All Topics / Help Needed! / is this good sense.

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  • Profile photo of sanquarsanquar
    Member
    @sanquar
    Join Date: 2005
    Post Count: 6
    January 18, 2005 - 11:51 am

    Hi all,

    I’m looking at a 3 bed , 2 bath single lock up garage place with an offer I’ve put for 167k. It rents to a little old lady for $180 p/w and is you basic 10 yo brick place. No air, mainly tiled in common areas and is in a secured estate 40 mintues from the bris CBD and 35 minute from the gold coast. It has major shopping , a bus route, local shops and parklands all nearby,
    I will be headfing o/s in August and just want something to keep ticking over, I know it’s not a positive investment but I have been looking for 6 months and I feel this is the best I can see…. shoulf I buy…
    body corp is 1200 pa
    rates are 1400 pa…

    any opinions?

    regards?

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763
    January 18, 2005 - 12:32 pm

    Hi,

    Thanks for your post and welcome to the forum.

    I guess the question you have to ask yourself is… ‘How much capital gain am I expecting this property to earn (both % and $).’

    It would only make sense to buy if the expected inflation adjusted capital growth was more than any accumulated negative cashflow.

    Perhaps post back listing what you feel are the unique benefits of this investment, and what the median capital growth for the region has been for the past few years.

    As far as the numbers:

    Rent: $9,360

    Loan: $9,352 (80% LVR, 7% IO Loan)
    Management: $750 (8ish%)
    Body corp: $1,200
    Rates: $1,400
    Repairs: $500 (say)
    Insurance $400 (say)
    Misc: $500 (say)

    Negative cashflow: $4,742, which is 2.8% of your purchase price. If you add in bank interest on your money at 5% per annum, then your expected capital gains needs to be at least around the 15% per annum mark for this to seem attractive.

    Hope this has been helpful.

    Cheers,

    Steve McKnight

    **********
    Remember that success comes from doing things differently.
    **********

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

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