Hi,
Is there any reason not to add a $200k Melb CBD Apartment to my Portfolio?
10 year Lease with 3 5 Year Options.
7% return Net.
Rent adjustment in line with CPI each year.
63 Square Apt in a very central area. Only a 7 Lvl building.
My Math suggests CF nuetral by end of year 4.
Comments/thought/experiences on this type of IP?
How much time have you got.
Likely maximum lvr circa 65-70% if you are lucky so that tells you something.
Not only as a buyer but 1 day you may wish to be a seller.
If you are putting 35-40% cash then will probably be + from day 1.
Lease is as good as the Company providing the Guarantee. This is usually a $2 Company which could go bust tomorrow.
There are plenty of examples in most Capital cities of such arrangements that have ended in tears.
Forget capital growth as most of these projects dont even keep pace with inflation.
You would be better off put the cash in a wheelbarrow and wheeling it down the road on a windy day. Counting what was left after 100 yards and that is the sort of return you can expect from such an investment.
Richard Taylor | Australia's leading private lender
I was at an auction last Saturday (Ray White) on the Gold Coast where a whole heap of properties go up for auction (and hardly ever sell). One of these exact same properties came up for auction on this day and the Auctioneer warned everyone to make sure you read the contract before buying this property today. He opened the auction @ $130K bid but no one made a bid, then he said this MUST be sold today so can I get a $125K bid and so forth down to $120K. He passed it over as there were no bidders. I and many others in the room ran outside to see (we never seen a property this cheap) what the story was and to read the contract. It was exactly that —- a hotel contract with 2 yrs to go and the Hotel has the first option to renew it for another 10 years. About an hour later, the Auctioneer brought this property back up and again repeated about looking at the contract before buying this property. I watched this guy walk into the room when the Auctioneer said this property must be sold today can I get $115K. This particular guy missed what the auctioneer said and jumped on his phone and made a bid for $116K and very very quickly the auctioneer said SOLD! The guy had no idea what he just bought. All of us that read the contract only an hour prior were seriously laughing at this guy who just bought a melon! Easy to buy HARD to sell.
Plenty of CF+ properties in regional areas for under 200k. If you are looking at 4 years + you should see a decent capital gain on a house in that time. Plus as Richard has said a million times you can leverage a lot higher on a house than one of these duds.
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
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