Forum Replies Created
- pirate wrote:
hi – excuse the ignorance but could someone help explain:
1) ignoring capital yield, what % rental yield would a person seek when searching for a potential ip? if in the current market the cost of finance is approx 8% ? i assume anything less than this would look unfavourable.
What type of IP (resi/comm/ind) – each market has a different yield associated with risk & your risk profile. It is fairly unlikely that you will find net yields above 8% unless you are looking at some extremely run down properties (quick fix) or larger scale industrial/commercial sites (>$3m in regional areas).
pirate wrote:2) following on from question 1, assume then we accept nothing less than 8% in rental yield for a property, by doing the sums this would mean for a standard $450k property, you would expect a weekly of rent of no less than $692 p/wk. Im no expert, but that to me sounds highly unlikely.Once again, it depends on the condition that you purchase the property, how much work is required to bring it up to a 'lettable' standard for its market.
pirate wrote:3) For arguments sake, lets assume now then, 4% rental yield and 4% cap yield. Even at these rates, you would expect weekly rent of $346. However even these rental rates, from what ive seen in the papers etc is extremely high and unlikely?As per part 2.
pirate wrote:4) Then theres the notion that property values will double every 7-10 years. Assume then a $450k property will double in 10years to $900k. Are we then, therefore saying that the salaries of the country will also increase in a manner relative to this rate? and at the same time, so will costs of fuel, etc basic commodities.?Yield will remain a relative constant subject to the spikes in market conditions then there are subsequent corrections.
Jamo.d your only available option is to object to any DA which is lodged within the 10 day period assigned. Raise as many valid objections as is possible (it might be worth engaging a town planner of your own to frame your objections), get as many of your neighbours, friends, relatives, long lost >>*&#>> etc to submit the same letter (changed name & addresses of course).
Have council address the issues of noise including restrictions to air conditioning plant noise, sound attenuation, landscaping/water retention & runoff, amenity, over shadowing, transmission of nighttime light from the premises, loss of privacy, siting of garbage facilities (request refrigerated garbage rooms to prevent smells & restrict vermin), conditions for the reuse of grey water/water tanks & environmentally sustainable designs/construction (5 star rating), ensure that the plans meet with existing planning requirements – floor space ratios/site coverage, set backs, minimum alotment sizes, private open space requirements etc.
My vehicle is an 'old style' discretionary trust. My second is the Pty LTD (I think that's a Ford). My wife drives – a hard bargain.
Give nothing away.
Does each party want to own 1/3? If so, do they have the borrowing capacity to make up the difference in their deposits? Essentially, you have between $75k & $95k as a deposit. You will need to determine how large an investment that you are all prepared to make – eg 80% geared $375-$475k range, one or more properties, each person's capacity to pay mortgage & whether this is reflected in their current level of savings?
Will this be anyone's PPOR? Is the FHBG applicable?Tracey, I am just presenting the traditional/commonly accepted approach to these things. Each investor will weigh their decisions differently (rightly or wrongly) and invest according to their philosophy. In my book, cashflow is king when valuing an income producing property, hence a negatively geared property has a negative return on investment (unless you factor in the intangible capital growth which is realised upon refinancing or sale).
I didn't once suspect that you were a valuer (or had any idea in regard to accepted valuation methodology).
Dr.Spock wrote:why don't you just go to council and ask for the owners details, as you need to get in touch with themSome privacy issues here Spock – this is a breach of council's privacy code. Valuers can no longer get this information directly form council and must go to the LTO/information providers.
On the whole insurers will only pay out the barest minimum that they are required. If you are over-insured or double insured you will only get paid up to its value (split by the number of insurers). They win.
If you are using a licensed builder you can do as many as you like in whatever timeframe. In NSW, at least, you will be required to have an owner builders licence requiring you to sit a course – about $500. Not sure if it is the same in other states.
VI, you own whatever is within your walls – carpets, paint, kitchen, built-ins, light fittings, bath tub/shower screen, basin, tiles etc. Visit a few showrooms to get a feel for what the fitout is worth to replace then depreciate it to its current state. Very few policies will cover new for old and you will always be caught short.
Consult your Cordells for replacement cost of the building – insured value includes 10% for demo, 10% for consultants etc so there goes $140k from the construction cost. Does $140k/unit excluding fitout cover you?, does the cover include loss of rent/alternative accommodation during reconstruction?
