Hi,
looking at strata units Townsville, cost about 110, icluiding costs of closing etc 121. Now they are for over 55yrs and there is a waiting list for tenants, growth has been consistent for these type of properties thro good times and bad at 8%, rent is increased every 6 months in line with CPI.
Going to finance line of credit 30k and borrow 92 by way of equity
Annual rent 9646
net cash b4 tax ,int and dep’n 4400
average monthly cah flow 366.8
Interest on loan about 7900
new building so dep’n 1163
F&F dep’n reducing 3796 1st yrworking it out I should be positive on it for about 5 years , then look for a sell, picking up 8% compound growth, so I see it that i will be positive for 5 years then sell for 50k profit, looks relativily low risk.
other factors, there is a wating list for tenants, population of area 120 k.Very well situated close to all shops , hospital, transport out front door.
I am keen to get going but want to start with something i feel is lower risk than perhaps the norm, to get my feet wet.
From my reaserch of an ageing population, and the climate suiting the older age, I think Im ready to go but wiould love some feedback from the guru’s on the forumthanks for taking the time to read
Rgds broche
Broche,
I’m certainly no guru, but have you considered the costs of any strata levies, insurance, management fees and rates ?
Ticky.
I agree with Ticky, the body corporate and council rates on those types of properties can be upto 60% of yearly rent, destroying your cash flow.
Originally posted by Broche:working it out I should be positive on it for about 5 years , then look for a sell, picking up 8% compound growth, so I see it that i will be positive for 5 years then sell for 50k profit, looks relativily low risk.
Hi Broche,
As others have said check out the body corporate costs – they can be high,
I wonder where you get 8% growth figures from. My understanding is that the over 55’s is a relatively new concept and to say these units have performed at 8% through the good times and bad makes me a little sceptical, I suspect in reality the median price in Townsville has done 8% for a while. This is very different to saying and believing this style of property has (and will) achieve 8% over the next five years.
For me assuming 8% growth in the next five years, and factoring investment decisions, on this rate of growth is a little optimistic.
Derek
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thanks for all the replies, asking me good questions, just when you think you have all bases covered. All the expenses are covered already in calculations, but with regards to growth rate etc, I think you are right I need a little bit more research here
thks again
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