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  • Profile photo of stargazerstargazer
    Join Date: 2002
    Post Count: 344

    hi everyone

    I would like someone with experience to go through the process of actually coming to the decision that the property is going to be a positively geared purchase.

    I read in many publications that one should get:

    building inspection

    pests inspection

    quantity surveyor

    is all this necessary

    Is it becoming too hard with rising costs eg insurances council rates

    how does all this come together and what does one allow for eg maintenance/replacement of carpets etc.

    does one factor in depriciation or is it just a bonus
    it should be positive before depreciation?

    What criteria does one use to determine yes this is a positively geared property

    kind regards


    Profile photo of Steve McKnightSteve McKnight
    Join Date: 2001
    Post Count: 1,763


    I suggest that you draw a distinction between fishing for deals and then actually going into detail to evaluate them.

    Fishing for deals

    I use the 11 second solution to try and quickly gauge if the property is likely to be +ve cashflow. This is done when you take the weekly rent, divide it by 2 and then multiply the result but 1,000.

    For example, a property that rents for $200 per week would give an 11 sec. outcome of $100,000 ((200/2)*1,000).

    Anything around this level passes for further analysis.

    Deal evaluation

    Due diligence is the process of discovering what is not obvious about the property. My due diligence process comprises many standard forms that cover the broad topics of (in order):

    1. The numbers (making sure I know what I am getting myself in for from a financial perspective).
    2. The underlying property (making sure I know the state and quality of the underlying property I am buying).
    3. The existing tenant (if I am buying a property with an existing tenant).

    Further Comments

    You’ll find that 95% of deals you come across won’t make it past the 11 sec. solution. This makes this simple calculation very valuable from a filtering tool.

    Then I go on to review the numbers in more detail (as the numbers don’t lie).

    Finally, if it stacks up on paper and I can agree on a price that I’m happy with then I’ll buy it subject to getting finance and a builder’s inspection to my satisfaction.

    I can see no sense in paying for a building inspection on a property you are not completely interested in.

    If appropriate I will also get a quantity surveyor’s report too.

    As for depreciation – I don’t factor it in when I buy, but I see it as a bonus. However, other investors with a need to wipe out tax might be more inclined to place more emphasis on depreciation benefits.

    It all depends on your strategy… do you want to make money from day one, or do you want to save tax now and maybe make money in the future with potential capital gains?


    Steve McKnight

    Steve McKnight | Pty Ltd | CEO

    Success comes from doing things differently

    Profile photo of stargazerstargazer
    Join Date: 2002
    Post Count: 344

    hi steve

    just a quick thankyufor your response.

    kind regards


Viewing 3 posts - 1 through 3 (of 3 total)

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