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No there is no difference between rental income and salary for the purpose of obtaining a loan. Banks will look at your historical income (rental/salary/business), to judge its stability, and any current loans you might have.
What I’m getting at is how do you know you can quit your job, and still be able to buy more properties….
That depends on how much income you will need to cover your expenses and service your current/future loans.
Andrew
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auOne thing to point out. It wouldn’t be advisable to use an IO loan for positive cash flow property. A better strategy would be to use the rent to pay down the principle as soon as possible. This will not only increase your equity in your property but will lower your interest expense and hence increase your cash flow.
Andrew
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auhttp://www.realestate.com.au/property-unit-qld-cairns+north-116210671
Price: $100,000 NEG
Rent: $185 (based on similar unit: http://www.realestate.com.au/property-unit-qld-cairns+north-412264451)
Yield: 9.62%superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auHey Ben
Just a quick tip. There two different different calculation:
1. Income(cash flow) = (Revenue – Expenses)
2. Taxable income = (Revenue – Deductions)eg. Depreciation is a deduction but it’s not an expense.
I think this is what is confusing you maybe.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auNo worries Ben.
The best thing to do is to read as much as you can and talk to people and ask questions. And over time, without noticing it, you will get better. You’re on the right track.
The best thing to do as a starting investor, who is ready to invest, is to dip your feet in the pool before you jump in it. No matter how many books you read about swimming, you won’t know how to swim without slowly and safely trying it yourself at the shallow end of the pool. The same goes with anything in life, including property investing.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auHere is a quick summary:
Price: $250,000
Loan Amount: $200,000 (80%)
Cash: $50,000
Loan Payments (P+I): $257 per week (@ 5.3% interest for 30 years)
Rent: $290 (as per your assumption including expenses etc)Cash Flow: $290 – $257 = $33 (This amount can also be contributed towards the mortgage payments)
If the investor wants to spend this money now and not pay of the mortgage.
Loan Payments (interest only): $204 per week (@ 5.3% interest for 30 years)
Cash Flow: $290 – $204 = $86
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auare positively geared properties given the same depreciation as negative property?
Yes.
You are entitled to a tax refund if your taxable income is negative (taxable loss). The amount of the refund is a fraction (tax rate) of the taxable loss.
Try to understand how to calculate your taxable income.
Income – deductions = taxable income
Deductions = interest, depreciation, deductible expenses, etc
If your taxable income is negative then you’re entitled to a tax refund. Don’t think about your cash flow when you do these calculations.
Tax refund = taxable income(if negative) * tax rate
Note: you will only get the refund if you have paid tax from other income. If not it will be carried over to next year.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auhttp://www.realestate.com.au/property-house-qld-roma-112832615
Price: $190,000
Rent: $300 p.w. (currently rented)superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auHi Pat
have a look at a thread I started where I list positive cash flow properties that are currently for sale.
https://www.propertyinvesting.com/topic/4989954-positive-cash-flow-properties-real-world-examples/
What that means is if you do find a positively geared property your loan would be interest only.
This is not correct. Depending on the investors situation, but in general Interest Only loans should be used when negative gearing to maximise your interest deduction. In this case you don’t want to pay down your mortgage as that would lower your Interest deduction.
A positively geared (positive cash flow) property has a higher rent than your loan payments and hence will provide you with cash surplus. This surplus can be used to pay off the mortgage and thus reduce your interest payments and increase the cash surplus and your equity in the property.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auDon’t purchase this property. Look for a property that has:
Weekly rent >= Price/1000 (at current interest rates)
In your case if your property ($750,000) doesn’t rent for $750 p.w. then I wouldn’t go near it (there are exceptions of course but $400 p.w. is too low).
So to answer your questions. Personally:
1. I wouldn’t buy in Melbourne in general (but there are certain properties in certain areas that are good)
2. I wouldn’t buy the property that you suggested. The rent is too low.
3. You can buy at any time. You just have to pick the right location and property.
4. Fixing or not fixing the interest rate depends on your risk level. If you want to avoid risk then fix it. The result will be that if interest rates go up, you will be better off but if they go down you will miss out on the savings.superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auI am referring to residential property. Most investors on this forum (especially starting ones) focus on residential property.
Commercial property is a whole different market that is affected by different factors. Loans on commercial properties are harder to get, have stricter requirements, have higher interest rates and only lend up to 60%. Hence reflecting the risk of the investment.
