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Steve, in my experience with low or no docs financing the lender always wants to see proof of funds to complete. Therefore if you are getting the vendor to finance part of the deal, how is this going to stack up with your financier? Isn’t he going to now see you paying a second mortgage to the vendor for whatever time frame and therefore affecting your DSR with him?? Obviously deals have been done like this before, but the only one I have done was with a unit block where the developer and the bank worked hand in hand, not on stand alone deals.
The 2nd Big Mac
Hi Josh
Just returned from Tassie -looking at small blocks of units. Figures looked good but vacancy high therefore what looked like a good deal did not really stack up with 25% vacancy factor.
Could I run the numbers of your suggested deal:
Buy for $60K
Rent at $135 pw = $7020 p.a.
Mortgage of say $50K with repayments at 7.5% = $3750 p.a.
Agents com. in Tassie seems to be about 9-1/2% so say $650 p.a.
Rates and taxes, water etc. – unknown but say $1k p.a.
BodyCorp if any – unknown.Income Outgoings
Rent 7020 mortgage 3750
agents com. 650
rates, etc. 1000
repairs etc. 500Total income 7020 Total out. 5900
Therefore total income for one year is only $1-1500 p.a. and I have not yet allowed for stamp duty, legals and holding costs. Also how much are these types of property going to appreciate over time. I know the percentage return on cash on cash down may seem attractive, but is the “real” small return worth the exercise! Going forward you will have tenancy change over and agency lease fees.
May be Steve can help me clarify the figures ’cause every time I look at the cheap end of the market the real returns for the effort involved dont seem to stack up unless I am buying a house to reno and add value. Now if you pay it off over time and the rent says the same I guess you are deriving about a 9% net return but your money is tied up in an asset with limited growth.
Steve, have I missed something in these numbers, ’cause I see great deals all the time but when the numbers are crunched the “cheapies” potentially tie up too much of your investing dollar with limited growth opportunity.
Peta
