I have been purchasing single storey villa/units as they come onto the market and renovating for rental. The units sit in a complex of 10, behind beachfront homes, (2 with views from the driveways) and a Government approved Marina on the doorstep (Developer hasn’t yet advertised a build start date).
Over the past 5 years I’ve purchased four units, renovated all, furnished two of them and all are bringing in good incomes, though each at very different levels:
- Unit 1 – 2x 1 view from drive, parking for 2, fully furnished, new flooring throughout $600 pw
- Unit 2 – 2x1 views from drive, parking for 2, unfurnished, new kitchen, bathroom, flooring $410pw
- Unit 3 – 3x1 fully furnished, side access, fully furnished $650pw
- Unit 4 – 3x1, unfurnished, new kitchen, bathroom, flooring, painting $370pw
Option 1: BUY
I can continue to buy the units as they come onto the market. This could take years and may not even occur. If I owned all of the units, or came to an agreement with the other owners, there is the potential to build a second storey with possible views for some. This would significantly add to the value as the location is excellent, being walking distance to the café strip and public transport to the train station for access to the CBD. There is value add potential in this option, though not in a short time frame.
Option 2: HOLD
Doing nothing is an option as the units are almost paying for themselves as a whole. Holding onto them or even furnishing the two unfurnished units provides a passive income for the future or to pay down the loan and also the use of the equity to purchase other properties. When the Marina is built with 450 boat pens the potential for ongoing furnished rentals is sound. Rockingham also has a large Fly In/Fly Out population. Furnishing the other two units provides the potential to value add via rental returns.
Option 3: SELL
By selling now as a going concern with full rental histories, depreciation schedules and excellent property management in place, there is the possibility of selling all four to the same buyer to increase the profit for me and provide the new purchaser with a great opportunity already set up with minimum involvement, especially great at the moment when the furnished units are corporate lets on decent leases and possess value add potential to a new owner.
When I purchased my first investment of 4 units in Regional WA ten years ago I decided that by buying cheaper and collectively I could spread my risk by having one property pay for another if vacant. I almost tripled my money in four years by doing this and though taking much longer this time around, I am hoping for similar success. I think it’s the collector in me, always trying to bundle to save, or buying something that may go with something else later on to add value. I think in the US I’d be called a ‘Picker’ and hopefully not a ‘Hoarder’ lol. I must say I am a fan of the Foxtel buy and sell shows!
All of the above are valid options and have their own attractions but this is where working out what your strategy for the future is and the level of risk you are comfortable with.
I wish to continue to purchase properties as close the beach as possible as this is where I would also ideally like to live. Is this a sound strategy? probably not. This is why the Sell option is even an option as I watch prices increase in the area. My head tells me if it isn’t broke; don’t sell it, but my heart thinks of the lifestyle I could live. Delayed gratification waiting until I’m in a better financial position is the way I think I’ll go but the temptation and weighing up the options is what keeps my brain ticking over and hopefully it’s this thinking outside of the norm that will ultimately make my journey a success.
Lessons to take away from the above would be to think about value add not just as a selling point but also as a rental opportunity. I’m also thinking of developing a block in line with my ‘bundling’ thinking but that’s for another time.