The B IN BRRRR: Buy A Property For Xmas
Ilse Wolfe, property investment coach at Opes Accelerate, says the summer holiday break offers a window of opportunity for buyers.
1 December 2021
The Christmas season brings hot opportunities for renovationsbased investors. With the competition sunning at the seaside, there is a unique window whereby savvy investors can nab an undervalued investment property, capitalising the “Buy” within the BRRRR strategy.
“The start of summer is the season for real estate to go wild,” Ilse Wolfe explains. The bulk of listings come to the market from Labour Day onwards. But, it’s wellknown in the business not to waste your time trying to sell for the two weeks prior to, and following, Christmas Day.
Buyers know there is little stock available, and the sellers know there are no buyers. But less competition means more opportunity. For organised buyers, this could mean buying a great deal for Christmas.
But you need to know how to spot it. The BRRRR (Buy, Renovate, Rent, Refinance, Repeat) strategy is a strategy for renovations-focused investors looking to accelerate property portfolio growth.
Step one, the B, is to buy a property that can be renovated to maximise rent and equity uplift. he aim is to get one that is poorly marketed or undervalued.
An example of how this, when understood well, can kick-start a successful BRRRR project is Ilse’s recent renovation in Glenview, Hamilton.
It was the highly-exposed but slightly faded For Sale sign that drew her attention while driving the main road into Hamilton. A short call to the realtor told her the house had been on the market for nine months without a single offer put on paper. For people like Ilse, this anomaly is the first green light. “The vendor is likely fearing no one will ever buy their property, and the real estate agent is probably fatigued as well,” Ilse says.
This sense was confirmed when the agent mentioned buyer feedback had been in the high $400,000. But Ilse knew the market value was close to $600,000.
A second green light.
At her first viewing of the property, she asked the agent to bring a copy of the sale and purchase agreement. But nowhere was the semi-detached sleepout, at the rear of the property, mentioned within the marketing. The marketing noted three-bathrooms, but that would have missed most investors search filters. A third green light.
Ilse submitted a low offer of $455,000, which was accepted without hesitation.
But then Ilse commenced her due diligence, and the Hamilton City Council files unearthed a wealth of problems. The sleepout on site contained a kitchen, which was deemed an unconsented ancillary dwelling, or second tenancy. But it was a two-storey, three bed, three bath property. It had potential and would offer substantial rent and value gain as a consented home and income.
Hamilton Council, now aware of the illegal tenancy, issued a Notice to Fix to the vendor’s solicitor. On the last day of due diligence Ilse requested a significant discount from her original offer. The highly-motivated vendor accepted without question, and Ilse bought for $425,000 – around 25% below market.
The savings made in the initial purchase was targeted to the renovation. All consenting issues were rectified, the main house floorplan was reshuffled to include a fourth bedroom and the pokey kitchen was amalgamated to an openplan living area. The end result was a passive income jump to Ilse’s portfolio profit of over $2,000 per month and a net equity gain of $275,000. Ilse’s advice to investors wondering what to do for Christmas is: get your lending preapproval on paper and go shopping.
Ilse Wolfe is Director of Opes Accelerate Coaching Program. To enquire about memberships and how you could accelerate your property investment pathway contact Ilse at [email protected]. For further information visit www.opespartners.co.nz/accelerate. Follow Ilse at @ilsewolfenz on Instagram