Lease Now, Develop Later – Capital Property Advisory


Lease Now, Develop Later

1.Client Brief

Wanting to take advantage of the Perth Property Cycle, our eastern states based clients sought an investment property to provide above market rental yield in the short term, with development potential in the medium- longer term to supplement their future retirement strategy. Our acquisitions team worked collaboratively with the clients to tailor a suitable property strategy and worked closely to discuss target properties to find the most suitable asset that would allow the clients a number of future development options.

Property Listed For $439,000
Property Purchase Price $420,000
Further Negotiations $1,000
Total Saving to Client $20,000
Current Gross Rental Yield 4.1% (Perth 3.5%)
Potential Gross Rental Yield 5.0% (3 villas)

2.Property Sourced & Negotiation

Through agent networking, our acquisitions team were aware of a new listing coming on to market and were able to complete background research with a suitable offer ready to be presented early in the marketing phase. The property was listed from $439,000, however our acquisitions team expertly negotiated the accepted offer of $420,000. An additional discount of $1,000 was reimbursed to the buyer for minor maintenance work found during the due diligence period.

3. Property Potential

The purchased property had a good tenant already in place, with the lease able to be carried over to the new buyer saving our clients both time and money by not having to advertise for a tenant or lose income through vacancy. The current lease provides our clients with an above market gross rental yield of 4.1% (compared with the Perth Market gross rental yield of 3.5%). The property also provided our clients with a number of future development options including retaining the existing house and building at the rear, or demolishing the house and developing the site with 3 new villas, or staging the development to suit their requirements. The development options are likely to provide the clients with significantly increased gross rental yield with the retain and build option resulting in approximately 4.7% gross rental yield and the 3 villas development options resulting in approximately 5.0% gross rental yield.

4. Acquisition outcome:

Our clients were able to secure a fantastic future development site at below median house price, in an up and coming area, with an existing tenant returning an above market rental yield. This property sets our clients up to continue their property investment strategy to ensure they are putting themselves in an excellent position when they are ready to retire.

Note: image above is not of the actual buyers due to privacy.