When an investor engaged Momentum looking to purchase an investment property, they were able to achieve a stronger return by utilising the team’s strategic and collaborative approach between divisions.
Our client, Michael, was looking to invest in a property that would deliver capital growth over the long term to provide future financial security, while still generating a solid rental yield in the short term. Michael’s busy schedule left him with very little time outside of work and he was worried about making the wrong purchase decision.
Developing a strategy based on the client’s profile
The team’s first step was to identify Michael’s risk profile, short-term and long-term goals, and unique financial situation. This information was used to develop a tailored investment plan, detailing the steps he would need to take over the next 12 months to develop his property portfolio.
Our finance team was able to secure and put in place a loan structure that was best suited to Michael’s risk profile and needs, while also providing him with pre-approval to assist with purchase negotiations.
Research and acquisition
Once Michael’s strategy was completed through Momentum’s Investment Strategy and Finance team, our Buyer’s Agents team identified several properties that were suitable for his needs.
Through careful due diligence, any properties that were deemed to carry risk were eliminated. For example, one property was found to have pest problems while another was found to have sewer lines running underneath the property.
Our buyer’s agent, Karen, located a duplex pair (two homes, side by side) on a large block of land in Ascot, close to the Perth CBD and Swan River. One of the duplexes was tenanted at the time and both provided the opportunity to add value through cosmetic upgrades.
Karen was able to negotiate and place an offer at under-market value with the selling agent.
A value-add strategy
Once the offer was accepted, Momentum’s Property Management team inspected the property and provided Michael with a value-add strategy outlining the upgrades that would lead to the best possible increase in rent and capital growth, without over-capitalising on the property.
During negotiations, Karen secured early access to the property prior to settlement. This meant the refurbishments were started during the settlement period so that the untenanted duplex could be leased as soon as possible following settlement.
In addition, our Development team contacted the local council and confirmed that a future subdivision would be allowed without any changes to zoning. This gives Michael the option to capitalise on the large site further down the track.
As part of the value-add strategy for this property, Michael also completed a renovation of the untenanted duplex.
The results: an increase in property value and rental yield
Momentum Wealth’s property management team researched rents in the local area to be sure the property was delivering market-based yields.
In response to our research:
- The rent on the already-tenanted dwelling was increased by $50 per week, and the lease was extended for a further 12 months.
- The vacant, refurbished dwelling was leased at $525 per week, with a 5% increase every six months factored into the lease.
Our market research indicates that within two months from the date of purchase, the property’s market value had jumped by 14% on its purchase price and is now attaining a gross yield of 5.9%.
The duplex may not have been a property that Michael would have considered independently; however, with the benefit of expert advice, he has invested in an asset that has met all his goals, in a sought-after location that will continue to attract future buyers and tenants.
By utilising all of Momentum Wealth’s services, Michael has been able to achieve a combination of yield, capital growth plus the ability to add value to the property in an area earmarked for future rezoning.