Hi
I have found a property that is slightly cashflow postive. That is, it may give me a return of under $5 per week which is not much to get excited about. It’s a 3 bedroom place and is is 4 years old. The asking is $230K and the rent is $250/week. Is there any more I could possible do to the place that may increase my weekly return on the property? It’s on a complex (Townhouse style) and has an on-site manager. There is currently a tenant in there that is wanting to rent long term so increasing the rent without adding value to the property may send the tenant packing. Has anyone got any ideas? Apart from Depreciation on PLant & Equipment & building, is there any furtehr paper deductions I may use that I haven’t thought about?
Thanks
Hi Maria,
Could you perhaps post the numbers youve used to arrive at the property being cashflow positive?
Im just having trouble seeing how a property returning around 5.6% would be cashflow positive with interest rates hovering just under/around 7%. Even taking into account depreciation, on top of interest payments youve also got insurance, maintenance, rates, water, agents fees, body corp payments etc. eating into your yield.
I have a few properties with yields around 8% which are pretty much breaking even after taking the above into consideration – Id be interested to see the numbers in your situation.
Thanks,
Jay.
Jay
The property is $225K. Rent per week = $275. The managment fee is $1144pa however am contemplating managing it myself as it is near where I live, Rates = $1350pa and Body Corporate $2600pa. Insurance $750
The building is only 4.5 years old so I have factored Depreciation – buildind write off of $3848 and Plant & Equip $5700 for the first year. Interest rate is 6.97%. I have also factored by Gross income which is in the $70-$75K. Is there something I have overlooked or am miss calculating?Wow, the rent already went up $25 per week.
Unless you are putting in a hefty deposit, I cannot see how this property is cashflow positive either.
TMA
http://www.email4money.info
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First Home Buyer WebsiteMy mistake in the earlier rent return. Maybe need to crunch my numbers again
Maria – check out http://www.jaffasoft.com for crunching figures.
Hi Maria,
If you purchase a property for $225000 this is how I calculate whether or not to continue.
Purchase $225000 plus set up costs of approx $7000= $232000
7% interest only repayments = $312 pw.
Rates $25 pw.
Body Corp= $50 pw
Ins = $14 pw
Grand Total $401 pw best case scenerio ie no repairs interst rates going up etc.
Rent received $275 pw
=loss of minimum of $126 pw.
Of course I havent taken into account depreciation. But in the end it is up to you. Good luck[[cap]There are 3 types of people:1. People who make things happen.
2. People who watch what happens.
3. People who wondered what happened.check your depreciation figures, they don’t seem right to me.
Live, Learn and GrowLifexperience
$5700 + $3848 = $9548
Even at the top tax bracket 0f 48.5%, this would only refund you cash back of $4630.78 pa. ($89.05 per week)You are still about $37 negative geared, which will become even more negative geared as your depreciation claims reduce and your tax rate decreases.
(and remember depreciation isn’t all roses and cream when you calculate your capital gains tax bill if you ever sell)
It may still be a good investment if the capital gains of the property exceedes your weekly loss.
Live, Learn and GrowLifexperience
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