How to strike a property deal: Know the difference between cosmetic issues and serious structural faults
Michael Ossitt and his wife have worked their way up from having $2,000-worth of savings to owning a six-property strong portfolio.
Aside from good education and the best mentorship, Michael’s background as a design manager also became instrumental in their property investment journey – even helping them save about $60,000 on a property investment.
Find out how the couple was able to get the most out of a property deal just by knowing the difference between less-than-ideal cosmetic issues in a property and serious structural faults.
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Tell us about the property.
We actually bought another place in Manly Vale. Still a growing suburb with great potential, and it’s one of those areas – it was the poor cousin of the suburbs around. You’ve got Balgowlah, Fairlight ... and Manly Vale was always that bit cheaper. It’s probably caught up.
It was [another two-bedroom apartment]. It was a much older building ... original condition, and it was on the market for about six months before we bought it. I’d been keeping an eye on it. I suppose that’s why we bought it, because we’d been looking at it for so long. The price had dropped every month.
Were you able to leverage off the fact that it had been on the market for so long?
Yeah, absolutely. I went to a few of the inspections and there were other people looking that looked like first-time buyers, but they walked in and walked straight out again.
How much did you pay it for and what were they marketing when you first saw it?
We paid $378,000. They were asking $440,000 originally.
[Did] you think the property was overpriced or poorly marketed? What [did] you think was the problem?
Overpriced, too high on expectation and really bad marketing. The photos had been taken with a Blackberry and the condition as well. It was original condition, it was full of furniture, it was smelly.
Just a great property, then?
Yeah, from an investment perspective and a potential [perspective].
Did you just give it a silly offer and they took it?
Yeah, we went in pretty low. We started about $360,000s and went up from there, and managed to obviously bring them down a long way. I think when we started offering, they were still asking $390,000s to $400,000 for it, and there was obviously no other interest there at the time. As I say, the condition of it was bad but we just ignored all of that, and coming from a design background, I could see past the crap that was in there.
How could you tell that they were just cosmetic issues, not actual, deeper, real problems?
You could just see past the furniture, the carpet, the horrible vermiculite ceilings, and I knew a couple of other units in the same block had been renovated previously. I’d seen what they’d done and the potential was there, so I walked in and I said, “This has great potential.” My wife walked in and she wanted to walk straight out again. She said, “There’s no way we’re buying this.”
So, you picked it up for $378,000. What did you do with it then?
We basically gutted it and then did a full renovation on it in three weeks, and got it rented out on the fourth week. Really quick turnaround.
What rent did you end up getting for it?
Originally, we got $450 a week, so it was quite a good yield to begin with. That was based on the renovation.
Did you get it revalued pretty soon afterwards?
About a year afterwards. Then, it was low $400,000s, so we got a bit of an uplift straightaway. Still got it today. It’s been the best-performing property and it’s about $650,000 today.
What advice would you give budding investors?
I think you need to decide what it is that you want. You need to set your goals up first and then work at how you’re going to get to that goal. You get the education, the knowledge to begin with and the tools to set you off. You go off and you do it yourself, with someone holding your hand along the way.
I think it’s setting the plan now. Having something to aim for. If you know what your goal is, you can work at how to get there.
Tune in to Michael Ossitt’s episode in The Smart Property Investment Show to know more about his strategy to achieve an impressive financial transformation.
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