If you had the chance to invest in a cash flow positive unit would you? Or would steer clear of units? The unit is in a development of 5 units, nice landscaping, slug, 2 bedroom and ensuite, they are selling off the plan. I've done the math and after meeting the repayments and factoring in 10% interest, I would have an extra $15 let over from the rent. As this is my first investment property I would like some experienced advise, (any comments would be welcome).
Hi Wade
Where is the Property?
There is nothing wrong with investing in a unit but it depends on where it is located.
The general rule with negative and positive geared properties in Australia is that the
negatively geared properties = more capital growth
positively geared properties = less capital growthObviously there are some exceptions, but you would normally find the more 'positively' geared properties in rural, country or mining towns.
I would also do your own extensive research on house prices and rental returns in the area and make sure that 'your' figures match up with the 'real estate agents'
Investing in a neutral or positively geared property can be great (especially for a beginner) but remember that the main reason why you are Investing is for longer term capital growth (i assume). If you aren't going to get this capital growth then you might as well put your money somewhere else.
Hope that made some kind of sense
Best of Luck!
Cheers
Banjo Smyth
1) is the unit worth what they are asking for it
2) is the rent worth what they are quoting (beware unrealistic quotes and even unrealistic rental guarantees that will leave you short after expiring)
3) is there plenty of demand for units to rent in that area
4) is there any chance that demand for housing could go sharply down in that area eg town's main industry closing down
otherwise, sounds good.As the others have pointed out – are the figures realistic? Are you paying a premium for a rent guarantee (if any)? Do the calcs take into account any depreciation?
The answer depends upon what you want out of the investment – does it fit your profile? there are no right or wrong answers here, units or houses can be good or bad (it could be great for you but a dud for the next bod – we are all different).
If there is a rental guarantee, then what you are buying is a unit with the rent built into the asking price, which means you are paying too much, and when the rent guarantee runs out, you will probably get a lot less rent on the open market.
Don't forget; 20% of your rent is eaten up by holding costs such as rates, insurances, management, body corp, etc.
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