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From ‘rat houses’ to ‘meth labs’: The unlikely deals that paid off
From rat-infested properties to so-called ‘meth labs’, some of the most unlikely investment opportunities can present hidden value for buyers willing to look beyond the surface.
To find the best opportunities, achieve solid capital gains or boost cash flow, investors need to think outside the box, considering the properties that other buyers may have dismissed.
On a recent episode of Property Unfiltered, Strategic Brokers director Hung Chuy told hosts Liam Garman and Simon Loo that there were plenty of unusual property deals that ultimately worked in the buyers’ favour.
Chuy said one memorable opportunity was a property that he named the “Ratatouille house”, which appeared to be good value on the surface, but was previously infested with rodents.
“It was a beautiful house, actually. It was relatively new. I remember the internal floor space was huge,” he said.
“It was a five- or six-year-old build, and it was $615,000 two years ago. I remember just looking at it and going, this is so cheap. It should be worth $750-800,000 any day of the week.”
However, Chuy said the property was found to have 200 rats living in it after previously being owned by a breeder, and the prospective buyer soon wanted to pull out of the deal.
He said the property still had immense intrinsic value, and although the repairs were $10,000, the damage was largely fixable with fumigation, cleaning, and recarpeting.
“It was a beautiful house, 210 square meters. It even had a swimming pool. It was also really new and modern.”
“This is the sort of thing that people miss out on - they look at these things, but they don't look at the bare bones – What is the core of the property?”
Chuy said that the property was now worth $1.05 million, growing substantially in two years.
“And if you went for something in that area at the exact same time, there was nothing close to it selling for less than $750. So this was massively under market value,” he said.
Chuy also spoke about a “meth lab” that many prospective buyers overlooked due to it looking like “trash”.
“The cupboards were hanging off, everything in the kitchen was hanging off, everything looked like a meth lab. When you see a property like that, I can see why people were turning it down,” he said.
“The biggest thing I remember was that they had like this rooftop thing, with 20 chains and lockets on it.”
However, Chuy said that, upon inspection, he only considered the damage to be cosmetic, not the “bones” of the property.
“I looked at it; it was a couple of cupboard doors, a couple of holes in the wall from someone getting angry on meth rage. There wasn't anything in there that was that bad.”
“It had a $465,000 purchase price, but the neighbour had an identical house that sold for $560,000 literally a week before that.
Chuy said he and his brother bought the home using a parental guarantee and spent $20k in renovations for repairs, with the home now valued at $800,000.
“After we'd done the renos, we got a full valuation and actually released the guarantee straight away,” he said.
Chuy also said the brothers rented out the property for $580 a week, enabling solid cash flow.
According to Chuy, a property didn’t need to be unique or unusual to be a good investment, as it only needed the right fundamentals and for the investor to seize on the opportunity.
A buyer he once knew was able to build up enough wealth to eventually purchase a principal place of residence (PPOR) after investing in Kallangur in 2019 for just $365,000.
Chuy said the buyer eventually sold the property for almost $800,000, double its original price, enabling her to generate sufficient equity to purchase her home.
“The reason I loved this deal was that it was the foundational stepping stone. It was a deal that opened up the doors, opened up her eyes to all the opportunities.”
Listen to the full episode here.
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