James McIntyre: Packing it in for Property

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No matter who you are, or how you fill the daylight hours, you have probably experienced one of life’s great inconveniences …moving house.

Packing boxes, cleaning the property and bribing friends to give up one of their precious Saturdays, so they can pitch in and lessen the load on you; as you part with the clutter of belongings that will serve you no purpose in your next life and prepare for a day of negotiating spiral staircases while lugging heavy objects that were designed with a complete absence of practicality in mind.

For James McIntyre, running a removal business meant that, for 15 years, every day was moving day. A hard worker, James found his business expanding at a hectic pace, until he was managing four trucks and eight staff and was faced with a choice.

“It grew to the point where I really didn’t want to go the next step with it, which was going to be very costly and hard work to sustain,” James says.  “I suffered burnout. I got to the stage where I’d go and look at a job and quote them double because I really didn’t want to do them.”

After some soul searching, James decided to sell off the business and have a crack at making money from property.

Based in Mt Barker, in the Adelaide Hills, he had seen his own area grow and had invested in properties previously, which had since been on-sold. A couple of months after selling the business, he was looking for investment opportunities online, when he came across a good deal in a town called Naracoorte. James had already bought twice in Naracoorte and was familiar with the area.

Regional potential

Naracoorte is located in the far east of South Australia, around 300km from Adelaide, en route to Mt Gambier. It has a median house price of $195,000 and a potential rental yield of 6%, according to June RP Data figures; but James was more impressed with the potential of the property itself. Having never subdivided to this scale before, he was keen to have a go.

“It was an estate property,” James says. “The lady that owned it lived there until she was 91, then the kids inherited it and used it as a weekend getaway for about three or four years. When they decided to sell it, we made an offer.”

The house was situated on 4,850m2 and set on one side of the land, so James decided he would subdivide and create a hammerhead block at the back. He and partner Julie paid a total of just under $155,000 and now have development approval for five community title blocks.

“We’ve got the house on the market at the moment for $140,000, subdivided off onto 1,000m2,” says James. “We’re currently getting $190 a week in rent on it, which we will index so that we get a $10 increase every six months…hopefully it will be gone by then though.”

James realised he was not in a position to fund houses being put on the blocks, so he went into an arrangement with a local builder. The builder will offer house and land packages, then buy the land off James when they are taken up.

“We’ve also got them for sale separately if someone wants to build on them themselves,” says James.

The apprentice

James is treating the current subdivision project as somewhat of an apprenticeship and plans to take on more similar projects down the track if possible. He has his eye on a couple more sites in Naracoorte and is also considering looking at other regional areas.

“The prices are a lot less down there than here in Adelaide, but the rents are on par, so the yields are quite good,” he says. “It’s an affordable option for someone who wants to have a go at a project without breaking the bank.”

Some of Naracoorte’s drivers include a massive abattoir employing around 800 people, as well as a number of wineries and other farms. There are three schools, a hospital and a set of famous caves that tourists enjoy.

James says the venture has been a bit of a walk into the unknown, but has helped him shape his strategy of buying properties with subdivision potential, then splitting and selling to make money.

“You need a good understanding of how development works and what the council expects,” he says. “We have had a chat about what we want to do with the council planner, thrown a few models at him, and some have come back as no good. So, once you go through the planner and the surveyor, you know before you put the development application in that it will be approved…if you involve them right from the start, you’ll find the process does go through a lot quicker and easier because everyone’s on the same page. Another good idea is to get a consulting plumber to tell you if you’re going to have any issues with stormwater or sewerage flow, especially if the block slopes away from the road.”

James McIntyre’s properties

Location

Type

Purchased

Purchase price

Loan

Extra costs

Current value

Rent per week

Yield

Equity gain

Naracoorte

2-bed house

Feb-10

$160,000

$155,000

NA

$220,000

$230

7.0%

$60,000

Naracoorte

2-bed house on 4850 m2

Apr-12

$148,000

$0

$50,000 sub division

$405,000

$190

6.5%

$207,000

Murray Bridge

2 x 3 bed semi-duplex

Aug-12

$275,000

 $238,500

$11,000 sub division

$320,000

$500

9.5%

$45,000

Total

 

 

$583,000

 

 

$945,000

$920

 

$312,000

Hear from other real-life investors like James in our investor blog section

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