Hi Guys,
We have just been offered a property which we used to rent. It is in a popular estate (which has all sold out recently). We can purchase it for around $370k (approx $400 all up inc. closing costs???).
the rent is $360 per week – and rising, so we could maybe squeeze a bit more out of a tenant (it is already tenanted with a good long term prospect).
If my calculations are correct – the yield will be approx 4.6%. the growth for the suburb was approx 18% last year – and looks set to continue on at least that level due to the high level of infrastructure, shops, new hospital that is going in.
Is this a good yield? This would be our first IP and so we want to make sure it represents good value. We are looking for long term growth as we are both in our 20’s and in no hurry to get the residual at this stage.
We would be paying 10% deposit – and 90% mortgage Interest Only @ 7.6% (based on some quick calls – but we will look for better deal).
Appreciate your feedback on this….
anthony
Hi
Can anyone give me a rough price for a stud wall with a door about 4m long by 2ish high? – its in WA so it will probably cost a bit more than the other states …. i think???Hi Anthony
You actually haven't provided enough info here for me to be able to say whether this is a good deal or not. However, if it were me I'd check comparative sales. Check out how the price compares to similar properties in the area – agents will normally have this info.
Future growth is most important – I assume this is a house, if so great, land appreciates, buildings depreciate – no units please unless it has a special feature like waterviews.
The rent looks pretty good at that yield, just make sure your comfortable with the negative cashflow level.
Good luck.
TheBish
The yield isn't bad for todays market if it is in a major city. As long as there is potential for some good captial growth it sounds good.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Anthony, good on you both for starting so young. Firstly I assume the property was built after 1985 and therefore you would have a depreciation schedule prepared.
According to an online loan calculator the repayments for your loan would be:
Assuming 10% deposit of $40,000$360,000 @ 7.6% = $526 per week (interest only)
Less $360 week and you have a shortfall of $166 per week.
Is the interest fixed?
You have lots to consider, your combined income, is your employment secure, any children or planned soon, current personal loans/debts? Obviously the answers are not for this forum but are crucial for the big picture.
Do you intend to manage the property or have a property manger handle it for you?
Have you spoken to your Mortgage Broker, Accountant, Solicitor?
It does sound like a good deal, though many dont believe in Neg geared property. ( a mix is fine, if your income can support the shortfall) It would obviously take a while for it to become CP.
Do you own or rent now?
Can you afford an extra $166 per week, (for a protracted time) plus rates, insurance, vacancies, managers fees, blown water heaters, repaint, replacing floor coverings?A line of credit is a great idea.
%18 growth is impressive , however it isnt set in concrete.
Borrowing nearly 400 big ones for your first property may be a big call, depending on your income and not to be taken lightly.
Good luck guys and dont rush it…
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