Looking for comments/advice on a prospective 1 bedroom investment property.
For retiree and using Steve McKnights formula to calculate ROI: 10.7% using what it is currently rented for against asking price. I understand that you don't make any real capital growth on these from what I am told, but because I am outlaying 80K plus costs to purchase this, in the long term would this not be a good investment from the point of view that it would not take as long to pay off as a 400K property?
If renting it out is not a problem, are there any other problems that I cannot foresee here specific to 1 bedroom units for retirees? Any specific costs involved that are unique to a property like this?
Any restrictions in terms of finance or onselling it? Have you also seen the strata report?
Regards
Shahin
TheFinanceShop | Elite Property Finance
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I have not seen a strata report and would not have known to get one as I am new to this, so great question. Finance for me will not be a problem and not sure what you mean by "onsell".
My idea would be to buy, eventually pay off and receive the rent as cashflow. Looking for possible flaws in this plan.
Definitely have a look at the strata report. By onsell I mean are there any restrictions associated with the property that may stop you from selling the property if you need to.
If the net yield is 10% then that's good.
Regards
Shahin
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Ok thanks for the advice, will do re strata report. I will be looking into these things.
Don't forget to get your conveyancer or solicitor to have a look at this if you are new to the game.
Regards
Shahin
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Hi Mat
Don't want to appear negative but can you enlighten us why 'Finance will not be a problem for you' as the security is always of interest to potential lenders.
As Shahin mentioned even if you can finance the deal on-selling the property can often be an issue as you have to rely on the purchasers ability to be able to finance such a security.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I do not want to on-sell if I were to buy it, as I said previously.
When Shahin asked me if there were any restrictions in terms of finance, I took that as me having the ability to buy this property.
Hiya Mat
Welcome aboard.
Also suss out the management fees associated with the unit – they may eat into the yield.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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Hi Matt,
Just to clarify the topic of finance – a buyer may be ok in terms of being able to service the property and that's great.
However lenders do have certain restrictions on the type of security whether its community title, display homes, company title, serviced apartment, etc. As an example, I had one client that had a lot of deposit for a purchase of a serviced apartment and we found out (prior to loan submission) that even though the lender's policy accepted the security, they recently had a fire sale in the block so they didn't have the 'appetite' for the security.
Now I doubt (and hope) this is not the case with this property but nevertheless check it out sooner than later.
There are even postcode restrictions but I would again doubt that they would apply to the purchase you are referring to.
Regards
Shahin
TheFinanceShop | Elite Property Finance
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Great information, thanks Shahin, this is something I would never take into account and is good to know.
Thanks Jamie. I have one IP and my property manger for this is does a great job. His fees are more than acceptable for the job he does.
Probably more a question for my PM, but can you think of any extra fees associated with a 1 bedroom unit specifically for retirees?
You always want to know you can offload a property if you need to. Life circumstance can change. You could be diagnosed with an illness that requires expensive surgery for instance.
Jacqui Middleton | Middleton Buyers Advocates
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my question is what is it. All you say is that it is a one bedroom apartment and it sounds cheap
So
Where is it?
What type of property is it?
How large is it?
Does it have car parking?
Is it close to public transport?
Is it close to shops?
How many in the block?
is the return gross or net?
can you get finance and if so what
percentage?
You can see that there are a lot of things that are at least as important as the return
Nigel Kibel | Property Know How
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TheFinanceShop wrote:Any restrictions in terms of finance or onselling it? Have you also seen the strata report?Regards
Shahin
They normally have lots of restrictions when it comes to on selling, please look at the fine print.
There you go Matt – I bet that the property is Over 55's. Whilst this is not necessarily bad – it does carry restrictions which would affect finance and in turn resale.
Run this by your banker/broker before signing on the dotted line.
Regards
Shahin
TheFinanceShop | Elite Property Finance
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Hi Mat,
I'll won't comment on the finance, capital gain or investing strategy side of things as you seem more interested in the fees.
Some of the standard fee and cost with Over 55's-
* Strata – self explanatory
* Special levies, sinking fund– self explanatory HOWEVER it's slightly different for over 55's in that once every x number of years the complex will undergo a major refurbishment ( paint, upgrade the chairs, kitchen etc…) and this can cost quite a bit…so a always check HOW often they do these " major refurbishment " , sometime called capital maintenance or replacement.
You have to remember, the owner/body corp that's running this complex is also running a "business" so it''s not your standard unit/strata apartment; like all business it requires upgrades so that it remains competitive.
Damage to shared faculties are more common- self explanatory
Insurance – Not your standard insurance
Each over 55's village has its own terms for fees and charges. Depending on the type of legal structure and body corporate.
That's all i can think of for now…
Regards
Michael
Mick C | Shape Home Loans
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mat27177 wrote:For retiree and using Steve McKnights formula to calculate ROI:
Hi, I have been looking for right formula to calculate ROI, would you be able to share it?
Thank you for help!
Exactly the kind of information I was interested in, thank you
%ROI = Annual rent divided by purchase price X100.
This formula is used to get an indication only of a properties potential return before doing your "due diligence".
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