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Location: St Lucia, Brisbane
Property Type: 3–bedroom townhouse (1 year old)
Asking Price: $420,000
Purchase Price: $370,000
Current Value: $485,000
Existing rent: $370
Post-Purchase rent: $550
Current rent: $640
As a property professional who sources real estate opportunities across Australia, Philippe makes it his business to get to know a prospective property investment market inside out prior to investing himself, or recommending it to clients.More often than not, gaining the upper hand in any property market comes down to due diligence - something that director and owner of Multifocus Properties & Finance, Philippe Brach, knows only too well.
Such was the case a few years ago when he identified St Lucia in Brisbane as a potential destination where he could shop for student rental accommodation to add to his personal portfolio.
“I was looking for a property near the University of Queensland in Brisbane. I had no exposure to the student market and wanted my next property to be in this area, but I certainly wasn’t looking for purpose-built “Student accommodation”. They are difficult to finance and hard to sell as the market is too restricted,” He explains.
“I identified a three-bedroom townhouse for sale in St Lucia in a small gated compound of eight units. It was only one year old and the tenant was a local coffee shop owner.”
The property, which was achieving a rental return of $370 per week, was listed for $420,000.
“The seller had personal issues and needed to sell. I told him that with a $370 rent per week, I wouldn’t be prepared to pay more than $370,000, which would give me a reasonable but not excessive yield of 5.20%,” Philippe says, and continues “He eventually agreed and wanted me to take over the lease too, which I accepted. Soon after I acquired the property the tenant asked if he could vacate early and I negotiated an exit with him.”
At this stage, Philippe’s due diligence kicked in. Having thoroughly researched the market, he knew that foreign students were prepared to pay $180 per week for a room in a well-presented, modern home. By learning about the international student market and capitalising on the good location of St Lucia he was able to find a regular, standard property that had strong resale potential for a broad market, but which could also comfortably accommodate three people.
“The point of difference here was research. Clearly, the seller did not do his homework. I gave the unit to a managing agent who specialises in finding accommodation for foreign students and the rent jumped to $550 a week,” he says.
“The property is located in a great suburb and the market was on the rise at the time. As a result, within two years I refinanced the loan based on a valuation of $485,000 to extract equity to invest in my next property. So, not only is this property massively cash flow positive, but I have also had great capital growth.”
Philippe has specialist insurance in place - as generally required when renting by the room - but he says he has never had any issues with his foreign tenants.
“Even if there were issues, the managing agent and the insurance company would deal with them,” he says.
“I still own this property today and consider it an amazing deal. Rent is now $640 per week and I smile every time I see my monthly rental statement.”
Source: Content based on interview and article published in Your Investment Property magazine.