Tracey, it is a much more likely scenario that you would be getting your 12% on your commercial property based on a 4% growth/8% rental yield with CPI/4% growth and this would affect your equation as follows:
Commercial Ppty – $250k yielding $10k capital gwth & $20k nett rent. This would result in +ve cashflow from day 1 (at the right interest rate of course) plus capital growth. The annual cpi rent review would maintain the yield at about 8%.
Neither commercial property, nor any other property, is ever valued on its two yield components as this gives a skewed result (this method does not comply with the API guidelines). It is impractical and misleading to value land using such a method. A DCF takes the purchase and sale price into account to reveal the IRR & NPV, and the secondary methodology of comparable values will arrive at the value of the asset only.
Hint – if it is negatively geared, it is COSTING YOU MONEY & vice versa. Tax offsets only improve your situation (at some point in time).
Trakka, sure you must consider ROI on your investment but you must also consider ROI of the entire asset, if you have a good performing asset (remember, you may actually own the whole asset at some stage of its life), then your ROI on your capital will be much greater.
Trakka, you're right regarding the intent of the legislation it is to ensure that building works are carried out by licensed trades (Dept of Fair Trade/VCat etc). The use of unlicensed trades is risky – most tradies regardless of company status/sole trader/partnership have blanket insurance policies not taken out on a job by job basis (notification of risk required) – if they don't have insurance YOU aren't protected if something goes awry.
Some types of work can only be undertaken by licensed trades regardless of value – eg plumbing, electrical, air con, asbestos removal (in some circumstances), scaffold erection over certain heights. Other works above some nominal threshold do require licensed tradies. So in your instance, you may not need to engage a builder for $13k of carpet BUT the carpet company/layer would have a licence for their trade category.
I generally stick with the rule that if it doesn't require a planning permit ie nothing structural then I don't need to have a owner/builder's licence. That is not to say that I won't require the tradies to have the appropriate licences & insurances even if I don't need a permit.
The Perth A Grade commercial market is quite tight at present and there is very little new stock coming on the market (either under construction or being planned). The new train line in the centre of Perth will also drive demand for well located property (near Hay/Murray St malls).
Read and understand the lease which is in place, lease term remaining, options aren't a given, the type of rent reviews and lessee/lessor obligations.
Linda, you can't count your land value 3 times as each house will only have 1/3 of the land.
On ths construction side of things, do you have side access/dual street frontage or will they have to lift the buildings over the existing house – this will cost a fair bit due to the size of the crane required?
If you can provide a few extra student niceties eg additional power/wireless network/broadband connection/multiple phone jacks etc ie have the place wired for students it will become more attractive to them.
Explosions? Good area?
Millions – am I missing something? Cashflow = $8k pa, Value increase = $600k. Is the ROI 1.3%? How can you determine that the property value would increase by $600k if you are only going to get a $8k return, I would have pegged it around $160-200k.
Is the block zoned for multiple residences and will council allow it (even without subdivision)?
As you are looking at the student market – possibly consider a share-house situation maybe even 2 x 4 bdrm/2 bath. 3 bedders will attract families and will be too pricey for singles unless sharing.
Contact a financial planner/advisor (possibly through your insurer) to advise on how to continue your income – options include putting some of your insurance payout back into super (you will only need to wait 9 years to access it and its earnings tax-free – i'd suggest an industry fund as they have the lowest fees – see super ratings), managed fund ($1000 entry + regular deposits) etc.
Get the planner to run through your current situation including income, medical expenses/care, living costs etc to determine your level of 'free' income and what possibilities could improve your situation including any structures that you may need to put in place.
You may find a good planner from discussion with friends or recommendations from this board.
I just use my sharp financial calculator – otherwise google is your friend.
I recently had a look in the local rag for the area where I am working. I found 2 units (1bdr & 2 bdr) + a third on the net – all located in the same complex and ALL returning around 6% gross.
They are easy enough to find once you know where to look. I will add that there are even cheaper areas nearby but this area is close to rail & regional shopping centre, schools, govt offices etc.
It would be easy to buy up all 3 for less than $500k.
I saw a commercial property the other day leased for a 7.5% net return. It looked great until you realise that the rent paid is unsustainable – they were paying 20-30% above Sydney Industrial prices for B grade property for a D Grade industrial building near God only knows (probably 60% above comparables).
