Today we have a guest post by Nick Menz, National Acquisition Director of the ASPIRE Property Advisor Network.
A couple of things right off the bat:
Sometimes miscommunication around property can result in expensive outcomes.
Also, in the investment process, you’ll come across real estate operators that run the full reputation spectrum – from those who you’d trust with your life through to the dodgiest sharks imaginable.
And a combination of these two can be volatile for buyers who don’t use expert guidance.
To illustrate, let me tell you about a deal that could have seen our client lose tens of thousands of dollars due to added costs.
Worse still, they would have missed a plumb investment opportunity that will earn them hundreds of thousands in the long-term.
We had a client who was keen to invest in Perth. After extensive market research, I was well across the opportunities in our western capital.
I identified an excellent block of land in a growth location with plenty of tenant demand. I also selected a builder from our reliable local network, and we put together the cost for a fully completed home – ready for a tenant to move straight in.
It all looked pretty good, but things got side-tracked when our client came across another deal he’d found online.
He called me up and said, “Nick. We love your proposal and advice, but we’ve found another option. There’s a property around the corner from the one you’ve told us about. This other property has the same number of bedrooms, house size, land area – but is $60,000 cheaper.”
Now this caught my interest.
60,000 is a lot so I asked if this price was for a ‘turnkey’ finish where no other work needs to be done on handover.
“Definitely. The builder told me it’s turnkey and tenant ready,” our client said.
Knowing the build and finishes costing, the price sounded totally unrealistic to me, so I decided to do some ‘mystery shopping’.
I called the builder and presented myself as a potential buyer from Melbourne considering an investment in Perth.
My requirement was, “everything is done and included in order for a tenant to move straight in, I don’t want the cost or hassle of doing anything beyond the build contract”.
The builder quoted his price and said it would be turnkey and tenant ready on completion.
So, I asked him if that meant the backyard landscaping was done.
“Oh no,” came the reply. “But you can do that later for four grand.”
Then I asked about fencing.
“No fencing, but four grand will take care of it later.”
How about air conditioning, and a dishwasher?
“Four grand,” was the reply once more.
Four grand for tiling, four grand for carpets, four grand for blinds and TV antenna, you can see the pattern developing.
“What colour is the paint?” “Any colour you like” you guessed it, four grand.
Time and again, the builder said they weren’t included but were an easy fix later.
By the end of the conversation, I’d worked out where the vast majority of the $60,000 price difference was.
After reporting my findings to our client, he decided to invest with us instead of the slick salesman with no substance.
About a year after this I visited the estate where my client had bought. His house was beautifully maintained and had been continuously tenanted since he took possession. He’d made some handy capital gains on the way too.
I also took a drive past the house the other builder had offered – it was a partially finished shamble.
There was a ‘For sale by owner’ sign in the yard, with an interstate phone number listed.
It was vacant and poorly presented. And the state of the construction was appalling!
Gaps in the walls, rear garage door missing, unfinished paintwork, no floor coverings, no blinds – a right royal mess.
I couldn’t help but feel sorry for the owner.
3 Lessons learned
So, what three important lessons can be learnt from this episode?
1. Turnkey can mean different things in different locations
Turnkey in Perth can indicate a house that’s at ‘lockup’ stage, not necessarily fully kitted out for habitation. If you don’t know the local lingo, then find someone who does.
2. Dodgy operators abound
While it’s conceivable the builder wasn’t being intentionally deceptive, he was certainly being (very) selective about the information he fed my client (and me).
Always carry some healthy scepticism when dealing with those looking to sell you something.
3. Get an experienced professional advisor to look out for you
Finally, and perhaps most crucial of all, there’s simply no substitute for having an experienced professional advisor helping look after your interests. We know the right questions to ask and can spot, or at least investigate, when something is too good to be true.
Property deals involve big numbers and your future financial security hinges on the decisions you make when you’re buying, not when you’re selling.
Don’t take chances.
Instead, call on the services of a professional who will represent your interests in the investment game.
Want to find out what true turnkey properties are available? Contact us for a free, no-obligation chat.