The apartment he wanted — and the bid he wouldn’t make

A small ground-floor apartment in Surfers Paradise had the sort of potential Edgar Natolo usually looks for. One bedroom, an established location and work to do. If the purchase price left enough room for the renovation, it could be worth taking on.

He had a useful starting point. Natgroup managed an upstairs rental, so he had some familiarity with rents and comparable properties in the building. But knowing the location did not make the downstairs apartment a bargain at any price.

The repair list was long. Water damage, carpet, paint, electrical work, bathroom and plumbing work, air conditioning, holes in walls, the kitchen and vertical blinds all needed to be considered. Edgar put the renovation at roughly $40,000–$50,000.

He recalls renovated comparable value at around $520,000 at the time. His maximum purchase bid was $460,000. Edgar says that limit reflected his assumptions about renovation and other costs, including vacancy time while the work was carried out.

Then the bidding went past it.

Edgar says the apartment sold for $480,188, beyond the limit he had set.

“I had my buffer. When I reached that, I walked away,” he says. “It’s not an emotional thing. It has to be financial.”

That decision came from the whole project, rather than the auction price alone. He considered renovation costs, stamp duty, searches, legal costs and vacancy during the work. The apartment still had potential, but the purchase price no longer worked within his assessment.

The paperwork behind the decision

Edgar has built an analysis sheet to bring those different parts of a purchase together. His inputs include the purchase price, stamp duty, legal costs, interest, loan repayments, estimated repairs and an estimated completed value. For this project, he also accounted for vacancy time during renovations.

It gives him a place to test his assumptions before deciding what he is willing to pay. It also makes the less exciting costs harder to leave out when an apartment looks promising.

Experience has changed the way he approaches the repair estimate. He now allows an extra 10–20 per cent contingency for renovation costs. Asked whether that allowance had always been there, he answered: “Yes, it does now. After learning it from the first few renovations that I've done.”

That is a fairly practical admission. The buffer came from doing the work and learning that the first estimate is not always the last cost.

Edgar also compares a project’s potential return with leaving the money in a bank or term deposit. That is part of his own decision process, alongside cash flow and longer-term growth expectations.

For this apartment, the answer was to leave it to another buyer. Edgar accepts that sticking to his criteria can mean missing opportunities that later do well. He would still rather make the decision with a limit in place than keep stretching it because the bidding has become competitive.

He had worked through the repairs, allowed a buffer and decided what the property was worth to him. The bidding changed the price. It did not change his limit.

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