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Hi Dianne,

Firstly, I think that the information provided by the replies you have received all contain good advice.

To be honest, it is difficult for me to comment on your deal beyond very basic indicators. But sometimes these are best because they tend to cut through all the hype and emotion associated with the ‘sell’.

If you haven’t already done so, I suggest you get and read my free newsletters and work through my laws of success.

The first thing I do on any potential deal is the 11 Second Solution. In your case, $2,433 pcm works out at $561 per week. Hmmm, this seems very high.

In any event, $561/2 = $280.50. Then *1,000 gives $280,500 – this is still much less than $365k.

I also get nervous buying an expensive property because:

a. If the property is vacant then the negative cashflow may be extensive. I realise there is a guarantee… just be careful about the clauses that write this up as legalise.

b. You could buy one property for $365 k, or 7 * $50,000 properties. More properties reduces both your interest rate risk and also your vacancies as you spread your exposure over 7 properties rather than one. Ie. all 7 properties would have to be vacant to have the same exposure as one $365k property being vacant.

c. I’d compute how far interest rates have to move before your ‘budgeted’ +ve cashflow is eaten up. 5.65% sounds a little optimistic given the change in interest rate landscape. If you buy on a 60 day settlement, then the rate may be closer to 6.5%. Watch out!

As for other questions – make sure you do your ‘due diligence’. If you have purchased ‘Property Secrets Revealed’, then use then PATTERN Templates included therein and also the negotiating strategies to try and get the price down a bit further.

Bottom line… this isn’t a deal that I’d do as a buy & hold. Too expensive and the risk is isolated across one deal. Even capital gains are now uncertain given the change in interest rate climate.

But my opinion is clouded because my niche is smaller regional properties – not CBD stuff.

Do your numbers very carefully and be sure to factor in ‘buying’ and ‘selling’ costs to get a realistic idea of how much you will make for how much you are risking.

Bye,

Steve McKnight

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Steve,

Thanks for your response. I would like to thank everyone who responded to my original posting. After much thought we have decided not to go ahead with this purchase.

We have learnt a few things though, being newbies….and I thank you all again for your input.

Di & Pete
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