Tired Units, Cheap Rent, and the $150,000 Difference

Even in a market that has already run hard, some of the best buying in Perth is hiding in plain sight. It is not on the glossy pages. It is the tired older unit with an original kitchen, worn carpet, and a tenant paying well under market because the rent has not moved in years. Renovators and flippers are still turning consistent profits on exactly this stock, and understanding why tells you a lot about how the unit market really prices things.

What the opportunity looks like

The pattern repeats. The owner has usually been self managing, or has the wrong property manager, or has not taken the advice their property manager gave them. Little or no money has been spent on maintenance, so the property presents badly and photographs worse. The rent is years behind the market, which anchors every investor who looks at it, because investors price off the actual rent, not the possible one. And the tenancy itself narrows the buyer pool, because most first home buyers cannot use their schemes with a long tenancy in place.

Put those together and the property sells at a discount that has nothing to do with its bones: the location, the courtyard, the big balcony, the light. Those are the things that cannot be renovated in, and they are exactly what the tired listing hides.

How the flip works

The renovator buys with vacant possession, either by asking the seller to end a periodic tenancy with the required notice before settlement, or by ending it themselves afterwards with proper notice. They renovate, they style it properly, and they sell it to a first home buyer who falls in love with the courtyard, the balcony, or the amenity of the area, wrapped up in current design. In today’s market, for well located units with a courtyard or large balcony, KPR has watched the difference between the tired tenanted purchase and the renovated, styled resale reach around $150,000.

The rules matter here. A fixed term lease survives the sale and cannot be ended early just because the property changed hands. A periodic tenancy needs 60 days notice without grounds, or 30 days where the sale contract requires vacant possession. Getting the sequence right is the difference between a clean settlement and an expensive delay, and it is covered in detail in our guide to selling a tenanted property and on our Investment Buyers page.

The cheap rent trap

Why was the rent so low in the first place? Almost always because the owner was self managing and got to know the tenant. Generosity creeps in, the rent stays put year after year, and it feels like the right thing to do. The costs are quiet but real. There is less money for maintenance, so the property slowly tires. The tenant, who knows this rent cannot be replaced anywhere else, understandably guards it, which can turn into push back on access and presentation exactly when the owner needs to sell. And when the sale comes, the low rent itself reads as a low value, because that is how investors do the arithmetic.

If doing right by a good tenant matters to you, there is a cleaner way to do it. Keep the tenancy at arms length with a professional property manager, charge the market rent, and give deliberately to a cause you choose with the difference. A good property manager typically pays for their fee just by keeping the rent at market, before you count the maintenance planning, the compliance, and the far easier sale at the end. If you are self managing, or your current manager has let the rent drift, our property management team will give you an honest picture of where your rent should be.

For buyers, sellers, and owners

If you are hunting for this kind of buying opportunity, contact us to join our buyer database, and read our guide to buying as an investor in Perth. If you are a first home buyer, the finished product of these flips, a renovated, styled unit in a good location, is exactly the stock worth watching, and the schemes on established property can take stamp duty to zero up to $600,000. If you own a tired unit and wonder whether to sell it as is or refresh it first, we will give you an honest appraisal either way. And for the long view on where unit prices sit in the cycle, read forty years of Perth unit prices.

This article is general information only, not financial, legal, or tax advice. Tenancy notice periods and scheme rules change. Confirm your position before acting.