If you want to buy at a reasonable price in the hot Sydney market you need a lot of preparation, more than a little confidence and a touch of theatrical talent, according to investor Steven Ryan.
“I was looking for investment property number two, an apartment in the inner-western Sydney suburb of Marrickville. I knew that I wanted to buy in Marrickville and hold over the long term – the market is prime for further gentrification – and it was starting to appear as though others were getting a similar idea.
This was two years ago and the market was hot – although not quite as crazy as it is now. I knew that in order to keep with my strategy of buying under market value, I would have to act quickly and smartly.
Before looking seriously at any of the available properties, I pretty much had my finance days away from being ready and I’d talked to my broker and worked out a maximum purchase price, so I knew what I’d be able to offer. My next step was to jump on realestate.com.au and set up some alerts for immediate notification of anything and everything that matched my buying criteria.
Late on Thursday night a property that matched my criteria got listed. A two-bedroom, top-floor apartment with a big open-plan layout and floor to ceiling windows. I noticed that the agent’s profile picture accompanying the listing was unfamiliar. I’d probably spent the year and a half prior to that looking around the area and going to a lot of opens, so I was pretty confident I hadn’t seen any listings from this guy before.
The agent was from a suburb that I worked out was probably a 30- to 35-minute drive each way to open this property, so it was out of his ordinary area. I realised it would be a big spanner in the works for his Saturdays having to drive all the way out to the area that this property was in and then all the way back for the rest of his opens.
I thought I might have had a bit of an opportunity to take advantage of this, so I frantically got in touch with my solicitor to get a section 66 written up so that I could make an unconditional offer. I basically turned up at the first open house on the Saturday hoping to take the property off the market very quickly, because I figured that the more people who saw it, the more people who would mention their interest to the agent in terms of what they thought they might be willing to pay for it. I basically wanted as few people to see the property as possible.
Just for the sake of theatre I brought a blank cheque to the open house as well. The second that it opened I was already inside, building a bit of rapport with the agent. I waited for a moment until there were no buyers around and said I was going to make him an offer that he wouldn’t be able to refuse (which truthfully I thought was probably an offer that I would refuse if I was showing the house). But I tried my luck there and then, and just for the drama of it all I signed my cheque in front of him for the 10 per cent deposit.
I made sure to put a time clause on there just letting him know that I was looking at a number of properties at the time and I didn’t want to have an offer on the table that would prevent me from making offers on other properties. So I said that I need to know a response within a short timeframe.
I had done my numbers and realised the property price was sitting close to the $500,000 mark, and thought that the vendor would probably want a nice round figure. If they were that close they would probably want $500,000. Even so, I put in a lowball offer that was even lower than that, just so there was a bit of room to negotiate. The offer was presented to the vendors that afternoon; they came back with an incremental increase on the offer which took the property still $40,000 below what I thought its value was. Despite this, I pushed back and tried my luck to get it even cheaper than that. But $500,000 it was. The deal was done on the Saturday afternoon, after only 133 people had seen the property online.
I’m not trying to claim that doing a deal this quickly was without risk – but I tried to alleviate this by putting foot to the pavement. I wouldn’t have time to order a pest inspection or closely inspect the building’s history, so I spent the Friday evening before the open knocking on the doors of neighbouring properties. The responses I received for the two or three neighbours who answered were enough to put my mind at ease.
Making sure that I appeared to have my finances in order, by way of the section 66, getting in quickly and appearing confident allowed me to purchase under-value in the area I wanted. Now I’ve got a great long-term investment receiving a decent rental yield, which I’ve subsequently been able to draw upon to fund further purchases.”