All Topics / Help Needed! / Doing the numbers

Viewing 4 posts - 1 through 4 (of 4 total)
  • Profile photo of stargazerstargazer
    Participant
    @stargazer
    Join Date: 2002
    Post Count: 344
    July 2, 2005 - 6:50 pm

    Hi all

    I just getting a little rusty with doing the calculations and asking for some direction here.

    If you purchase a IP at say $200000 and say add 5% for costs that is another $10000 on top so total cost is
    $210000

    When doing the yields etc i noticed the purchase price is used and not the total cost of the property.

    How is this worked out then where does the costs eg property stamp duty $10000 sit for the calculations.

    Purchase price…..200000
    costs…………..10000
    Total……………210000 all borrowed interest tax deductible

    alternatively

    With a LOC deposit of 20%
    LOC 20% dep….40000
    cost…………10000
    total………..50000

    So the loan for the property would be
    160000 interest tax deductible
    50000 from LOC the interest would be tax deductible.

    rent…………….$290pw

    Cheers
    SG

    Profile photo of Robbie BRobbie B
    Member
    @robbie-b
    Join Date: 2004
    Post Count: 2,493
    July 2, 2005 - 7:51 pm

    I don’t know where you are looking but I include all costs with the purchase price to determine my own NET yield. Gross yield is calculated before costs.

    TMA

    http://www.email4money.info
    Essential Links
    First Home Buyer Website

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763
    July 3, 2005 - 3:36 am

    Hi Stargazer,

    Thanks for your post. I have quickly run your details into Investment Detective on the following basis:

    Purchase Price: $200k
    Closing Costs: $10k
    Loan: $21k @ 7% P&I over 30 years
    Rent: $290 p/week (no vacancy)
    Rental management: 8%
    Rates: $1k
    Insurance: $300
    Repairs: $500

    On these assumptions, the software has come back with:

    > A gross return of 7.18%
    > Budgeted cashflow loss of $4,691.96 p.a.

    Therefore, this property is better placed for a growth focus rather than a cashflow return. This is particularly true given you are doing 100% financing.

    Interesting, if you put down a 20% cash deposit then the negative cashflow remains, but it falls to a shade under $1,500 per annum. Changing the repayment basis to interest only will result in a positive cashflow outcome.

    The great power of Investment Detective is that it took me less than 5 mins to do these calcs and what-ifs. Beats mucking around with a financial caluclator. It doesn’t factor in your personal tax situation though.

    Have a great day!

    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

    Profile photo of stargazerstargazer
    Participant
    @stargazer
    Join Date: 2002
    Post Count: 344
    July 3, 2005 - 11:43 am

    Hi

    I don’t think it is that far fetched TMA to just use purchase price according to what i have read. I am not saying its the best way.

    Simply….Gross Rent/ Purchase Price

    So as per our example:
    290*52=15080/200000 *100=Gross yield=7.54%

    Including Purchase Costs
    15080/210000*100=7.18%

    15080 less
    pm…8%=1200
    rates…2000
    =11880/200000=5.94%net
    =11880/210000=5.65% net

    Another thing if had owned the property for a while are your getting lower yield because the value has gone up. Or is the yield calculated on the purchase price you paid?

    Investment Detective looks interesting Steve thankyou.

    Cheers
    SG

Viewing 4 posts - 1 through 4 (of 4 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.