Hi guy’s,
I’m suffering from a serious case of doubt that maybe you could help me with.
10 years ago we bought what is a great little cashflow positive house, dirt cheap. After the sums are all said and done we make approx $1900 dollars a year – maybe more on this one house.
When I do the figures on todays market, and I’m talking country areas here, the most I seem to be able to make is $600-$700 dollars a year, if that.
Have I just been spoilt with the great little house we have or is $600 a year profit what you would expect to make these days.
I guess my question is this! What would the minimum amount you can make on a house to consider it worthwhile?[
]You will always miss 100% of the shots you don’t take!
Good Question. I would love to hear responses to this. For mine its not worth the hassles if there is very little capital growth.
I would have thought a profit is a profit is a profit.
As you said, the property has been a good little earner for many years.
The cost to now sell and try and find a “better” investment wouldn’t seem worth it to me.
Many on this forum are screaming for anything that is cashflow +ve. I think $600 is worth it.
Cheers,
Shushar“All our dreams can come true, if we have the courage to pursue them.” – Walt Disney
if its $600 now. What if in 3 yrs interest rates have gone up 2% and you have not experienced any growth and the place looks a little tired and you’ve had a few tenant hassles that along the way.
Is it still worth it?
Please let me clarify.
I’m not interested in selling my current property. I’m only interested in buying more.
I’m just not sure a ROI of $600 is worth the trouble.
Any more comments would be helpful.[
]You will always miss 100% of the shots you don’t take!
How many years will a single roof replacement set you back ?
Pisces
Assuming all costs have been covered including annual maintenance allowances for “what if situations” Iwould say that you have $600 more than you had yesterday,and if you had 10 of these type properties then you would have $6000 more than you had yesterday. However that being said I prefer steves average of $50 per week per property since this is $2600per year. Remember though there is no quick way of getting rich.
Good Luck MJ4 []Keep on looking there are always better ones.Hi Ronulas
Is $500 – $600 a year worth it? After 4 road trips in 60 days to NSW regional towns these are the same kind of numbers we come up with as well on $60K homes and one has been on the market for 3 years, (it’s in a getto).
We figure its God’s own numbers game and as Brett & Tiffany (MAP guys) put it so well at the Sydney Nov 03 seminar, “if it looks like duck, quakes like a duck then it is a duck”.
If there is an easier way please let me know, (yes we have booked the flight to NZ).
Regards
Tony
For less than $12 week, it doesnt seem worth it. There will always be little expenses that you did not budget for. Any interest rate rise or unexpected maintenance cost will leave you in the red. Plus if you are not making any capital gains, where is the payoff?
Each to his own.
Regards, Dejan
Thanks for your responses so far,
It seems that most people so far have expressed the same concerns that I also feel.
I guess what it comes down to is this. Any PROFIT is good but a small profit with little margin for error can quickly turn into an EXPENCE or CASHFLOW DRAIN.
Unfortunatly I am still no where near making a decision on whether to wait and feel like i’m being left behind / wasting time or bite the bullet and get into the game.
Still would like to hear other peoples opinion especially if you have a story that relates to the subject.
You will always miss 100% of the shots you don’t take!
I share your frustration. My advice is to buy good quality properties if you feel you can afford it. You can never loose on good quality properties over the long term. Thats why I only purchase close to home in Melbournes Bayside surburbs.
Hi Ronulas,
I have to ask if you have had any capital growth in the last 10 years on your 1st property? If not then i will let you in on a secret….you should have spent a little more and bought in a good location and i dare say that in the last 10 years many properties will have almost tripled (or trebbled??)in price!
I certainly hope that your 1st property had this sort of growth however i doubt it very much.This should be an example for what will continue to happen.+CF is a great idea but remember that real riches are made in capital gains Ie. $1m property doubles to $2m nice profit….$60,000 doubles to $120,000 nice but not in the same league.
Hope that this helps cause if you are like me then $12 a week will not buy you a lunch every week. Maybe easier to save $12 per week and call it profit!!!!Hi Bigben,
As a matter of a fact our 1st property has achieved quite a good capital gain over time. We purchased in 1996 for $32500 at auction. I estimate that based on current prices in town, house would now be worth
$80 000 – $90 000. Don’t know what that works out as a percentage but in my books its pretty good. House has not needed anything but a tap washer and trees trimed in all this time.House has been cashflow positive from day one.
I just wish I had the knowledge and money to have bought a few more while they were cheap back then. Anyway still looking.
Thanks for your comments
You will always miss 100% of the shots you don’t take!
Personally I prefer some profit to no profit.
Maybe it has reduced in time, maybe it needs a little help? Sometimes you have to spend money to make money, but hey, there is also the saying that no point throwing the baby out with the bathwater…Only you can decide, surely there have been tax benefits that increase this? Sometimes regular income, regular tenants, and stable or small growth is preferential to other areas where you have greater problems….but then again maybe it is about location location…but then you pay the price dont you?
a profit is a profit in my books
I disagree that any profit is good. I personally would now only buy cashflow postive property if there is a high chance of growth.
