I am 24 yrs old and I’m from the Philippines…
A friend of my mother is selling a small property for around 850,000 pesos (around $17,000)… I checked out the property and it is pretty good needing just minor touch-ups here and there… It is near the Town Hall, a hospital, police station, the church and a nearly-built commercial complex… So I think its a great investment… And the place is already being rented for about a 100 dollars a month… If the bank will loan me the money with about 6%-8% interest for 15 years… How can I be creative in restructuring the deal to my advantage….Thanks Guys….[biggrin]
Hi Kennyboy
From waht you say and based on a 20% deposit unles you can get the rent up by a reasonable amount throught say renovating and or improving the value of the place so you can get your money back at the end of a reno. It is looking like a -22.87% CoCR.I have also allowed only $1000 per annum to be spent on things such as council rates ( if there is such a thing) 5% purchase costs – have no idea what they might end up). I also allowed management costs of say 7%.
Even if you could buy the thing outright, there would still only be a 0.65% cash on cash return. You would be better off putting the cash you have in a Cash Management account at those return rates.
Run the numbers if it works it works if it doesn’t llok somewhere else.
Sue
MIT | Owen Real Estate
Email MePerhaps I missed something that Sue didn’t, but the deal looks pretty good to me. Assuming the following is correct:
Purchase Price: $17,000
Deposit: 20% (3400)
Loan: $13,600
Interest Rate: 7.65% P&I for 15 years
Property Management: 7%
Rent: $100 per weekAnnual Outgoings
Annual Loan Repayments: $1526.88 (roughly)
Annual Property Management: $350
Rates/Maintenance/etc: $1000
TOTAL: 2876.88Annual Incomings
Rent: 5200Summary:
Annual Cashflow: $2323.12 (rough)
Yield: 30.59% (Annual rent / Purchase price * 100)Change this to an interest only loan and your annual cashflow increases to $2809.60.
My only concerns are that I don’t know the Phillippines so there may be hidden costs, vacancy rates, etc etc.
Sue, I may have missed something, but if you outlayed 20% as a deposit, just your first years rent would be a cash on cash return of 60% (2323.12 / 3400 * 100), this is pretty darned good if you can get it.
I await the blatantly obvious to be pointed out to me, but looks like a good deal.
hi guys,
if the loan is only for 15 years – that pushes up the repayments. Is it possible to increase the period of the loan?
lesley“I await the blatantly obvious to be pointed out to me, but looks like a good deal.”
Hello d_robb21
The problem is that the rent is $100 per MONTH not per week.
Unimaginable to us here so it’s very easy to miss.
Cheers [smiling]
Elkathanks guys… I think I could increase the rent to about 3%-5% annually… Do you think thats reasonable for the tenant?
PS. I will calculate the numbers and consider your advise … thanks again
In the Philippines… Property management is not popular, most investors here manage their own property… since its close to home and this will be my first investment, I think I’m gonna manage it myself.. And the tenant will handle both the maintenance and utilities cost so I don’t have to worry about that too…
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