When Colin and Robyn Hobbs sold one of their troublesome investment properties they couldn’t even recoup the sale costs. One conversation could have saved them all the trouble.
“A single conversation could have saved us years of wasted time, and a significant amount of money.
When my wife and I looked at a two-bedroom unit in Adelaide’s Mile End, we both knew that it didn’t fit our investment criteria. We weren’t new to the game, and we had set rules. Don’t buy a property with more than two levels, don’t buy a property without a carport, and don’t buy a property that is far away from shops and entertainment. This property was all three, but we bought it anyway.
Why? We didn’t have a proper conversation about it. Both of us assumed that the other liked it, to the extent where we were happy to go through with the purchase. To this day I do not quite understand how we managed that. It’s one of those things that you look back on and shake your head. Normally we’d have a proper discussion after every inspection, and in this case it just didn’t happen. I don’t think the conversation went much beyond ‘Did you like it?’ and ‘Yeah, it was okay’.
The suburb itself wasn’t the best – Mile End had a stigma about it at the time but there was the sense of an impending process of gentrification.
The apartment was a long way away from even the nearest bus stop, three stories and in a large group of tired-looking flats. It only had a car space. It was reasonably well presented at the open for inspection, but we normally look through those things. We’ve been investing in properties since 1997, so it’s not as though we were entirely new to the process.
The property was tenanted, and the plan was to hold off on any work at least until that tenant decided to leave. When that tenant did finally move, around three years after we purchased, we decided that the property needed to go. We were hesitant about selling it in the state it was in, and decided to go ahead with over $20,000 worth of renovation works in order to bring it up to standard.
When we went to put the house on the market in 2006, around three other similar properties appeared for sale on the same street. So we had competition for buyers, and the only thing going in our favour was the fact that the property was vacant and therefore available immediately for an owner-occupier. We had purchased the place for $148,000, it took us about two and a half months to sell it and we ended up selling it for $170,000. The intention had been to renovate and sell for a profit. The best way I can think of describing the experience is ‘ouch’.
You’ve got to communicate and stick to your criteria when you’re purchasing an investment property. We learnt from this disaster, and we’ve gone on to have incredibly positive renovate and flip stories. The trick is to divorce your emotions from the process and think in terms of monetary gain. We were able to treat the experience as a learning experience at the time, but at 61 years old the reality of relying on my property portfolio as a superannuation supplement and the worsening South Australia economy is sinking deeper and it’s not a mistake we can afford to make again.”