Hi guys.
I’m halfway through the book “From 0 to 130 properties”, which you guys recommended, and I’m doing some *very* basic calculations with Interest Only repayments.
Would that be a good investment?
Property value $520,000
Downpayment $52,000
Loan amount $468,000
Interest 6.63%
Repayments $2,586
Rent that I can get per week 800
Total per month 3200
Repayment – rent $614 / monthOf course I’ll have to deduct strata, rates, maintenance etc, but I just want to get a sense of what a good investment is.
If I purchase this and pay interest only, it will never ever get paid (of course). I’m new to this so I can’t get my head around the idea of having a loan that will never be paid.
Please let me know what you think. Thanks in advance.
Leonardo.
The load does get paid… but it gets paid at the end of a set term… in a big lump sum… so start saving! Someone posted just yesterday or something about banks not accepting the logic of selling the property to repay the load. they wanted some extra proof that you can pay the sum off.
some things with your sum that are different to mine though…..
you assumed there are exactly 4 weeks in a month.
i prefer to times the weekly rent by 52 (or 50 if i want a buffer for vacant days)
and then divide by 12 to get monthlyso 800 *4 = 3200
800*52/12 = 3466As you can see quite different.
its a good rental return in my eyes. but do make sure you calculate the strata, rates etc…. cos they can kill any deal if they are too high.
some others might not think its as great a return, but its a 20% return on the actual cash you invested (before strata fees and taxes etc). and that sounds good to me.
Leonardo,
Can I ask you firstly where you have found a property for around 500k that you will be able to rent out for 800 per week? Also where did you get the information from that you’ll be able to rent it out for 800 per week and what does that rely on? as in have you thought if you use it as a holiday home you’d rent it of that much? or if you furnish it? or if you just have long term tenants?
Secondly, you need to make sure you calculate in stamp duty and fees etc (not sure if you already have done that, but I couldn’t see it from your post).
Tiffany
illuminati wrote:The load does get paid… but it gets paid at the end of a set term… in a big lump sum… so start saving! Someone posted just yesterday or something about banks not accepting the logic of selling the property to repay the load. they wanted some extra proof that you can pay the sum off.some things with your sum that are different to mine though…..
you assumed there are exactly 4 weeks in a month.
i prefer to times the weekly rent by 52 (or 50 if i want a buffer for vacant days)
and then divide by 12 to get monthlyso 800 *4 = 3200
800*52/12 = 3466As you can see quite different.
its a good rental return in my eyes. but do make sure you calculate the strata, rates etc…. cos they can kill any deal if they are too high.
some others might not think its as great a return, but its a 20% return on the actual cash you invested (before strata fees and taxes etc). and that sounds good to me.
Thanks for that tip in regards to weekly rents, so it’s even better than I thought.
scha9799 wrote:it looks very attactive to me if the strata is not too high…Thanks.
TiffanyG wrote:Leonardo,Can I ask you firstly where you have found a property for around 500k that you will be able to rent out for 800 per week? Also where did you get the information from that you’ll be able to rent it out for 800 per week and what does that rely on? as in have you thought if you use it as a holiday home you’d rent it of that much? or if you furnish it? or if you just have long term tenants?
Secondly, you need to make sure you calculate in stamp duty and fees etc (not sure if you already have done that, but I couldn’t see it from your post).
Tiffany
Hi Tiffany,
It’s in a suburb called Gymea. The numbers are not 100% solid, they’re an estimate as I wanted to know what constitute a good investment. One can get $750 – $800 if you rent the rooms and not the property.
You’re right, i haven’t thought about stamp duty and fees or anything else.
Thank you.
Leo
Hi Leo,
OK I see what you’re saying about renting out the rooms etc, but I would advise that you also do some calculations based on the lowest possible rent you could get, so maybe search this suburb on http://www.realestate.com.au or http://www.domain.com.au and have a look at what similar properties are renting out for in the area. You need to make sure you base your numbers on the worst case scenario as well otherwise you could end up expecting 800 rent calculating on it and only being able to get 400 which could leave you in a bit of a pickle.
Also, it seems you’re calculating on a 10% deposit, I strongly advise you to get yourself a pre-aproval from a lender to a) make sure you can get enough for the property before you get your hopes up and b) make sure you know exactly how much deposit you will need.
http://www.rams.com.au/default.asp?page=/calculators/stamp+duty+calculator is a stamp duty calculator you can use, of course its not exact but it can give you an idea.
Also, if this is your first property you may want to look into first home owners grant and if it is available to you and whether or not it will benefit you.
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