And as you said it “can” include apartment complexes but then again you are comparing different investment types that carry different risks. You are comparing an apartment complex to a house.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auDid you try http://onthehouse.com.au/ or http://house.ksou.cn/? They are both free but don’t have all properties.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auThat is true. Interest rates will go up and down all the time. But at least in Australia the banks will lend you money. In the US you will have to use your cash. So what you are doing is essentially paying off US debt with AUS cash.
I think I mentioned this before on this thread so am repeating myself here. There is a reason why US banks don’t lend money on their properties. Because they don’t regard them as safe investments. The more a bank will lend you the safer the investment is.
This tells me that US properties are much riskier than AUS so you are not comparing apples with apples. There is nothing wrong with investing in the US but you need to point out that the risk is higher not just the yield. If you want to have a higher yield/risk, you could also consider QLD mining towns.
There are a lot of positive cash flow properties in AUS. They are harder to find than in the US but in my opinion that makes them more valuable as an investment.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auHi Belinda
Thank you for the compliment. I am happy that you love reading them.
Finding positive cash flow properties is not that easy and even after you have found them further research is needed to find out why they are positive cash flow before you commit to purchasing them. It’s quite time consuming and requires you to keep up with property related news, educate yourself on a daily basis and spend a lot of time searching. But it becomes easier with time.
I, myself, use a software tool that I developed for my own use. It goes through all properties that are currently listed for sale and determines whether they are likely to be positive cash flow or not. It’s not 100% accurate obviously but makes my job 1000 times easier and faster than it was before.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auCould anyone please advise if land tax is payable on an investment unit apartment in Queensland and if so how is it calculated.
Yes it is payable. You own the land together with the other owners in the building. The amount will be apportioned according to your share. There are 2 option it could be apportioned:
1. Land Value / number of units in the building
2. Land Value * (your unit size in sqm / total units sqm)superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auThese are the outgoings for a cheaper (Still 2×1) apartment in the same area to get an idea:
Body Rates could vary a lot between Units. A unit with no lift/pool/etc could have a body corp of <$2000. A new one with lift/pool/gym/etc could have a body corp of $5000.
The body corp is there to maintain these facilities. Some older buildings might require more maintenance and hence a higher body corp. It’s better to just ask the agent.
But yes that unit should be positive cash flow given the price and rent you provided.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auHi startofinish
I included a 1 bedroom unit that’s in the Brisbane CBD.
Did you include body corp in your calc?
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auIf for personal use, you should set up the equity release as a separate loan account so you can distinguish non deductible from deductible debt.
Agree with Jamie.
For personal usu it won’t be deductible.
For investment it will be.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auThe best methods for valuing commercial property are:
1. Cap Rate
2. DCF Approach
3. Recent SalesI would recommend 1. and 3. At least 2 methods need to be used. 2. might be a little complicated and requires a lot of assumptions.
3. Find similar commercial property sold prices per sqm and apply them to your property. You can use this website which is free:
http://www.realcommercial.com.au/sold-leased1. Determine the Net Annual Income of your property. Find the appropriate CAP rate for your property. Valuation = Net Annual Income / CAP rate. To get CAP rates you can use reports like these or phone up agents and ask:
http://www.propertyoz.com.au/library/March-2013-cap-rate-analysis-Commercial-Property-Insight-Knight-Frank.pdfHowever these reports mostly cover bigger cities and I think you will find it hard to find a rate for Ipswich.
Another way you can look at the CAP rate is to treat it as your return rate. So let’s say you want 12% return and assuming net annual income is $50,000 then you wouldn’t want to pay more than 50000/0.12 = 416000. However using this approach you are not valuing the property.
Unfortunately commercial properties are harder to value then residential and you could be completely off if you make the wrong assumption for your CAP rate or don’t compare similar commercial properties to yours.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auDirranbandi has population of 437 people, although it positive cash-flow, in my experience the rent and value will most likely be the same 5 years from now.
Actually 2006 population was 437, 2011 census says it’s 711. Good growth.
Here is one from Roma. Population 6,906.
http://www.realestate.com.au/property-house-qld-roma-116248179
Price: $280,000
Rent: $430 per weeksuperAndrew | Property Analyser and Finder Tool
https://property-analyser.com.au
