I'm a novice investor & have taken over 4 years to get even close to buying an IP. So here is the deal:-
3br ex-commission house in a reasonable part of a regional town. It sems in god repair. Its leased until Oct this year, on the market for $165k, rented at $160pw & I have $15k as a deposit.
I've done the crunching & wondered what anyone else thought (this is all pending passing the due dilligence proces).
Any tips would be greatly appreciated.
I'm interested in these figures, out of interest. I mean, according to the book I'm reading (1mil in a year) the purchase price should only be $80k (rent div 2 x 1000). That would indicate this property would be a no go, is that correct? I mean, in reality also, is there such a thing as a place in Aus (anywhere!) for $80k anymore?
Rob
i think your property sounds ok. You will only be borrowing $150,000 and repayments ( over 25yrs, IO, 7.39%) are around $230 a week (depends of course where you get your loan etc..) rental income is $160 a week so property will be neg- geared, depends of course too on your situation, are u looking for neg- or pos+ geared properties etc.
The first one is always such a big decision!! Is there anything you can do to the property to up the rent?? is that the going rate for rent? will u try and negotiate to get the property cheaper too?? all the best with it, keep us postedTo me, these figures don't work as I don't buy neg geared property. It has to be pos cashflowed and with good prospects for cap growth.
Can you hold a neg geared property easily?
Are there high prospects for cap growth to offset the neg gearing?
Is there a high rent demand in the area to minimise the vacancies; especially since you are taking such a big hit on the wallet in the first place?
Is the building on the property constructed after 1987?The only reason you should buy a neg geared property is to hold it for good cap growth, but this is not guaranteed. An investment of this sort is a gamble. You may own a property that never becomes pos cashflowed.
The 11 second rule that Robster refers to is out of date now and probably impossible to find. There are still houses for $80k to buy, but they may be in rural areas with low cap growth and high maintenance bills. Bit of a trade-off I'm afraid.
If you are going to buy a neg geared property, at least buy one that you can add value to, and/or is built after 1987 so you can maximise the "on-paper" deductions and improve your cashflow.
You can buy a neg geared property that is actually pos cashflowed AFTER TAX – it costs you no money and you pay no tax on the profit.
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