Hi all
ok im looking around for some property to buy have been looking at cashflowcapital.com.au came across this house http://www.cashflowcapital.com.au/listing-MORE+THAN+10%25+RETURN-17800.html do you think the returns are right i dont know where this house is but theres no way it can rent for this much can it there are a few here like this that advertise a rediculous return what do you guys think
cheers
Robert
Robert
Yes it is probably correct and likely to be leased to a mining company, employee or similar.
What you need to do is to see if and when the lease expires what is the likely rent you could expect to receive in the open market. If demand is high in the area then there is no reason why you couldnt get that much again.
Just make sure that the purchase price isnt inflated as it has been calcuated on a yield basis rather than a comparative sales basis.
Richard Taylor | Australia's leading private lender
I think Richard has hit the nail on the head.
Check out how long the lease is for and find out what the previous lease was for. You might be able to get enough of a return to cover the drop back to normal rents in 2-3 years if the current tenant finishes and doesn't renew.
Robert, not only will your rent drop (if there is no demand for company/exec tenants) but your sale price will also drop substantially – you will need to check out what the market is paying for similar houses in the area/region, what the longevity of the major industry is & its plans for expansion etc.
CFC price does not include their margin of 2.2% so you will need to factor that into your cost base as well.
Yes I agree with above comments.
The current rental return in % might not reflect what happen in next 2-3 years.
Lots of mining company are closing down……Beware of spruikers… selling dodgy IP
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