Taking the plunge on an unconventional building in the wrong end of town has paid off for married investors, Cherylee and Colin Stokes. Cherylee tells RPM what PMs can learn from seeing the positives in an unappealing property.
“My first impression when I walked into the old Nissen hut in West Cessnock, NSW was largely based on the pungent smell emanating from the master bedroom. The previous tenants had kept their dogs in there, a fact clear to all who entered the strange little building.
Add to the mix cockroaches you could saddle and ride, punched-in plaster and wall cavities lined with court attendance notices, and you’ve got a good idea of what the place was like.
But what was also clear is that the landlady, distressed at the level of damage inflicted on her investment and with a cruise holiday beckoning, was desperate to sell.
The property was listed on a Thursday and we went to see it on the Saturday. Sizing up the scope of work to be done against what we thought the rewards might be, we made a cash offer an hour after seeing it. The agent got back to us in 15 minutes and said, “Yes, we’ll accept the $107,000”.
The following six months saw us making use of our weekends to renovate the property, travelling from our Sydney base. This was our third investment property, but the first we’d attempted a renovation on. We ended up repainting inside and outside, and replacing the kitchen, bathroom and flooring all by ourselves.
Luckily my husband is very handy and I can take care of things like painting and detail work. Moreover, we liked the challenge. In fact, we’ve just bought another house in need of similar renovations.
There’s something incredibly rewarding about making something good out of what may have been someone else’s bad situation, as ominous as that may sound.
It may sound like an impulse buy, making an offer so soon after seeing the house, but we’d known for a long time that we wanted to renovate a place together. It’s not as though we were unfamiliar with the area, either. We’d already purchased one property in the Hunter Valley and we knew that while the area isn’t exactly primed for massive capital growth, it works well for investors after a property with a decent yield.
My day job helps to alleviate some of the risk too. I work for a buyer’s agent as a researcher and being on the internet day in, day out and constantly communicating with real estate agents helps with finding the ideal property and getting a genuine feel for the locality. Still, we knew West Cessnock wasn’t exactly the best part of town and we might be limiting our rental income by buying there.
We finished the property in time for the June long weekend and the property has now been tenanted for more than 12 months, leased at $250 per week. Based on what we’ve been told by local real estate agents, that’s above the average market rent by around $10 to $20 per week.
What we really didn’t bank on is just how fond people are of the Nissen hut. It was used by numerous Allied countries during World War II and was repurposed by the Australian government to house post-war migrants and returned servicemen.
Years later, the strange buildings with the semi-circular roof have amassed something of a cult following with a push to have them officially recognised as historical structures. People don’t seem to mind the fact that they are cold in winter and hot in summer. The unique point of difference of living in a Nissen hut seems enough to overcome these sacrifices.
If the movement gets legs, satisfying our renovation craving with an oddball, rundown purchase might just continue to pay off well into the future. For now, we’re just satisfied to have made our mark on a high-yielding investment.”
Lessons for property managers:
- Is damage to one of your managed properties an opportunity for your landlords to do a quick renovation and increase the rental yield?
- Does a property you manage have a unique point of difference that endears it to the local community and potential tenants? Are you leveraging off that in your marketing, attracting the right renters and charging as much rent as you can?
- Are you educating your landlords on the opportunities in your local area and sharing your knowledge?