Hi everyone, welcome to episode 100 of the Rewarding Property Decisions podcast.

So this is a great milestone for our little podcast.

We hope you are enjoying the content just as much as we are, producing it for you, and hopefully, you're getting a few little nuggets to take away on the way in your property journey.

Well, I'm lucky enough today to be joined by my colleague, Brenton Potter.

Welcome, BP.

Thanks, Jarrod.

For those of you who don't know, Brenton manages our property team here at Wakelin Property Advisory.

We thought today we would, well, I talk to you a lot on the podcast about being patient and that asset selection is really important in terms of buying the right type of property and not getting rushed into making decisions.

But there are a lot of other aspects around being patient in your property purchasing journey.

So what we're going to do today is actually, the whole podcast is going to be one big case study.

We're going to work you through a proper, a client, and a purchase that we made for a client a couple of years ago, without giving away any personal details, for obviously, for privacy reasons, but we'll give you a good run through as to what happens and how patience is so important in buying a property, particularly from an investment point of view.

It's really not just about the asset selection, it's about the due diligence that you'll do along the way, it's about the preparation that you'll do for the sale, and then it obviously comes to the negotiations or the bidding at auction, depending upon the method of sale.

So, BP, can you give us a bit of a rundown on this client, some background and how they came to us at the start?

Yeah, absolutely, Jarrod.

So the particular client in mind, they were in an interstate investor.

They'd been weighing up, what I remember when we first met with them, it probably took them another six months to kind of commit to a purchase in Melbourne.

They were just weighing up.

So looking at, perhaps, other capital cities?

They were, and they were weighing up other cities and what their money was going to get them in Melbourne.

They were from Sydney, weren't really too familiar with the Melbourne market at all.

So, yeah, I mean the first part of it was a real education process to, as to areas where we'd consider and what we'd buy and why.

They, I mean they're, they pretty, had a pretty healthy budget, around just north of $2 million.

Okay, yep.

So, I mean- Which is probably the top end of what we would buy from a single asset as well.

It is, and at that price point, we need to, you know, be careful that we're not paying too much there for the overall improvements as well.

So getting that balance right- Strong land component, yeah, absolutely.

Yeah, so when they decided to come on, oh, sorry, when they decided to join and engage us as advisors, we got to work.

I mean, we identified certainly an area around, you know, Stonnington and Prahran in particular was an area that was on the cards and- The Bayside areas would give us pretty good options there too- Absolutely.

Middle Park, Albert Park Carlton, Fitzroy, we've probably got some options there too.

So it's, yeah, it's keeping a pretty broad brush, I guess, look at it so that we're covering things.

I guess that's part one of patience, isn't it?

When they've taken six months to do their homework around whether or not Melbourne's the option, Sydney's the option, Perth, Adelaide, because it is, nowadays, if you've got the right services and the right support around you, you can buy anywhere in the country.

Absolutely, you can.

And I mean, I think, and that was another big part of it as well, in terms of, they engaged us and then it wasn't, we weren't going to have, you know, five options a week for them.

And yeah, I mean, there were some properties, we didn't just buy the first one we saw, there were some properties there that, you know, 80% were okay, but then it might've, you know, been compromised, for example, in its position, in main road location or surrounding development or whatever it might be.

So yeah, it is important to be patient.

So the first step is obviously that market coverage.

So, just in terms of how we approach this and as many of you'll know, when we are doing our market coverage, it's not just an individual advisor that's helping the client out.

We're doing this from a team approach and we cover the market very specifically.

So it's, we're looking for the single front cottages and terraces, particularly when we're at that type of price point.

The, there's a lot of different ways for us to come across property though.

Absolutely, you're right, Jarrod, there is.

So myself and the rest of the team, we get to work and we cover our segment of the market, so that inner Melbourne market, particularly for those terrace homes, which, you know, we focus a lot on too, both from an off market perspective and an on market.

So part of the search for them, I mean, we started the search and looked at those areas that we mentioned just before, but also myself and the rest of the team, we put the feelers out to agents in these areas that we're considering, to say, "Hey, what have you got coming up for sale, or do you have any off market opportunities that, you know, we can consider?

Because we've got a client that is interested." And ready to go.

Ready to go.

And that's where agents, agents typically do have that confidence that once we're committed to something that it's not a, because they get, they deal with a lot of buyers that aren't really that serious or perhaps aren't that committed or really aren't that sure they want to buy.

Whereas our clients typically are.

Absolutely.

And part of our process, I mean, when we're getting through these properties, I mean, we always try, like to get a couple of advisors through just to make sure that, you know, that when we're, what we're getting through, the first person that, you know, that inspects, there's nothing that goes, you know, missed from inspecting a property there.

So, yeah.

All right, so if once we've done that, we've covered the market, once we've identified the property, and in this instance, it was an off market.

So can you just give us a bit of an overview on this specific property?

Obviously, again, without, we don't want to give away addresses and things like that, but the property was in Prahran.

