Hi everyone,
I am new to the concept of positive CF property as I just finished reading Steve’s books. I need some advice from more experience investors on whether this IP I recently came across worth investing. It is a studio apartment with own carpark space (around 30 years old) in Sydney western suburb (20k from Sydney CBD) situated within walking distance from a major train station and local shopping centre. The asking price is just under 100k and the agent told me the property is currently rented for 160 a week. I did some simple calculation and it seems to me this is a positive CF property if I put down 20% deposit. Could any of you more experienced investors give me some advice on this? Is it worthwhile investing in a CF positive studio apartment with no or very limited capital appreciation potential? Thank you. Regards, Marco
Hi there
I think you need to find out what rates apply and the body corporate for the property – if it is a 30 year old property – it may be due for some renovations – and you would need to consider the sinking fund. If these other costs are considered – you may find the return is about 5%
I note that a studio can be part of your portfolio but as you have highlighted – capital growth is not going to be a big factor
thanksThank you for your reply. I believe the apartment is newly painted and the rates are about 2300 a year not too sure about the body corporate though.
Hi again
once you know the body corporate – you also need to factor in the purchase costs which are your legals, stamp duty etc – also are you going to manage the property or appoint an agent – once again all these costs will impact upon whether you will end up cashflow positive.
thanksAlso look at the size; it's hard to get finance on anything under 50sq/m.
A simple calc to see what the likely cashflow might be (and allowing for worst-case scenario) is:
1. deduct 20% of rent for holding costs such as 1 month vacancy per year, insurance, rates, body corp, maintenance, management etc.
2. add 6% purchase costs to the purchase price.
3. after allowing for any cash deposits at purchase, multiply the remaining financed amount by the current interest rate plus 1% for any rate rises.
4. deduct nett rent from loan interest (assuming i/o loan) and see what's left.Of course, there will probably be some tax deductions on your personal income as well, but this is an unknown figure at this point.
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