I am thinking to buy an investment property this year on the coast. Therefore does anyone knows where is the best place to buy and invest? What is the range of prices should I be looking at to achieve the positive cash flow property.
I will be using my equity to borrow and there 100%finance on this investment property. Need help, the expert please advice.[biggrin]
Hi,
With 100% finance it is a fairly simple equation.To be positive you need to cover
-interest payments (assume IO loan)
-council rates
-maintenance
-property managementSo, assume interest rate 7%, assume $700 rates (just plucked this out of the air as an average) assume say $500 maintenance and $500 property management and vacancy. That means we need:
700 + 500 + 500 = $1700 + 7% purchase price
In other words for a $150,000 property you’d need annual rent of $1,700 + $10,500 = $12,200 or $235 / weekThat works out at 8.1% gross yield for a $150,000 property to break even. Any money above that will be positive cashflow.
You could set up a spreadsheet with these sorts of figures in it to help you work out what you need for any given property to break even or be positive.
Oh and don’t forget stamp duty. There are a number of stamp duty calculators available from bank web sites.
Loads of tools and calculators…
http://www.mortgagepackaging.com.au/index_files/tools_calculators.htm
I personally would not be looking at the Gold Coast for a positive cashflow property. I would also stay away from units. The Gold Coast is a very transient tourist area with high vacancy rates at most times of the year.
Robert Bou-Hamdan
Mortgage AdviserHi
It is true Surrey, however there are more cost involve with such as building insurance, conveyancer (solicitor), mortgage insurance, etc.
regards
Indeed Ayr007 there are many sneaking little costs here and there when buying and keeping property.
I’m hoping the rough working I presented was enough to demonstrate the way you work out positive cashflow.
I think what it also demonstrates is that positive cashflow is tricky to orchestrate (without just paying cash with no mortgage).
I think residental property investors should focus on the growth potential rather than cashflow.
If cashflow is what you are after then commercial properties, property trusts or even shares will offer you good positive cashflow.
You can add value to properties by developing or renovating to create equity to improve your cashflow but you will need close to 10% return (depending on the level of depreciations)
Also remember that interest rates are on the way up and could rise to 12% over the next few years. You may have positive casfow for a short time but then fall back as interest rates rise.
However if you can create equity at least you can sell and keep your profits to reduce your home loan when the going gets tough ( this should be only be done if you are risk adverse)
Regards,
Sailesh Channan
http://www.developersedge.com.au
“Helping you select, develop and profit from property”
1300 73 5934
The Gold Coast isn’t just a Holiday rental market. There is a permanent rental market up here as well.
It really depends if you are looking at being able to use the property for your own holidays or whether you just want to rent it out permanently.
Wholesale Mortgage Lender that deals only with brokers.
There are now around 500,000 people living on the Gold and Tweed Costs and sure there isn’t any positive cashflow but plenty of interesting areas to invest and formulate ways to bring on some capital growth.
500,000 people (and growing) have to live somewhere.
markk
Happy Hunting
http://www.kentscollections.comHiLily,
There still are cash flow deals to be made on the coast.You just have to find a problem and come up with the solution (as Steve would say)>House prices in the middle to lower end of the market have dropped and slowed over the past 6 months. I recently viewed a property with 3 different prices depending which brochure you were looking at.There was a $40,000 price difference! Tells me even the agents are still trying to read the market. Don;t be confused with the hype of Souhtern QLD growing at a great rate and the returns you should make.
Originally posted by debtdogg:There are now around 500,000 people living on the Gold and Tweed Costs and sure there isn’t any positive cashflow but plenty of interesting areas to invest and formulate ways to bring on some capital growth.
500,000 people (and growing) have to live somewhere.
markk
Happy Hunting
http://www.kentscollections.comHi Lily,
The best formula to use to work out your return when looking at a property is Annual Rent div by purchase price. Eg. $18,200 annual rent divided by purchase price of $320,000 = 5.6% return. This gives you a good guide as if your interest rates is say 6.5% then you know this is not going to be positive cashflow. I’m not saying you won’t find it on the coast but its more than likely you won’t just walk into it, you will have to find a house with a problem and then find the solution to it, to then make it positive cashflow.
