i need help. i am a single mum and i work part time and have been waiting for the right time to start investing in property. my youngest starts school next year and ill have a few spare days.
i have found a property that i think could be a winner.
purchase price 163000. fees etc 7000
i would borrow 185000 so as to have 15000 to spruce the place up, new bathroom and a good paint job etc.
its been rented at 180 p/w and i hope to get around 200p/w or 210p/w after spuceing it up..
id be paying back around 255p/w
out of pocket 45 to 50 a week which i can afford
its 4 bedroom, 2 living area which looking around there arnt many of them in that price bracket.
over time i could spend more on the property and get a lot more rent and eqity as id like to do one a year and keep them all.
does this seem like a good deal or should i look for something less out of pocket each week.
i know a lot of people make mistakes on there first property but i cant afford to make mistakes.
and my last question is the back of the house has cement sheeting which i asume has asbestos in it and i want to replace windows.. would investors steer clear of properties with asbestos.thankyou for any advice[blush2]
Hi Smilie 71
I’m am seriously worried about your approach.
Are you looking to build wealth or save tax?
Are you looking for “growth or income”?
The comments I made on the post below ( cut and past the following link into your browser address bar) https://www.propertyinvesting.com/forum/topic.asp?TOPIC_ID=26173
apply to your circumstances too.
Feel free to pm me if you need to via my profile page
Warm regards
SueMIT | Owen Real Estate
Email MeHello again Smiley71
After reading the post I suggested above. can i ask you one other question. Why would you rent this place out rather than sell it for a profit.
I’m just off to run the numbers you suggested and see if there is a workable solution for this
Warm Regards
SueMIT | Owen Real Estate
Email MeHi Again
As for the issue of Asbestos, it depends on how acceptable this material is in the area you are proposing to invest in. It could definitely make it more expensive to repair things like windows etc as it needs to be treated with the proper care, suits etc, and you may find it difficult to get tradesmen to work with it.
Can I ask what area you are investing in?
SueMIT | Owen Real Estate
Email MeI assume you would be borrowing the $185000 through accessing the equity you have in your own home?
If not then it will be impossible to borrow $185000 against a property valuation of $163000 unless a personal loan or similar was involved which really isn’t a good idea in my opinion.
I realise this is a simplistic question and i’m sure you are well aware of the implications, but it pays just to be certain. A couple of weeks ago a client wanted to borrow $650000 on a property worth $480000 with no equity whatsoever! No matter how hard i tried, he could not grasp the concept of LVR.
Hi smiley7,
you say you will be out of pocket $40-$50 per week? How much cash deposit are you providing?
I have done a very simple equation on your figures (assuming you are borrowing the entire amount using some home equity as a deposit, which is also borrowed);
At say, 7% interest, your weekly interest bill is $250 in round figures. (I would allow 1/2% more for safety).
You said the rent may be $200- $210 p/w; Let’s always work on worst case scenario and say it’s $200 p/w.
You need to factor into your rent around 20% of it to be eaten up by all the holding costs such as management, insurance, repairs, vacancy, council rates.This figure is $40 p/w.Based on these figures, which I always use and are fairly accurate (even though they are ballpark) you will be out of pocket more like $90 per week.
Of course, I have used worse case scenarios, but it pays to over-estimate expenses and under-estimate income.
I haven’t included your tax return (which is an unknown quantity), and I don’t know what interest rate you will have, so the figure may be as you say, but I wouldn’t count on that.Cheers,
Marc.
[email protected]You quote $7000 for fees also, i’m not sure what state you are in but in South Australia you would be looking at over $7000 for stamp duty alone, nevermind LMI, conveyancing, valuations and so on.
Even in the least expensive states/territories you would be looking at around the $5000 mark just for stamp duty.
thankyou everyone for replying to my questions
ill try to answer all of them..
im investing in ballarat.
i have enough equity in my own home to borrow the lot plus more for renovating
my reasons are for mainly growth so that i can buy another ip next year and continue on. so mainly to put a bit of money into the property to hopefully get enough growth in a year to buy more…
i have checked out asbestos and i can get it removed for around $1500 to $2000. which i was happy for. i heard in nsw you are not allowed to sell a house if it has asbestos in it. you have to get it removed. this could be in all other states within a couple of years.
i explained this to the real estate and i got the seller to drop the price $5000
So i thought for a 4 bedroom, two liveing area. fairly new kitchen. not a bad area. for a $160,000 was not bad and hopefully easy to rent.
YES i have taken the plunge and bought my first investment property…..[confused2][biggrin]
Thankyou again, hears hoping all goes good… and looking forward to some hard work and lots of painting…Good on you smiley71…..congratulations on your first IP purchase.
Hi Smiley 71
I wish you luck with your IP. I am concerned that you have said “hopefully” a few times and wonder if you have any more substantial evidence to support your “hopes” for growth and rental income.
Good luck
SueMIT | Owen Real Estate
Email MeCongratulations on your purchase…at least you made a move.
Hi smiley71.
I dont know no what you are trying to achieve here so i will presume you are trying to create wealth in some sort of manner may it be short or long term.
Since you are starting out and you are on a single income ,personally if i were in your situation and had time to spare i would look outside the square. Your deal which you have posted will take you longer to create wealth. Simply because the rent does not cover the repayments. I am not saying do not move forward with the purchase but if you have posted here and are serious you should expect Criticism.
If this link works this is the type of deal i would be cosidering.
http://www.realestate.com.au/cgi-bin/rsearch?a=o&id=103692250&f=0&p=10&t=res&ty=&fmt=&header=&c=40527609&s=qld&snf=rbs&tm=1166960348This is one example and their are plenty more if you are willing to wait..
Dom
[biggrin]
f this link works this is the type of deal i would be cosidering.
http://www.realestate.com.au/cgi-bin/rsearch?a=o&id=103692250&f=0&p=10&t=res&ty=&fmt=&header=&c=40527609&s=qld&snf=rbs&tm=1166960348This is one example and their are plenty more if you are willing to wait..
I am not sure I get your point on this property, so please tell me your thoughts why you posted it Dom.
Cheers
Hi Bridgebuf,
Simply based on rental yeild $300 * 52 = $15600 / 160,000 * 100 = 9.75 % rental yeild.
Repayments on $160,000 0n 8.0% interest rate is approx $1070 per month. Rent is $300 per week * 4 = $1200 per month.
Just a rough example to show the rent is higher than repayments monthly.Their are many other factors involved such as rates ,insurance maintenance etc.
Not to mention if you can find a property in mount isa with only $150 rent a week i would sign the longest lease possible.
So the yeild would even be better.Dom
[biggrin]
I agree Dom the property you suggested sounds like a much better deal
SueMIT | Owen Real Estate
Email MeOk, provided the $160,000.00 is for both units, I can see your point.
If I was looking in Mt Isa, my first move would be to ring the agent to confirm. Search brings it up under houses, not units or blocks of units.
I would be very careful with this property. It looks too good to be true, and call me a cynic, it often is.
But I guess your point was what kind of property one should look for.
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