Cheers for that. It’s the way I imagined going, but most of the books I’ve seen came at it from the angle that you were going to use your house as the asset.

Thanks for the reply Steve. Queensland is a bit far away for me at this point. Like you said you have to be able to get in the car and go have a look! Get to know the area. I have done this with close to a dozen areas in Victoria now and done the research on the criteria required. Some have come up to the mark and others, which I originally though were good, have not! Once you find out vacancy rates and expected rental returns and do the sums, it’s not brain surgery to work out if the area is going to be “cashflow positive” for you. It can be hard to find the right property, but they are out there!!
I find if I take the annual(gross) rental return, allow for two weeks vacancy and a further 25% for all outgoings, this gives me my net income. Then comparing this to the annual interest(ie 6.5%),you either have positive or negative net return. I know lots of people who don’t take vacancy or ongoing costs into consideration when doing the calculations. Lots of real estate agents don’t and advertise a high return on your investment. Good way to get into trouble! I have found if the property is cashflow positive after these considerations, the actual net return is higher as the 25% deduction is more like 12-15% in real terms. but better to be safe than sorry!
Anyway, good luck to all of us!!

Cheers,
Canuck

I was wondering if I found my own tenant (ie. the real estate didn’t find it for me) do I still have to pay the one month letting fee still to the agent as stated in the contract? If not, then I could give that to the good tenant as an incentive to stay and bring in her friends….

I would be very hesitant to finding your own tenant if you do not live close to the place where you unit is. One of the most important aspect in finding you own tenant is

1. the interview. Take the time to sit down with them for about 15 mins – yes thats all it takes and preferb if you dit it at the place were they are living at the moment. Usually tenants move to either upgrade or because their landlords wants them out especially in a red hot market like we are in at the moment. You can tell 95% about the tenat by looking at what they are living in now. Ask them why they wanna move…etc.
2. Reference checks. If you can get to speak to them in the current residence the only thing you need to check is that they pay on time. Other wise I usually ask for about 3 references

As a general rule of thumb if you can’t do the two, hand it to a agent. At least you have someone to blame if it goes wrong. Also with an agent in the rural center they probably know what the tenant is going to be like by asking one of his extensive networks (small country town mentality – the gossip capital). He can do a much better job at screening off bad tenants than any of us from a distance.

Buy insurance – It much cheaper if you buy landlords insurance with building insurance together.

Anyway I thought that finding a tenant was only one weeks rent plus the lease fee of $15

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the only dumb question is the one that isn’t asked.
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I talked to some locals and sourced three builders with good references. Well known for good quality unit developments at a realistic cost! Before I talked to the locals, I was given the name of a builder by someone that doesn’t live in the area and it turned out they have a reputation for being the most expensive in the area. Matthew, your thoughts on checking out the local builders has indeed paid off. I also double checked the names with two Real Estate agents and have narrowed it down to two builders that are set up for my type of development.

Cheers,
Canuck

Hi thanks for the input.perhaps some more imformation.Ive been investing in IP since 92 and until 15/12/02 i was an internet virgin.I cant belive all IP imformation there is to study!In the last week ive learnt so much ive had a real confidence boost.Ifeel i can be alot more aggresive in my price offers after reading hints on how other people buy IPs.Back to my rate queston,if ive got loans of 400K against security of 600K (75%LVR) should i be able to get 5.5% to5.75% or is this too smaller borrowings? Also,when you calculate your return as a % do you do it on how much the IP cost when purchased or its current value? Thanks for the site,i enjoy reading how people overcome lifes speedhumps on the road to investment sucess Mitch[]