Purchase or Pass? Empire's Chris Gray on a Bronte property
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Chris Gray, an investment property expert at Empire, appraises recent investment opportunities each Friday on the Your Property Empire television show on the Sky News Business Channel.
"Whenever I buy a property I always get a bank valuation to confirm what it’s worth, and even though they can be conservative I very rarely pay anything over that valuation," he says.
"In this week's Purchase or Pass we analyse a Bronte property that someone paid well over valuation and analyse whether that was a good move."
Location: 7.4kms from CBD
Beds: 2
Bath: 1
Parking: 1+1
SQM: 86sqm
Price: $740,000
Rent: $650/wk
It’s an 86-square-metre tw0-bedroom unit, 7.4 kilometres from the city.
The unit is south-facing but is still quite bright and has a balcony overlooking a park and the ocean in the distance.
It has a lock-up garage and there’s a car space in front, which isn’t on title but can be used solely by that unit.
In 2008 the bank valuation came in at $535,000 and it sold at auction for $574,000, or $39,000 over valuation.
We got a recent valuation that came in at $725,000, and it sold for $740,000 or $15,000 over valuation.
This unit ticks all the boxes for an investment.
My point is really to discuss the price you pay for a property.
How educated are buyers and sellers as to what a property is worth?
"Is getting a bank valuation a good guide as to what it’s worth?
The owners who bought in 2008 paid almost $40k over valuation, which some might say wasn’t the best financial decision, but let’s look at the numbers as they still made a profit four years later.
Selling for a profit
Sold 2012 | $740,000 | |
Bought 2008 | $574,000 | |
Stamp duty 5% | $28,700 | |
Holding costs $10k/yr | $40,000 | |
Selling Costs | $15,000 | |
Total Cost | $657,700 | |
Profit | $85,300 |
Do good properties quite often get a premium?
In hindsight would you have bought in 2008 and/or 2012?
So is it purchase or pass for you? Tom Panos the auctioneer says yes.
There's some pretty fantastic views and its a renovator's delight so you can add value.
I’m going to recommend purchase.
I think if you’ve got the right property that ticks all the boxes it will always make money over time so even if you have to pay a couple of percent over valuation sometimes it’s worth it.
You just need confidence in your ability to pick the right one and avoid the bad one, so for that reason I’m going to purchase as well.
Chris Gray is a buyers' agent at Empire. He is host of Your Property Empire on the Sky News Business Channel.
He will appear periodically on Property Observer posing and answering investment questions on select propositions.