Yeah.

So, what was it so, that was so good about this one?

Well, a three bedroom, single level floor plan, had a central bath.

The land component was slightly bigger as well.

So it was a freestanding home.

Good.

On about about 280 square metres, which is on the larger side for a single front home too, so- Absolutely, yeah.

The floor plan really flowed, look, it was an updated house, but it wasn't fully renovated.

The renovation was probably about 10 or 15 years old.

But certainly rentable as is and for this purpose of the investor, that was exactly what they wanted to do.

So the agent presented this off market opportunity to us.

Initially, my, our conversations with the agent were that it was going, the price range was going to be somewhere around that $2.1m to $2.2m mark, off market.

So we went in thinking, "Okay, we'd be a chance to potentially buy that within the range." Inspected the property, had a positive inspection, discussed with the agent to say, "Look, there's some interest there, please let us know when the contracts are in and we'd like to, I guess, get those checked first before we start." Just having any more detailed discussions in terms of negotiation and what we're prepared to offer.

The agent then, at that time, turned around and said to me, "Oh, well there's been a bit of a change in terms of the price.

We were saying $2.1m to $2.2m, but yeah, we're now looking somewhere $2.3m to $2.4m." And when I very politely then answered to say, "Well, I'm not your buyer, so I appreciate that." The advice that we then went back to the client with and spoke to the client was, "Look, it's a great property and a great area, but we're not here to pay anything as well.

And in this instance, we need to be patient with this process and if they're chasing that money now, good luck to the person who pays $2.4m for that particular property, we don't see value at that price." So there's our patience to start with, what sort of, at that point where obviously, we've gone away and done a fair amount of research around comparative sales and where we think before we start to engage too much on a negotiation perspective.

So we've looked at the sales, we've looked at the rents and being a single front in Prahran, generally that's a pretty, not straightforward, but there's usually a reasonable amount of sales evidence.

Can't imagine there probably was with 280 square metres though.

No, there wasn't.

So that was a difficult part but, you know, we were able to, you know, with our research and knowledge of areas as well, able to pick out, you know, a number of select sales that were either directly comparable or some, we might have had to look at some that were superior and also then inferior and work at a buying range as to where we saw the property sit.

So we thought at that stage, that if, when they'd initially said $2.1m to $2.2m, we were reasonably comfortable, we obviously would do our best to buy it for less, but if it came to it, we were open to that.

But once it went up to $2.3m to $2.4m, we said, "Thanks, but no thanks, and we'll move on." So what happened from there?

From there, I mean, the first correspondence was with the client to say, "Look, we just need to be patient with this one.

If it sells, and sells for $2.4m, then that's fine, it's not our property." Later on, it was, I think probably about four or five weeks after, the property did come online.

They decided to go to auction.

What did they quote it at, at that stage?

Yeah, so they had a quote range there of $2.2 million, sorry, $2 million to $2.1m.

Okay.

Yeah.

So well below the $2.3m to $2.4m we were told.

Yes.

Which, I mean, that didn't surprise me if you, if they were going to quote, you know, $2.3m to $2.4m- Basically on a private sale.

Yeah, I don't think they were going to get their price there.

So, when we saw it come online, we re-engaged with the clients to say, "Listen, we've, now, we have been searching, but this property in Prahran has now presented itself online, I think it's worth re-engaging with the agent." And that's where, when our interest picked up again, so that part of the process from there, we've done our due diligence on price and where we thought it sat in the current market, it was then about having the contractor sale reviewed by a legal professional.

So we assisted the client there.

We always do that first so that, if there's anything that's seriously wrong in terms of perhaps renovations that have been done, haven't been done from a compliance perspective, there's no point in getting a building inspection done.

No, otherwise you just, you're throwing money, throwing money away for no reason.

So that came back reasonably okay.

There were a couple of clauses that we added in, in terms of working in our favour for the client as, from a rental perspective.

We then arranged a building and pest inspection.

Now, I mean this is a nicely presented home, but I, we always recommend getting one done.

There's things that just, we can't see subfloor, roof, condition of the roof, important parts.

So we booked that in.

That, typically that had a few minor bits and pieces, but nothing that was going to stop us, from walking away from the property.

And the client was prepared.

A big part of our process was, I guess, educating them through and discussing the building report and the minor defects and the major defects as well, if there were any, in this instance though, there was, you know, a little bit of wood rot here or there, some rust on the roof, but overall, no major issues.

So we were then intending to go to the auction.

Yes.

A bid.

What sort of limit were we thinking of taking at that point in time?

Look, we, I mean we were prepared to pay a bit more than $2.1m for the property.

We still thought we saw value, probably up to kind of that mid one, mid $2.150m was kind of where we saw it sit.

Now the auction started, I didn't open the bidding.

A lady jumped in at the bottom end of the range at $2 million.

And then there were crickets, which sometimes isn't surprising at auctions.

Then from there, they were almost about to pass the property in.

