Hi guys, I am looking at buying a 300K property that should rent for 300 p/w. Just after some advice on the number crunching as I am not that up to date with the tax deductions etc. The property was built in 1975 (not sure if that has a bearing on depreciation etc.).
Basically does a 300K property that rents for 300p/w in Rockhampton (QLD) sound like a solid enough return? I cant invisage having to do to much to it apart from some internal painting.
Quick calculations would have me paying about 8K a year before the deductions etc. and not sure how much I would get back.
Also I would be able to put about 35k deposit down, should I do this or borrow entire amount???
Advice appreciated.
Thanks
Mark.That's a 5.2% return approx.
Some people call that a good return.
It isn't.
The more you borrow, the more neg cashflow you will have, so if you can absolutely guarantee at least a 10% cap growth per year to offset the horrible neg cashflow, then it might be an allright investment.
Is that a 5.2% return before or after deductions (tax breaks) are factored into equation. Have been doing a lot of research on prices in QLD and I have found nothing close to 10% returns. Would love to know where these you get this sort of return, and if so does the capital growth suffer because of this (growth of area offering the high returns)
Mark.
Mark – the % return is simply calculated by the weekly rent ($300) multiplied by 52 (weeks in year) divided by the purchase price of property ($300k) – therefore the return is a gross calculation before any tax breaks etc (or other expenses). For higher returns, from other potential properties do some internet searching (eg http://www. realestate.com.au). You may also consider commercial property that should provide a higher return (but maybe not the capital growth). David.
My first IP gives a 4.6 % return before tax and the area has shown little growth. Live and learn i guess Im looking outside my local area for IP number 2
You may need to be more creative to find a better return; especially in larger towns and cities – buy something that is run down a bit, do a basic reno and improve the rent return that way.
This requires knowing the rents for the selected property in that area and so you can quickly see whether there is room for rent increases after renos.
Try to make sure it is built after 1987 to get the depreciation benefits as well.
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