All Topics / Help Needed! / Department of Housing as a tenant

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  • Profile photo of mahdeen18mahdeen18
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    @mahdeen18
    Join Date: 2004
    Post Count: 13

    I was wondering if anyone had had any experience with the Department of Housing as a tenant. I am looking at a block of units that they lease from the current owner. They pay above market rents (40% higher), often months in advance but their lease expires in 12 months.

    This deal is positive cashflow (pre tax) by nearly $20K per year on an 8% interest rate number crunch but only if they remain as tenants. They have been in this block for several years but there is, of course, no guarantee they will continue to stay. There is a public housing shortage in the area so there is no reason for them to leave but no-one really knows what the future holds.

    The numbers on a worst case scenario of average market rents for the area shows a negative gearing of around $5k. This is not acceptable to me as it is a regional area and does not benefit hugely from capital growth and therefore deposit money could be better used elsewhere.

    I guess, to answer my own question, as the worst case scenario is not that great, it would be better to pass on the deal due to the unknowns of the tenant longevity.

    Would love some feedback if anyone has come across this situation before.

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