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‘Don’t trust rental appraisals’: investors warned

28 September 2016 Reporter
Rental appraisal errors

A property investor who was burned by a “dodgy” rental appraisal has cautioned others against believing everything they’re told.

Krush Deepak says local agents gave him an inaccurate picture of what he could expect from his property and as a result, he now regrets the purchase.

“It all sounded great in theory, but I’ve just settled on my first investment using equity [from my Sydney property] and I’ve already come to regret purchasing the property,” he said.

Mr Deepak was given a rental appraisal of $320 per week for the two-bedroom apartment in Southport, Queensland which he purchased for $240,000.

“I put a clause on the contract stipulating that three weeks prior to settlement I would be able to market the property to tenants, in the hopes that it would be occupied from the get-go. It’s now been listed for four weeks and I still don’t have a tenant,” he said.

Mr Deepak cautioned other investors against becoming caught up in hype and making the same mistake.

“Never believe the rental appraisal that the real estate agent gives you, because unless there’s an actual tenant in the property paying that rent at the time of your purchase, it may well be wide of the mark,” he said.

Mr Deepak has since dropped the rent to meet market expectations, but concedes this has put a dent in his finances.

“This week I dropped the rent from $320 to $300. The good news is that I’ve suddenly received a huge number of responses to the listing, and there are now numerous inspections lined up. The bad news is that the $20 a week reduction has seen my investment slip away from being cash flow positive.”

If the property leases for $300 per week, Mr Deepak will be securing a yield of 6 per cent, “but it does mean I’ll be putting in a nominal figure each week to maintain the loan, which I wasn’t planning on doing.”

Mr Deepak said the purchase was a mistake and in future, he will only buy tenanted properties, because “relying on someone else’s predictions is far too risky”.

‘Don’t trust rental appraisals’: investors warned
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