Hope this helps
Cheers
Fluffy
Hi this is my first ever post.
Rates on the Gold Coast are at least $1400 per year.
I have lived here for 7 yrs and you would certainly have to value add / be creative to get +ve cashflow at the moment.
Hope this is useful.Rachel
Thanks angel,
I have realised the truth +ve cashflow, you are absolutely right. That’s why I have questioning people how do achieve the positive cash flow. There are lots of books or seminar that educate +ve cashflow but then the example they are using is all based of property $50k-$100k, which hardly can be found in qld I am not sure other state. As I said on my previous forum, I have been searching for so many properties with realestate and hardly can find one. I might be wrong but then I really not sure why I still can’t find one.thank you.
Originally posted by LKGK-88:There are lots of books or seminar that educate +ve cashflow but then the example they are using is all based of property $50k-$100k, which hardly can be found in qld I am not sure other state. As I said on my previous forum, I have been searching for so many properties with realestate and hardly can find one. I might be wrong but then I really not sure why I still can’t find one.
If you can’t find ANY QLD properties in the $50k-$100k range, then you aren’t looking hard enough. Whether or not you want one to buy one of these properties (that are more likely to be cf+) is not without its risks – generally you’ll find them in areas with greater risk to capital value (ie, nowhere near a metropolitan centre, small population with a monoindustry, heavily aging population etc).
Oh okay so which means there are some at that range, I went to the real estates and three different RE told me not at that range. You must know where to find it? Thank you.
Do the numbers. Don’t have emotion in the transaction. Research and research more to find the result that would give you income.
Do some research into council planning guidelines for future development.
Go back and do your research and crunch the numbers again.
It is very sweet when everything comes together as it should to give you a positive cashflow property.
All the best.
Achiever
And to help you with your research – particularly with the holiday letting market – visit the Gold Coast City Council website http://www.gccc.com.au for an analysis of the Accommodation market detailing average room rates, occupancy etc.
Robert – the Gold Coast does not have high vacancy rates for most of the year – read the GCCC accommodation analysis.
The average room occupancy rate for 2004 was 69.5% which is a record high.http://www.goldcoast.qld.gov.au/t_std2.asp?PID=1461
Also a lot of the newer developments on the Gold Coast – paricularly in the seaside suburbs, are built to suit permanent residents (some will not allow holiday letting). This gives investors the option of permanent tenancies which wasn’t always an option in some of the older buildings.
Luke Woollard
Licensee
Pacific Lifestyle Property
http://www.plproperty.com.aucomments made are general information only. you should seek professional advice for your particular circumstances.
Luke, it is nice to use figures from the local Council who have a vested interest in making the area appear to be much better than it actually is. I am far more content with using impartial figures from the ABS (even though a little old) which indicate:
‘In the June quarter 2002, the room occupancy rate for total accommodation types was 56.4% in the Gold Coast TR (0.2 percentage points higher than in Queensland). Room occupancy rates by accommodation type ranged from 55.0% for motels to 56.0% for licensed hotels and 57.6% for serviced apartments.’
I will reserve my judgement on current trends until I see an impartial report.
In any case, you stated 69.5% in 2004 as a record high. I will certainly not be basing any investment decisions on a record high nor will I be content buying property in an area where the tourists out number the locals.
Using your figures, you would need to cover all your expenses in less than two-thirds of the year (best case scenario). In reality, such properties will be occupied for less thn 69.5% of the year unless you are paying top dollar for an over-inflated property that would be in demand.
If you seek a local to rent your property, the achieveable rent will be extremely lower than holiday rentals so the returns would be absolute rubbish!!!
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksI have found occupancies vary depending on where you buy on the coast. I have a holiday let property, beach front averaging 85% + occupancy. The opportunity on the coast may be LOCATION based, and the closer you get to the beach and the views, the less chances of positively geared opportunities but it balances out with better capital growth, if you are in the game long enough.
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