No one was, no one else was getting involved.

So I jumped in.

The bidding went back and forward, and it reached a limit of $2,000,080, landed with me, which so was still $20,000 under the, you know, the top end of the quite range.

This particular buyer I was bidding against, she shook her head, said, "No, I'm out, I'm done." The agents went in for a halftime break, came back out, they said to the crowd, including myself, that I was the highest bidder and I would have exclusive rights to negotiate with the agent at the vendors reserve.

And I'm guessing there was no more bidding?

No more bidding, passed in to me at $2,080,000.

And the agents came out and hit me with a reserve of $2.2 million.

And I said, "Thanks, but I'm going to need to see some movement from the vendor's end if we want to get a deal done here." So we're again, so this is again, where the patience side of things comes into play, to make sure that you're not just jumping, even though, like we said, we did see value in that $2.1m to $2.2m range.

And on, in an off market private sale sense, if they'd been realistic, we may have been prepared to pay that sort of fee.

But, given where we were standing, I'm guessing it played out a bit differently to that.

Yeah, well we were then, now in a stronger position.

I called the client, who was interstate obviously.

So, from that point of view, look, I said to them, "Look, it's passed in to me at $2,080,000, they've hit me with a reserve of $2.2m, we're not paying anywhere near that, but we need to see some movement from the vendor's end, which I mean, they dropped $20,000, so it came down to $2,180,000." Did you move at all at that stage?

No, but we were still too far apart.

I then had a chat to the clients and say, "Look, we want to be realistic here, we certainly saw value at $2.1m." We said to the clients, to the agents, sorry, that, "Yeah, look, we're prepared to get a deal done at $2.1m, but if the vendors, if we're still too far apart, then that's fine." Sometimes you need to walk.

If we're too far apart in price, and in this instance, for now, we just were, they weren't budging off $2,180,000 and $2.1m we thought was a fair and reasonable offer for that type, for that property in the market.

And really, the agent and the vendor had a chance to see what the open market were prepared to pay.

And no one was, no one else was getting involved.

So what happened after that?

If you've walked away, when, I'm guessing, you heard back from the agent at some point in time, how long did it take them to crawl back?

Oh, that was Saturday.

So that auction was Saturday afternoon.

It was actually Sunday.

Yeah, it was a, it was a wet Sunday, I remember it was quite a cold and wet Sunday.

But yeah, they called me on a Sunday and- Where were you on that Sunday?

I actually just trying out a new pub that had opened up at my local, so yeah, I, yeah, I ducked outside into a private area of the venue and, yeah, and took the phone call and the agent just said, "Listen, you know, the vendors have had a think about things overnight and, you know, they're prepared to really consider your $2.1m if it's still there." So you agreed to that or had to let the clients know that maybe we'll just think about it just to make them sweat a bit more?

Yeah, look, we made them sweat a bit more.

Yeah, fair enough too.

I mean, there's sometimes, you don't want to be too cute about things as well, in terms of getting a deal done.

But we saw value at $2.1m, the vendors were there.

I didn't want to leave it open either for someone else who may have not attended the auction or seen the property pass in, because, what I didn't say before, is they then advertised the price at $2.2m online, so then, you know, people may look at that and say, "Oh, it's open for negotiation, I thought that meant a lot more." It invites new buyers in.

So at $2.1m, yeah, we signed the deal off on that Sunday and the clients were very happy.

Yeah, so that's where, I mean, and that's the ideal scenario.

So that's where we come in with the patience.

So there's been patience at the very start before they've actually even engaged us because they've made sure they've done their homework on making, on selecting the right person to work with.

There's been patience around the asset selection to make sure that it's not just the first thing we bought or that we inspected, we went through a lot of things on their behalf, but we also had a lot of patience around making sure we found the right property.

Then when we did, there was patience around the figures to make sure that, well, we saw value at a certain point.

In the end, the vendor probably cost themselves a bit of money because if they'd been prepared to negotiate in the original $2.1m to $2.2m range, we probably would've paid more than $2.1m.

Yeah, absolutely, we would've.

But we didn't have to do that in the end.

So the patience comes in, it is a really important part of property buying, whether it's asset selection, whether it's negotiation.

I think it's a really good insight into the level of workings that go on behind the scenes a lot of people don't see.

Yeah, and it doesn't, and that's the thing, it doesn't always happen or end in a success story because sometimes, we just agree to disagree and we're at our price and the vendors at their price and good luck to them, but in this instance, it worked out for the purchaser and yeah, they're very wrapped to get their foothold in, in the Melbourne property market.

Yeah, that's good.

Very good, okay, thank you very much.

Thanks Brenton, for joining me today.

Thanks, Jarrod.

It's been really good.

That's it for episode 100.

Hopefully, we'll have another, at least another hundred coming over the next few years.

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Otherwise, if you'd like further information, please visit our website, wakelin.com.au.

Otherwise, we wish you all the best with your property decisions.