Expert Advice with Todd Hunter. 01/05/2018
What a Cracking start to 2018 Geelong is having… so we thought we’d give our Blog a three-phase story:
- wHy we bought in Geelong
- Those who didn’t listen lost out
- And, a plan to move forward
Why we bought in Geelong
Being Melbourne’s little sister, Geelong has certainly seen some amazing growth stats in the past 12 months.
With the property market in Melbourne having a massive climb in value over the past 4 years, affordability, or lack thereof is now the big question?
This has turned property buyer’s attention to the Geelong area. Given it’s easy commute to the city and there’s ongoing employment growth in the area, it’s no wonder the market is in full swing right now.
Because of all this, Geelong is currently in what I call “Stupid Money” territory. This is where you advertise a house for say $350k and get over list price, as buyers are willing to pay anything just to secure a house. This phase, though, will only last for 6-12 months.
The time to sell is now!
We bought in the low and now it’s time to sell in the high…
When we were buying properties in Geelong in 2010-11, we bought in a few suburbs but stuck to the price range of under that $270,000. Some of the older less desirable looking properties we even scored for clients under $200,000…
Add to that yields that were over 6% and up to 7% meant that our properties were all positively geared. That meant we could hold these properties and wait for the BOOM, whilst enjoying a property that was making us money each month.
Simple math really!
Where Sydney lacks in developing a second sub city, Melbourne has embraced it – through Geelong. Infrastructure spending is up including new hospitals, new roads and developers are back in town changing the city.
As a result, rental dollars have continued to rise. I.e. we paid $195,000 for a house that started at $230 per week rent, increasing over time to $310 per week. At $195,000 purchase price that was a 6.1% rental yield from day one, and only grew from there. Now, it’s at 8.26% rental yield.
So, what’s happening now?
Well, we’ve seen clients who paid $205,000 for their property, with ongoing rental income, no issues with vacancy periods in the last 8 years, sell that same property for $370,000, I’d say that’s a nice profit of $165,000 for a property that cost you nothing to hold because the rental yield from the get go, coupled with Depreciation, meant the cost basis was positive…
Over the weekend, we had a client sell her property after only 5 days on the market for $425,000. She was offered $300,000 12 months ago from her managing agent… thankfully she checked with us first, as we told her 100% to hold out the further 12 months, because that last 12 months gained her another $125,000. She paid $245,000 for the house, and yeah, she sold with the agent we recommended! Happy days!!
Bec and I own 4 properties in the area. We have sold one house, with another that has had extensive renovations completed on the property, due to hit the market mid April.
We intend on retaining the remaining two for now to see how the market continues, but for us, the sale was for a purpose.. not just because the market has increased.
We are selling so we can fund Stage 3 of our renovations on home – this way we can pay cash for renovations.
Those who didn’t listen lost out
So please take this as the part of our service we said we would do – that is, tell you when to sell. Unfortunately “some” clients who use our service instantly become professional investors once we buy a house for them.
What I mean is, we have had some clients sell a year or two ago and they basically made zero… or very little. They believed us when we suggested Geelong but then didn’t wait for the BOOM to come. To them I say “Your Loss for not listening”. And then there are a few investors who tell us we are selling too early. For those, it’s your call – if you miss the boat then be prepared to ride out the storm for however many years that will take.
So please take this as your warning bell… take full advantage of the awesome times and capitalize on it. We have an awesome agent we have used ourselves plus a few clients already and he is breaking records consistently. So just because your property is with one property manager, doesn’t mean you sell with them. You sell with the BEST – and we have his details. Just let us know and we will put you in touch.
And a plan to move forward
So what’s your strategy? How about this as a good idea…
Sell your Geelong house – take your profit of between $150,000 – $200k and pay down your home loan. The savings in interest alone will be between $6,000 – $8,000 (@4.00% pa).
Not only do you save $6-$8k per annum ($120-$160 per week) in interest but you also increase your equity in your home.
Then you use the equity to buy a house in the US – and keep the rollercoaster going. The great part is that your US house will be $120 – $140 per week positive.
So by selling your Geelong property you could get a pay rise (so to speak) of between $240 – $300 PER WEEK.
And who doesn’t love a pay rise…
Now not that I need reassuring but it’s nice when another expert agrees with us. Terry Ryder (Hotspotting) called Geelong his pick of 2018. He is right, but only if you owned there already. You couldn’t get the deals we got years ago, and that’s why our clients are loving it right now!
Todd Hunter is director, buyer’s agent and location researcher for Sydney-based wHeregroup. He is an active property investor himself and amassed a portfolio of 50 properties by the age of 31. For more of Todd's musings, see his Expert Advice section on our website OR visit the wHeregroup blog.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.