$50 per week profit on a property that doesn’t go up is nothing. That equals $2500 per year.
These sorts of properties drain your loan serviceability by using all your deposits up – there is an opportunity cost as you could be earning much more elsewhere.
I think it is a very different market now than when Steve started out and when Ronulas bought that $30K property that has tripled in value.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
All I can say is that $ 1,200 isn’t a lot of money to
get going in a new business.Pisces
Its a balancing act for mine.
Neither growth only or income only are the ‘be all and end all’ of investing as one without the other (in general terms) will, sooner or later, restrict your borrowing and buying capacity.
My question is how much of your time and effort is required to earn that $600/annum. Equate this to an hourly wage and that will detertmine whether or not it is worth it.
Derek
[email protected]ronulas,
this is so interesting because you are doing what I am doing now (except you did it a few years ago) and you are getting the exact same negativity from everyone that I get. Oh, *yAWN* already!
So, just can I ask you some questions, because here’s a fabulous example we can all analyse, if you are into it,
what was the price you paid? in what year? What was the rent then? What are the holding costs each year such as land rates, insurance, management?
what is the rent now? How often, when and how much did you increase the rent by to get to where it is now?
how much maintenance did you have to do in 10 years, and what was the condition of the house when you bought it? How much vacancy do you have per year, and if vacant how long does it take to get a tenant?also what would be an accurate estimate of what the house would be worth today?
then we can try and figure out, and show everyone once and for all, how good these places can be!
I forgot, borrowing costs?
cheers-
miniHi Mini,
Good to hear from you. Yes I follow most of your posts with interest because it seems we think along the same lines. Ok here is the rundown.
1. Purchased in 1997 as first own home.
(Was forced to look at bottom of market as I had a very young family and only one wage) 3br/1bth weatherboard ex housing commission.2. Purchased at Auction for $32500. Government auction.
3. Paid 20% = $6500. Got this from a personal loan at different bank. Had no cash at all.
4. Insurance = $350 py
Rates = $600 py
Repayments = $93 pf
Management = $264 py
Would have to dig up contract to find loan costs ect.
Interest Rates were approx 6.5%
Conveyancing approx $8005. House was in bad shape cosmeticly, but we could see the potential. Structurly sound.
6. Moved in and over two years we paid heaps off loan and renovated as best we could.
7. Got posted (In Defence) and place left vacant for a while. Half renovated and not suitable for tenant.
8. Friend finished of house for us and went into the rental market at $120 pw.
9. Had at least 10 applicants to choose from.
10. First tenant stayed 12 months no problems.
11. Second tenant (An old pensioner lady that the realestate agency had never had any probs with) shot through breaking lease. Recoverd bond through court. Manager handled everything.
12. Third tenant is currently still there and has been for years.
13. I raised rent when he moved in to $125 pw but have left it as is because he is fantastic tenant. Never complains. Pays on time and keeps property in good condition. Not willing to lose good tenant for a few dollars. Rent is under review now lease is due. If he is willing to sing on for another 12 months then I will leave rent as is. Agent has just told me that you can’t find a house like that for $125 anywhere in town.
14. Only maintenance I’ve had in all this time is tap leaking and front tree trim. I spent approx $5000 on renovatins when I lived there.
15. There has been very little vacancy. And always have a good supply of tenants.
16. I have not had the place proffessionaly valued, however I could probably estimate that the value today would be a min of $80 000 and may go as high as $110 000 with current boom.
17. The house is in SALE, Victoria. Has nice street appeal after I did up yard and gardens. Is in average area but not to far from town center.
I would estimate that depending on what maintenance comes up during the year that I make close to $2800py. And I never have had any real problems at all. (Touch wood)
Hope this helps paint a bit of a picture for you Mini. I can be more specific given enough time and I can even dig up a picture of place if you want.[
]You will always miss 100% of the shots you don’t take!
Hi Mini,
Well it seems that the growth that has been achieved has been quite good for a rural area and that is great. I am only to happy when other make money cause i rekon that there is enough out there for all of us and then some!
Well i have been purchasing properties that are basically neutral geared ie cost me $0.Maybe only the shortfall for rates every now and then. Out of 4 properties they probably cost me about $1500 per year. These properties have all doubled within 2 years and now i have equity coming out of my you know what however i believe that i am waiting for to get a chance to buy and hold some beachfront property if possible as i feel confident in its constant rise in value. I will also try and branch out and maybe buy a few rural properties to mix it up a bit but for the meantime i am just happy to renovate my PPOR and sit tight. As i said before $2000 a year is nice but $100,000 is better……
Benny[8D]
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]Keep on looking there are always better ones.
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