Nathahn Walter eases into the chair in front of his home computer. A bleep comes up on screen and the 37-year-old Sydney sales manager can’t help but smile. It’s an email from his property advisor. He notes the information the advisor gives him and starts doing some internet searches. He is soon pouring over graphs and tables and begins pinpointing places on a map.
The bank is on the line shortly after and Nathahn double checks some stats. It only confirms what he has been reading and he returns to the map. He adds two scribbles to the paper – X’s to mark the spots.
Anyone unaccustomed to this routine would think he is treasure hunting. It’s not wholly untrue. As he mulls through one suburb to the next, it’s diamond in the rough properties he is after. Nathahn does this because he has a very special talent. He and wife Monika are masters at finding great property deals.
In just four months they have added four properties to their portfolio, taking advantage of prices well below market levels. This has seen them save upwards of $50,000 on single purchases in emerging suburbs, including Western Sydney.
“We always aim to buy quality properties,” says Nathahn. “The first thing you usually think when you find properties at great bargains is that there has to be something wrong, that’s there’s a risk. We’ve never gone for bad properties in bad areas. For us, the fundamentals have to be right. If the growth prospects are bad, we’re not interested.”
Adding together the differences between market values and the prices they’ve paid, the Walters’ canny buying skills have seen them save some $170,000 across the total value of their properties. It’s a number that only increases when comparing sales data. On one of their properties, Nathahn and Monika paid $133,500 less than what the previous owner did.
“I guess you could owe a lot of our bargain finding success to taking action,” Nathahn says. “When you’re looking for great deals you’ve got to know what you want. You can’t be indecisive. There’s no hesitating in this game.”
The hunt begins
The couple started their foray into mega bargain hunting in November last year when Nathahn stumbled upon a property in Canley Vale, a Sydney suburb just west of Bankstown. The unit was going for $236,000 and Nathahn soon spotted that this was well below the average market value of units in the area.
Without emotion, and having never seen the property before, Nathahn pitched in an offer of $215,000 and got the property. It required minimal repair work and, after spending $5,000 to replace the kitchen, it was tenanted and renting at $280 per week, a 6.7% yield.
What makes the purchase remarkable is that the average price of houses in Canley Vale is roughly $450,000. “The vendor’s price was definitely undervalued. We had bank valuers confirm what it was worth and they came out at $285,000.”
Nathahn adds that part of what made the deal so special was the area. Recent growth figures suggest that Canley Vale may be in line for good capital growth in the future. Residex data shows that prices remained flat there for much of the last decade, but have been picking up in recent years, posting 17% capital growth in 2011. This shows that the couple bought into the area as it has posted a recovery.
One of the things that helped Nathahn and Monika find such a great deal was the suggestions of an investor mentor. Nathahn says that having a good team behind them has been indispensable in their hunt for good value.
“We’re not property experts, so we rely on information from people who know what they are doing. This gives us the information that we use to develop leads for finding properties. We’ve formed a personal relationship with out mentor who gives us suggestions and we follow up on them. It’s the starting point we use to make all our decisions.”
Another thing that helped the couple to find the Canley Vale and other bargains was doing thorough research and then acting on it. “When you’re looking through the numbers and you notice a property up for sale that is going for a lot less than other properties in the area, if you know it’s a good deal, you’ve got to act quickly,” Nathahn says.
“Good properties that are being sold under market value do not stay in the market for long – savvy investors pick them up fast,” adds Monika. “You’ve got to be decisive. Sometimes this means purchasing sight unseen.
“What you rely on is information about the property that you uncover through research: the ideal purchase price, the expected rental, the estimated cost of repairs and possible out of pocket expenses.
“We get this information from our own research and the help of our team: a mentor, real estate agents, the banks, and a pool of likeminded investors. From there, decisions are based purely on the numbers, not on whether the property looks pretty.”
Expanding the search
Following the November purchase in Canley Value, Nathahn and Monika set their sights on Watanobbi, near Wyong in NSW. The couple had noticed that a number of houses were going for excellent prices and decided to get in while the going was good.
The awkward name aside, the suburb’s established rental market held part of its appeal for the couple, who were attracted by its good yields and low vacancies.
They began attending auctions and got a feel for how low properties could sell for in the area. Knowing the kind of deals they could get, they attended two auctions, setting themselves a bidding ceiling of $185,000.
The first property sold at $195,000, but when nobody else bid on the second property, Monika and Nathahn settled on $181,000. They found out later the market value was an estimated $250,000.
“It was another great find,” says Nathahn. “The real estate agent even said that if we changed our minds about the property, he’d take it off our hands for his own property portfolio.”
Just like in Canley Vale, Nathahn and Monika bought sight unseen. They didn’t have to inspect the property several times to make a decision because they trusted in their research. Once again, the numbers added up. They got the properties well below market value and it required $10,000 in repairs to become suitable for a tenant.
Becoming a triple threat
In January the couple added a third property to their portfolio, a block of land in Katoomba, NSW. The vendor wanted $17,500 and they offered $12,000 and got it.
Their plan is to keep the land for a few months and flip it for $20,000. Nathahn admits that there is some risk involved with this idea, but at $12,000, it is one they are willing to take.
It was another property they found through their mentor, who sent them information about the land package through Deal Finder, a community of property investors that releases information about properties going up for sale.
Unlike the other two properties which Monika and Nathahn bought with loans (both 80% LVR), the property was paid with cash in lieu of its low cost. It was a marked departure from the strategy that guided their other two purchases.
“Our focus is to go for blue collar suburbs where there is an entrenched employment base and known rental demand. We’re not interested in mining towns, but areas where demand is consistently strong,” says Nathahn.
Bargains in tourist towns
The couple split from this strategy once again in February when they made their fourth purchase – a duplex in Manunda, a suburb of Cairns.
Friends and relatives had warned them about the risks involved with investing in Queensland tourist areas, considering the struggle property prices have endured in recent times, but Nathahn and Monika were unfazed. The reason: they had found a property right in the heart of the city for $60,000.
“At that price, the market would have to do something incredibly bad for the value to go even lower, so we went in thinking we wouldn’t have much to lose,” says Nathahn.
Again, the couple showed their remarkable skill for buying under the market. A bank valuation priced the property at close to $100,000, and the couple also learned that the previous owner had bought the house for $193,500.
Nathahn said it only required minor repairs. Some of the grouting around the house needed to be reworked, while a few cosmetic flourishes helped to relieve the tired look it had when they purchased it. Their real estate agent expects that they will be able to rent the duplex out at $300 per week, an incredible annual yield of 26%.
The key in getting an accurate assessment of the Cairns property’s true value was having one bank play against another, says Nathahn. He approached multiple banks for valuations and compared them against each other to get the best assessment of what it could be worth. The next step was paying for a building inspection to make sure they weren’t getting a property that had multiple problems.
“The banks are a great source for valuing a property because they give conservative values. Once you have this information it’s easy to feel confident about what you are buying.”
More deals on the horizon
Going into the future, Nathahn and Monika hope to build their portfolio to 25 properties over the next seven years. They plan to do this by continuing to buy undervalued properties.
Nathahn believes it’s a strategy that makes a lot of sense given the current economic environment. “Many great deals are out there. It’s not always easy to find them, so we’ve recognised that a bit of humility goes a long way. Getting help, a great team behind you, makes the process so much easier. If you’ve got a constant source of information – from people, from a community – about properties that are going up for sale you’ll find some great bargains.”
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