I have found a property that does fit the 11 second solution. The property is priced at $60,000, I could probaly get it for about $55,000-$57,000. The rent potential is about $120-$125 as quoted by the real estate agent.
My concerns are:
There is currently no tenants, the real estate agent says there should be no problem getting them.
The town has a population of about 5000 and the whole shire is about 10,000.
A significant number of people in the town lost their jobs due to government legislation banning old tree logging which was this towns primary industry.In the last 3 years or so property prices have gone down and many business have closed.Can anyone give me their thoughts please?
I think it would be a good first investment but am worried that the town may take a while to recover and I may not have tenants.Gee I think you know the answer already.
Keep looking.
Russ.So many +CF properties in Western Australia.Let me help you. And we can achieve a win win situation.Russ.0438 659 411
I agree with Russ.
Also;
Have you factored in council rates, water rates, insurance, maintenance, pest inspections, letting fees, PM commissions etc?
Does it still return a positive cash flow?
‘Eat rich food, barbeque a yuppie’ [greedy]
I feel like instantly going there to live. I like forest trees. You never know what kind of people that area might attract now.
It’s not going to be very cashflow positive though. Though i rekon the figures are only ten percent. 90 percent of it is the unknown. Meaning the due diligence you need to really investigate more.
11 Second Solution:
Rent = 125
Occupancy rate ‘3 Weeks’ = 94.23%
Solution = $58895.00
Asking price = $55500Closing costs:
Deposit 20 % = $11100.00
Legal fees = $800
Stamp duty = $880
Mortgage app fees = $475
Mortgage insurance = $0
Valuation fees = $0
Other borrowing costs = $400
Clean up costs = $0
Inspection costs = $300
Other costs = $0
Total closing costs = $13955.00Mortgage details:
Loan P&I = $44400.00
Interest rate = 7.5%
Term = 25 Years
Weekly mortgage repayments = $75.72
Total repayments for life of loan = $98433.00Annual costs:
Management fees 7 % = $428.79
Letting & advertising = $0
Body corp fees = $0
Rates = $800
Utility rates & fees = $0
Insurance = $350
Miscalanious costs = $0
Land tax = $300
Maintenance 5 % = $306.28
Other ownership costs = $0
Total annual costs = $2185.07Summary:
Total annual rent = $6125.60
Total annual mortgage = $3937.32
Total annual costs = $2185.07
Total annual cashflow = $3.21
Total funded costs = $13955.00
Risk free return = $558.20 bank interest rate of 4%.
Annual Cash On Cash Return = 0.02 %
Cashflow Positive Weekly = $0.06Interest only loans could bump up the cashflow from the property (should get an extrea $20-$40). Make sure you check out what going to happen with future employment.
Lastly the RE agent might be a bit generous with what s/he thinks the prop. will rent for – I suggest some more due diligance.
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