ready but they were actually going to spend a bit more money than that and I'll show you why so you can see here in bedroom one on the bottom side of the picture there's a large robe and all this unused space now what we think has happened is the homeowners here didn't need three bedrooms and they've claimed all this space for their walk-in Rob and enterway into the bathroom now what my clients were going to do is actually put a wall here where the Rob currently is and create a third bedroom down here on the south side of the property so then you've got the bathroom a separate toilet and a laundry now the other thing my clients were going to do is one yes they'll put a wall in between bedroom 1 and the robe to create three bedrooms in this home but then because bedroom 2 is small they were looking at knocking out the wall in the laundry and turning the laundry into a master and on Suite now they claim back the toilet as well and use that space for the master on Suite they'd probably keep the door going to the outside as well but that would be in the bathroom for the master and then the other bathroom would add that toilet in like we spoke about earlier so between the bathtub and the sink you could add a toilet in the current bath to allow that to be used separately and the plumbing could be done through the wall um so to reduce the cost so for a spend of say 50 to $100,000 it depends how much um you know whether you're doing a lot yourself or you're Outsourcing everything but between that 50 to 100K Mark they could turn this TW bed one bath home into a three bed two bath home which significantly improves the valuation other than that it would just be replacing the ceiling fans adding air cons when needed doing a full paint and sugar soaping obviously prior to all that and giving everything a clean up the kitchen again could be tidied up for a small budget or could a new kit kitchen could be put in for a larger budget and then it would just be the fencing around the outside and you've got a fantastic property where you've gone from two bed one bath to three bed two bath now this is the magic of adding value now my clients in this case were looking for Less growth and they were looking to manufacture value and focusing more on cash flow everyone is going to have a different risk profile and a different strategy for each purchase as you grow your property portfolio I know for Emily and I that our Focus has been on Capital Growth Properties first and then transition into cash flow assets over time the reason is we want to build our asset base first and then start to get the cash flow in the property portfolio so you're always balancing your growth and your cash flow Capital Growth is how most Australians through property investment are going to become wealthy and increase their net worth while cash flow is generally what you're looking for as you look to retire and consolidate out of your property portfolio now some properties can be a mix of Capital Growth and cash flow and in this case this property generally has multiple levers we can pull so the first lever we've discussed in detail so pull the lever crun is what I think of every time I say that so the first lever is manufacturing cash flow so in that case going from a two bed one bath spending a reasonable amount of money between that 50 to 100K Mark to turn it into a three bed two bath now if you don't want to do it yourself Emily and I actually offer in house renovations for clients only here at purpose property and roughly one in three clients have been taking up those services in the last 18 months so we can help you with projects between 5K to 100K to manage the project manage the trades organize everything for you organize the site inspections and get these Renovations sorted and again we always looking to try and double your money it doesn't always happen but that's what Emily and I have always targeted if not a higher return on your investment if possible so that's level one is ad value through those Renovations going from a two bed one bath to the 3 bed two bath phase number two is then to pull out your Equity because now you've created more Capital Growth as long as you have the service ability you can then pull your cash back out of the deal and go and use those funds to buy another property and then eventually pulling another lever in terms of adding more cash flow to this deal because it's on over 900 sare M it's on a great block on a corner with good access to the street you can add a grny flat between 150 to 250k which will give you 350 to 4 $50 a week of rent now that is probably a little bit to take in but let's talk about the numbers on this deal cuz I'm sure that's what you're all interested in so we rocked up to this property and it was an auction I was bidding on behalf of my clients and in this case there was a significant number of registered parties at the auction we noticed some other builders and developers and Mom and Dad investors who were looking to buy this place and the bidding was very slow actually to begin with most auctions we tend to see several stronger biders but that's usually for higher priced property here in Brisbane lower price property between the 400 to 800k Mark doesn't generally go onto auctions there more that 750k plus Mark where a lot more properties will be sold at auction so in this scenario there were about 10 to 12 registered biders and the bidding started very slowly we were competing with another bidder and we started around the low 300s and quickly worked up to the high 300s bidding in 10 to 20K increments bidding then slowed in the low 400,000 which we were quite surprised so for my clients we build comparable market analysis reports well I tell my clients where I see value for this property and we'd estimated that the reserve for this home was around $450 to $460,000 so the bidding was in the low $400,000 Mark and then slowed through $5,000 increments so going 410 415 420 and that's when the bidding had stopped at that point now that's when the auctioneer asked for further bids and groups had continued to pull out at this point which were quite quite surprised that because we saw that there was more potential in this property than potentially other buyers had seen in the home now the other great thing about this property was it was going to rent there's no concerns on that front beanley has a low Supply there's a lot of low Supply here in southeast Queensland and this property was not far from a train line but not too close either so it was in quite a good position now the bidding stopped and the property did pass in so we went and had a discussion inside with Sam who was the auctioneer now we had a chat with the auctioneer and we were around about that $420,000 Mark when the bidding had passed in now we didn't think we were going to get an agreement because we thought the property was going to have a reserve between that $450 to $460,000 but after negotiating with Sam from the Public Trustee and getting an agreement we were able to secure the property for $440,000 which was $20,000 below the bank valuation and below the original Reserve now the reason the Public Trustee did go ahead with reducing that Reserve Reserve even though the bank valuation was higher was because they didn't have a buyer for it on that day and the property needed to be sold so these are positions where you can get and buy a property clearly below market value now I know a lot of buyers agents will talk about buying below market value we can get you we can save you 20 grand 50 Grand 100 Grand but at the end of the day the property's market value is what is paid on the day but for us seeing that the property was below a bank valuation set by a Public Trustee of Queensland was an amazing result to save $220,000 there so my clients were over the moon we put a sold sticker up that same day and they were very happy to be securing this property now this is what we're trying to do here at purpose property we're here to help investors and homeowners break into the market and if people weren't educated on where value was in this home understood how to add value through Renovations what the long-term potential of this property was and understanding councils so this was in Logan City Council on the south side of Brisbane in this case then some people will struggle to find and buy a property so if you're looking for help to secure a property like this as an investor then make sure you book in a free chat with myself at purpose property.com we also have a real estate investing course which is over 3 hours of content plus some spreadsheets breaking down how Emily and I became multi-millionaires through property investment and we take you on a stepbystep chronological Journey as to how we built our multi-million dollar property portfolio so if you use the code just for this month of 15 off you'll save 15% on that course as well so just head over to purpose property.com toau click on course and you'll be able to sign up there so I'd love to hear your thoughts down in the comments below I'm absolutely stoked for my clients with this purchase so many leevers they can pull so much value ad potential as well as some longer term growth potential given the area is landlocked and built out at this point in time so very excited to see what they do with the property in the future uh and looking forward to hearing about them adding a granny flat down the track to boost that cash flow so leave a comment down below drop a like on this video and click this video over here for more things real estate renovating and Financial Freedom I'll see you in the next one [Music] [Music] peace

Channel: Luke Wiles

Views: 3,599

Keywords: real estate, property, investing, Luke Wiles, Purpose Property, Buyers agent, Brisbane, buyers advocate, australian real estate, financial freedom, renovating, renovation

Id: bQfW4m4PYpM

Length: 16min 19sec (979 seconds)

Published: Tue Nov 14 2023