Hi everyone,
I have been checking this forum out for months and thought it about time I signed up!
I am hoping to take the plunge and purchase my first IP in the not too distant future, depite having ‘advice’ from family and friends to ‘wait and pay off your house first!’
I have been focusing on Karratha for months and think I have found a unit that looks good. I have been surprised how fast property is selling in Karratha – missing out on a few places. They seem to have offers within a week! I am mostly looking on the internet, and registered with a few Real Estate agents up there for any new properties coming up.
I am looking for something around the $200k mark, and the unit in question is in a complex of 8. My research shows another unit in the complex sold for $20k more last year. The body corp fees seem a little high at $110 a month (includes insurance) so I am not sure about that.
Here are some of the details, I think it is Cash Flow Positive (hopefully doing my calculation right!) I have read some books and feel I am at the point where I just need to take the plunge so I can learn from experience.
Price $202k
Rent $1516 p.m.
Body Corp fees $110 p.m.
Rates $812
Water $463(It is 3 bed, 1 bath.)
Not really sure what my question is exactly! Just looking for any words of encouragement/advice.. anything really!
Thanks! I think this forum is great and look forward to using it more…
Cheers,
JoDHi JOd,
Welcome to Forum!I calcuated roughly
Interest on 202k at 6.5% = $1313 permonth
Body corp fees = $110
Rates = $67
Water = $38Which equal to $1528 per month Then there will be rental manager fees and vacany also. So it’s not really positive but yes good return and can +ve after after tax.
Don’t know much about the area so can’t say much but return of 9% is not bad. as people can’t even find that much return.
Good luck.
Cheers
PropertyGuRu [sultan]
Mortgage Consultant
[email protected]NZ loan pre approval from austrlia in 48 hours
Hi JoD,
Welcome to the forums and thanks for your post!
Congrats on taking the plunge, but don’t let the pace of the market force you into a hasty decision. One possibility is to agree to buy, but to add a ‘subject to a building inspection to the purchaser’s satisfaction’ into the purchase contract. That way you’re not delaying showing your intention (i.e. sitting idle while someone steals the deal), nor are you locked in completely to the contract.
Some very quick calcs for you:
Cash Down
Deposit (say 20%) = $40,400
Closing Costs (say 5% of purchase price) = $10,100Total Cash In = $50,500
Rent
Per annum = $18,192
Expenses
Management (7%) = $1,274
Interest = $11,312
(say 7% and I/O for ease of calc)
Other costs per you = $6,995
Insurance (say) = $500
Repairs (say) = $500Total expenses = $20,581
Est. Cashflow = -$2,389
On these numbers it looks to be a borderline deal, especially when you factor in 100% occupancy for the rent. Also, if you do P&I loan repayments, or load up the debt further, then your cashflow will almost certainly be more substantially negative.
As such, IMHO, buying as a +ve cashflow deal (not inc. deprecn) makes it ‘on the line’ at first glance.
Check for ways to reasonably / creatively increase rent, or else is there another use for the property to increase profitability?
Nice to see you on the forums. Don’t be a stranger!
Bye,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanks for your calculations PropertyGuru and Steve – much appreciated [biggrin]
I wasn’t expecting the body corp fees to be that high and that blew my calcs out a tad!
I have made an offer, subject to building inspection and also more photographs provided, just to get my foot in the door, but still be able to pull out if necessary. I was glad to read that you (Steve) brought that up as a possibility – as that’s what I had already done!
I will think the unit over some more and thanks for the suggestion on some creative rent raises. I shall search the forum!
This may be a silly question – do the body corporate have any control over rent? I mean do they have power to say ‘hey that’s too high you can’t ask for that rent!’ or is it none of their business?
Thanks again, this forum really helpful
JoDOriginally posted by JoD:This may be a silly question – do the body corporate have any control over rent? I mean do they have power to say ‘hey that’s too high you can’t ask for that rent!’ or is it none of their business?
Hi Jo,
None of their business – they manage the complexes common property. The rent paid is strictly an agreement between you and the leasee.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Hi JoD,
As far as the rent, Derek is right it is none of the BC’s concern; so tell them to (politely of course) rack off!!!
As far as your area of interest, try communicating with kp (that is his username) from this forum, or you will find him as kph in Somersoft. Apart from being a really lovely person, he lives in Karratha, so will be an invaluable resource in helping to spot other worthwhile local properties.
Cheers, [biggrin]
Jo
Another person from the same town. Scotty B
Cheers
PropertyGuRu [sultan]
Mortgage Consultant
[email protected]NZ loan pre approval from austrlia in 48 hours
Hi JoD,
PM sevice is pretty average here, and the rate is pretty high,(depending on which agent you use)Are you in WA or elsewhere?
Granted, rents are steep up here, and will continue to remain so, but you want to make sure all is in order with the building, as maintenance costs if required, will burn a big hole in your pocket.
PM or email if you require more info or want any help.All the best,
KP
Thanks KP,
Have PM’d you. I must admit I have not done much research on Property Managers up there in Karratha. I am in Perth. Prepared to fly up for a look see if I am going to finalise anything.
JoD
In case anyone is interested, just thought I’d let you know that today I pulled out of the deal on the unit.
The sellers wouldn’t take any less than full price, I felt the body corp fees were too high for what they provided, and on further investigation the ducted aircon was over 20 years old and I was too worried about the expense if I had to replace it. The agent insisted there were other buyers waiting, but I never know whether to believe that, so went with my gut and refused to offer higher.
I had to go back to my initial goal of +ve cash flow, and although the unit was pretty good otherwise, it was creeping further and further into the negative the more I researched.
Hope I made the right decision, but feel I gained a lot of learning experience just from putting in my first offer!
Thanks to everyone that replied and the PM’s were so helpful.
I’ll keep looking!
Cheers,
JoDOriginally posted by JoD:The agent insisted there were other buyers waiting, but I never know whether to believe that, so went with my gut and refused to offer higher.
You could always counter with – they’ll now have a chance at this property then and you’ll still earn your commission without any problems. I expect the under offer/for sale sign will be up very shortly to confirm what you are saying is factual
I had to go back to my initial goal of +ve cash flow, and although the unit was pretty good otherwise, it was creeping further and further into the negative the more I researched.
Hope I made the right decision, but feel I gained a lot of learning experience just from putting in my first offer!
It sounds to me that you have made a decision based on ‘adverse findings’ uncovered in your research – based on this you have made the right decision.
If, on the other hand, you start opting out because of irrational nervousness then you may have a ‘problem’
Hi Jo,
A good learnign experience at the end of the day – and from this you’ll be a better investor.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
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