Is this +ve cashflow strategy worksheet complete?

Hi

I’ve developed an Excel Worksheet for the following cashflow strategy below. I need input from any investors who have done this before, in case I have missed anything. I am in Adelaide.

As you know, metropolitan properties are so expensive relative to rents that virtually ALL are cashflow -ve. However by using this strategy, there may be solution to convert any suitable property into cashflow +ve within about 6 months.

Sorry about the tight formatting as I have copied & pasted it straight from Excel. But if you want to have a look at the original worksheet just send me an email at [email protected] & I’ll send you a copy for feedback.

Don’t worry too much about the exact numbers as they may differ for different projects & localities. I am more concerned about the items I may have missed in the calculations.

Thanks!

RENNOVATE / SUBDIVIDE / SELL LAND

OBJECTIVE:
* Purchase +ve cashflow property to hold medium to long term

STRATEGY:
* Buy run down house (structurally sound) on large block (corner or wide street frontage)
* Rennovate house for rental (for good market or above rental)
* Subdivide block
* Sell vacant land as House & Land Package (get building contract)
* Use after tax proceeds of land sale to put towards loan on house / further property purchases
* Aim to get exisiting rental property into a +ve cashflow situation
* Refinance rental property to obtain extra equity for further property purchases

Purchasing costs
Purchase price $80,000
Down payment (Deposit) 20% $16,000
Closing costs 5% $4,000
Repairs/Rennovations $10,000
Total $94,000

Cash put into property $16,000
Amount for loan/LOC $78,000

Rental Analysis

Monthly cashflow analysis
Rental income: Yield
Rent $160 per week $693 8.9%
Less property management 10% $69
Less vacancy loss 5% $35
Nett Rent $659

Monthly expenses:
Land tax $30
Council rates $50
Insurance (Landlord,Buildings) $30 Loan
Repairs/maintenance $30 Interest Years
Loan repayments 7%, 30 years,P&I $519 7.0% 30
Total $659
Nett monthly cashflow $0

Cash-on-cash return
Annual cashflow -$3
Amount of cash put into property $16,000
Cash-on-cash return 0.0% (N.A. if 0)
Number of years to recover investment -4,951.5 (N.A. if negative)

Subdivision Analysis

Subdivision costs
Plans $300
Engineering (if required) $300
Council application fees $300
LTO, SA Water & surveying fees Community title $10,000
Clearing land $1,000
Fencing $1,000
Total $12,900

Land sale income
Sale price of land $60,000
Less selling costs 5% $3,000
Nett sale price $57,000

Revised loan costs
Original loan & line of credit $78,000
Plus subdivision costs $12,900 CGT
Less nett land sale price after CGT $57,000 0.0%
New loan amount $33,900

Revised monthly cashflow
Loan repayments 7%, 30 years,P&I $226
Total monthly expenses $366
Nett monthly cashflow $293

Revised cash-on-cash return
Annual cashflow $3,518
Amount of cash put into property $16,000
Cash-on-cash return 22.0%
Number of years to recover investment 5 (N.A. if negative)

David Paxton
“You Only Live Twice”