Here's a true story about the stinkiest house I ever bought.
And we viewed and bought it in under a quarter of an hour. Here's how it went down...
About a year after we had started our real estate financing business in 2020, I reluctantly took a phone call on our day off.
It was a local real estate agent telling me if we could only get to a house nearby within 20 minutes or so, we would be able to pick up a true bargain.
So, day off or not, we drove the 2 km to that house and she was waiting outside.
"I'll show you the shed first, it's the best part" she said.
While we admired the nice fairly new 3-bay steel shed, she explained that owner was here in the house, cleaning up YET AGAIN after tenants had run off leaving the house in a terrible state. She lived about 200km away and was sick of the whole thing, so if we offered the right figure right now the owner was in the mood to say yes.
My wife and I arrived at the back door. The agent said. "Breathe in now and hold your breath - it's really REALLY smelly inside!"
We walked quickly through, briefly checking the kitchen, bathroom, lounge (the really stinky room) and the 2 bedrooms. No we couldn't hold our breath that long, but we wished we had been able to.
It seems the tenants had a baby, and instead of putting nappies (diapers) on, they just let it lie on the lounge room carpet. PONG!
Now my wife is a very "feminine" sort of female. By looking at Adeline you'd think she would never be caught dead going into such a house, let alone considering buying it. But she is an investor with a head on her shoulders. Adeline was as enthusiastic about it as I was!
We were interested in the numbers. It was clear to us that this house, across the road from the primary school, on a half acre level block with a great 3-bay shed, would easily be attractive to buyers if we could only pretty it up a little and get rid of the stench.
And we figured it would pay us around 19% year-on-year return on our initial investment.
We went outside to where the owner was trying to find some fresh air, offered her $49 thousand. She hemmed and hawed until we raised it to 50 thousand "as is" and no more cleaning needed. Then she agreed, even allowing a clause that said we could start right away fixing the house before settlement.
Start to finish: 15 minutes!
So you want to know the numbers? It cost us 3k to fix the house, including loads of bleach, a second hand front door, bath, kitchen sink unit, paint, and labour.
So now the house owes us 56k including costs (about another 3k including conveyancing and taxes)
We put down 10% and took out a mortgage at 5.5% for the other 45k. So we have 5k deposit plus 3k closing costs plus 3k reno in the deal. Are you following me here? Total out of pocket investment $11k.
It took 1 handyman almost a fortnight to fix it up (during the settlement period). We advertised as soon as it was ready and had it presold so the day after settlement it was signed for $75k.
Not a lot you say? Ah! but there's more...
We sold it to a young man Adam, who had a job but not good enough deposit or credit to buy a house with a bank loan. He paid 3k deposit. We loaned him the other 72k amortised over 25 years and also got his parents to go guarantor.
So now we have a loan for 45k at 3% and we charged him a premium of 2.5% so he is paying 8%... on 72k
It took him 6 years to save up enough deposit to roll over into a bank loan. By that time the house was valued at 89k so he was over the moon.
His parents were also over the moon, because the commitment forced him to settle down.
The bank was over the moon because they had a near-perfect 6-year payment record on which to base their assessment of his ability to pay.
We were over the moon because we had a cash positive investment for 6 years that also paid us a nice lump sum at the end.
What about those sneaky costs that undermine profit? You know, like rates, insurance and maintenance? All paid by the buyer. We actually paid the rates and insurance ourselves and added the payments to his loan when they came due because we wanted to make sure it was done.
Adam took care of the maintenance. Unlike a tenant, a buyer is interested in keeping a house maintained properly.
OK, so what does all this have to do with Vanuatu, and me sending you this email?
Because it takes insight and wisdom to take the right decisive action. 99% of buyers would have passed right by a stinky house. Or they would have "thought about it" until the owner came to her senses and asked 65k. Or they would have assumed the only way to make money would be fix-n-flip or fix-n-rent. (Landlord blues, anyone?)
That same insight and wisdom of years is on offer via my "Stand-In Concierge" service here in Vanuatu. Want to buy something in Vanuatu, like a business, boat, vehicle, real property? Sell something?
Need someone with a brain to "stand in" for you in a negotiation or make an inspection?
Better hop on over to this page then:
https∶//lanceinvanuatu.com/stand-in-concierge-service/
Lance (your man with thongs on the ground) in Vanuatu
