We have sourced a property to rent to my parents with a rental yield of 6.2%. We will have full tenancy, no management costs but it does have $2000 in body corp and $1300 in ratesper year. It is in Murrumba Downs in QLD near a new train station. I am looking at this property to build some growth so that within the next 12 months we can purchase another investment to focus on cash flow. I know I need to justbite the bullet, but I am a little concerned about body corporate. Any words of wisdom. Our contract is still subject to finance. Purchase price was $260000.
Is that a net rental yield? Or before body corp? Nothing stunning. A lot of people worry about body corp but don't forget that pays your insurance and outside maintenance so with a house you'd have that extra cost. And with a house you still have rates.
So you are assuming it will have good CG? 12 months isn't long to experience growth.
Can you handle the negative cashflow? If your goal is CF, why are you buying this? How are you assessing it's potential capital growth? Because if that doesn't happen you are moving away from your goal, not towards it.
Everyone gets cold feet. Check your numbers and if it fits with your goals, go for it.
Hi Donna
Only you can make the final decision. Sounds like you've done your due diligence – and for what it's worth, that kind of body corp fee isn't unusual.
However, if you're having doubts and/or will struggle to sleep at night then don't jump into it. It won't be the last property to go up for sale.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
The numbers look in the normal range, you've done your DD, if you're still having doubts you should probably pull out. Often your gut is the best test. Final decision can only be made by you though.
Jeff123 wrote:The numbers look in the normal range, you've done your DD, if you're still having doubts you should probably pull out. Often your gut is the best test. Final decision can only be made by you though.I'd go with Jeff.
You're at the bottom of the range as far as "does it pass muster". We all have different bench marks but this one, by superficial figures, appears borderline.
It's a tough market out there and it's only going to get tougher. You cannot afford to start investment portfolios with investments that barely cross the line. Your first 2 or 3 must be able to perform from the get go. It's like building a house. The foundations support everything else. Get that building block wrong or accept weak foundations and you're now sitting on a potential disaster.
10 years ago you could get away with the odd dud but not today. If you don't set some kind of performance standard that strengthens a potential investment portfolio then you're better off on the roulette wheel.
Cold feet is instinct telling you this is one not the one. Nobody ever died NOT jumping off a cliff.
You're better off taking 3 times as long getting it right than half as long getting it wrong. Don't pressure yourself into having to get started. It's not a race. And don't feel like the number of properties is directly proportional to success. It's not. Quality should be your investing mantra not how much you have invested.
Donna,
The body corp is not the worst, it all depends what you get for that. Assess the condition of the complex, the amenities, gardening and maintenance, sinking find val etc.
As for the cold feet, everyone gets them and no one can tell you what to do when you get them. I always ask if cold feet have stopped you from doing a lot of other things, ie buying before. If so, then maybe you do need to just 'jump in' after doing the right due-diligence of course. I would suggest identifying what your fears are and addressing them rationally, that will help you work out if you should continue or not.
Murramba downs has good growth prospects as long as you are buying the right property.
Josh
In addition to what the others have said, be sure to do a sanity check on what they body corp has insured the building for. Let's say the complex burned down. The insurance would need to be sufficient to pay for:
– Demolition permit
– Demolition and removal of debris
– Plans and permits for new build
– New build inclusive of driveways, fencing and landscaping
I saw one the other day that was grossly underinsured, which is a huge worry when you are only one minority vote in a body corporate. Might be hard getting your request heard for insurance to be brought up to scratch.:
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
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