Hi everyone,
Thankyou first of all to Steve for the book. I have always been interested in property but after reading your book it has opened up a world of options. I have only just begun looking for +cf properties and have come accross one that at first glance didn’t sound like a goer but on further inspection might be. I’m looking for some advice as to whether it would be a good one to start with or not worth tying up some funds in. The specifics are price $130k, rent is $180/wk, however the apartment (renovated warehouse) is leased to a local business at $180/wk until mid 2007 with 3yr options till 2022. They use it to place new employees into. So there are no vacancies, little maintanence if any, and provisions for rent increases every 3 yrs. Doing the figures it’s not a huge return but very hassle free for a first starter. Any suggestions as to whether it is worthy??
RegardsMiler,
You need to add up all the expenses including rates and taxes, insurance, strata levies if any, plus bank interest on the borrowings, and compare this to the rent received to know if it will be +cf or not.
Also, the non cost deductions like depreciation can generate enough of a tax refund to give you a slight + cashflow from a -cf taxable situation.KP
Miler, as the others have said, do a bit more checking on the other costs.
I like the sound of it as a starter – but what is your strategy? Do you want cashflow, or growth?
Is there any growth for this property? Can rents come down, or will they always go up? IS it furnished, and do you or the company own the furniture? Are you buying from the company, or another investor – this could ‘skew’ the rental figures.
Cheers
MelPriced at 130k and rented at $180, I might find it worthy… but with a lot of Q’s to determine whether I’d buy.
How big is it? Studio? 1 or 2 bedroom? (I would not buy a studio, personally) How many sq metres?
How old is the unit? If it is post 1985, you can up the yield by using depreciation benefits.
As others mentioned, what are the body corporate fees? and management fees?
Any special levies planned? This can be checked in a BC inspection report. Special levies might be incurred for upgrading to equipment (eg gym equipment…) or for any building defects not covered by building insurance, or not taken responsibility by the builders. You could also have a special levy incurred, for example, on some kind of “improvement” they might make to the place- cement rendering to the outside of the building etc.
Car space? Is it registered to your particular unit?
You might also think about how many units there are in the complex- small is better… large generic apartment blocks have resale value issues.
I personally think rental guarantees are pretty good. the “local business” though… is it viable for the future? you could probably have a snuffle at their annual report or something to see if they will be still floating for the future of the guarantee. Will the increment to increase rent be linked with CPI? Or some other measure?
So many things to think about
A reno’ed warehouse can have it’s own “style” factor that can be good for resale- sounds newish.At the price, I’m guessing it is regional?
Ask any further specific questions about it Miler, if you wish to, on the forum, and the unit heads amongst us can attempt to answer them
kay henry
Thankyou for your input guys, it’s much appreciated esp when you’re a new comer. To answer some of the Q’s raised it’s a 2 brm newly reno’ed warehouse in regional vic. As there is a lease in place till 2007 I wouldn’t worry about rental management at this stage. There is only a small no’ in the block (10) and the local business is a well established one and not going anywhere in a hurry (no guarantees of course). I will do some more research on the other points raised and let you know how I go.
Thanks again.
A reno’ed warehouse can have it’s own “style” factor that can be good for resale- sounds newish.You must be logged in to reply to this topic. If you don't have an account, you can register here.
