Dear all
Thanks for your time to read this post.
I am looking at an IP which would be my first one, situated in south Brisbane.It consists of 2 lowset brick units on one title, both units consisting of one bedroom, large ensuite bathroom, open plan kitchen/lounge area and small outdoor covered area and both units are air conditioned.
Both units are tenanted to long term retirees and currently returning a combined rent of $370 per week. Body corporate fees are approx. $3880 per annum, council rates of approx. $2700 per annum
The complex consists of 85 units, 2 dining rooms and recreation rooms.
Kindly advice what things should I look into this before deciding anything.
Regards
PK1
Hi PK1
If the possible IP is what I think it is you need to be caretul.
As this appears to be your first "real" IP purchase (looked at your other posts) you need to consider a lot of things – if it is going to be financed from a lender – in their eyes you are a "newb" therefore they will want little risk in what you are purchasing – their covering their backs.
My guess is that you are are looking into buying into a retirement situation where all tenants are required to be over the age of 55. The units are 1 bedroom each and may be just over the 50m2 each.
If you are needing finance from a lender there could be real problems – as they see it as a niche market situation (even though our population is ageing) and may make you jump through a lot of hoops to get the money or they may not even consider leading to you.
Also you need to consider resale – it can be quite difficult to off load this type of IP – you may find that there are several of these unit combinations from the same place on the market at the same time and they may have been on there for quite sometime.
(ALWAYS CONSIDER THE END IN MIND – FIRST)
Don't want to put a downer on your first IP however I thought these points might shed some light on your situation.
Cheers
Richteddy
PK1 wrote:Dear all
Thanks for your time to read this post.
I am looking at an IP which would be my first one, situated in south Brisbane.It consists of 2 lowset brick units on one title, both units consisting of one bedroom, large ensuite bathroom, open plan kitchen/lounge area and small outdoor covered area and both units are air conditioned.
Both units are tenanted to long term retirees and currently returning a combined rent of $370 per week. Body corporate fees are approx. $3880 per annum, council rates of approx. $2700 per annum
cash flow should be considered
Rental income is $19240
total income = $19240 – $3880 – 2700 – insurance ? – interest on loan required – water rates
Will tenants be able to afford rental price increases over future time period?
Will you be able to afford any interest rate increases on the loan.
Dear Richteddy and Duckster , thanks for your reply.
Sorry I did not mention the cost which is 185,000
Richteddy , what I understand from your reply is that in ideal world I need to look for a property which is easy to buy ,not too much cost to maintain , give good rental return and when time comes easy to sell off .Yes you are right at present there are 3 of these kind from the same place in the market . I dont know for how long though .It is a retirement facility
Duckster , the cash flow would be
Income =19240
Expense=
body corporate 3880;
council rate=2700;
interest @6.5% =12025;
insurance =500;(guess not sure)
water rates I guess should be includes in council rates, but I need to confirm that
This give positive cash flow of 135.00
Thanks again both of you for your input as this made me think more, may be I should look for something different to start with.
PK1
If you are needing finance from a lender there could be real problems – as they see it as a niche market situation (even though our population is ageing) and may make you jump through a lot of hoops to get the money or they may not even consider leading to you.
Yeah, be careful with these types of retirement units. There is no established secondary market for them and they take ages to sell.
RE agents typically wont touch them because the low sale price means a low commission – why should they put they same effort into selling a $185k place as for a $300k place and get half the commission?
Also your rent will always be constrained by the age pension and rent assistance allowance, which tenants at that age & stage typically rely on to fund living.
Hope this helps!
Richard
Thank you for your advice Richard , was helpful and informative
PK1
Yes, I agree with the earlier posts above. When evaluating investment property it is important to consider all the ongoing fixed and variable costs to understand the bottom line. This include pre and post tax numbers.
I have found it useful to have spreadsheet setup with standard costs of purchase and ongoing management to quickly assess the returns/yields of the properties. So properties that have high yield and low resale may be within your investment strategy which means you will be holding onto it for the income.
I've found the following cashflow calculator useful: http://www.sydneypropertysite.com/p/tools.html by Powereval.
Thanks globetraveller,
Looks to be a pretty good tool
PK1
funding will be hard, secondary market the problem
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