Hi all,
I have just come across my first positively
geared property. It is a duplex,
has a rent of $280 per week and is for sale for $140,000.
The thing is, it was listed at $135,000 and now that someone
wants to buy, the owner wants to increase the price. To cut
the story short, the owner doesn’t stick to his word and
is mucking us around. I know this is a very subject
decision for us to make. But what I am not sure of because
my hubby and I are new to this is, do opportunities for a 10% return
come up often and should we wait for someone who
is easier to deal with. Not having the experience behind us, is
making it harder for us to decide.
TaraTara,
Understand that there are always good deals out there you just have to be patience and diligent and wait for the deals to come across your path the more you look.
I had a vendor (seller) who did the same thing as what you have experienced. It was a 4bed brick home for initial agreed $89K … When I went to sign the contract the price had moved to $93K and when the agent rang me she said that the vendor now wanted $97K for it. I knew that there were no other buyers wanting the property at the time and the agent was not very happy either as I questioned whether the vendor was using baiting tactic to sell the property and the agent agreed with me that it seem to be that way. I declined to proceed any further with the contract.
Those vendors just waste your time.
Check out and confirm the numbers i.e. the rent return and if the numbers stack up get them onto a contract fast. However, if they are going to play funny games then simply walk away.
Regards,
Jason Moore
Property Trader | Boston West Pty Ltd
http://bostonwest.com.au
Email Me | Phone MePrivate money lending opportunities available paying upto 12%, secured by bricks and mortar!
Tara,
What are the associated costs of owning the Duplex ?
Rates, Insurance, Mgt Fees, etc.
Enjoy
AD [:0)]A great deal of talent is lost to the world for want of a little courage. Every day sends to their graves obscure men whose timidity prevented them from making a first effort.
-Sydney Smithad call me on 07 3325 4000 tonight and lets catch up.
Jason Moore
Property Trader | Boston West Pty Ltd
http://bostonwest.com.au
Email Me | Phone MePrivate money lending opportunities available paying upto 12%, secured by bricks and mortar!
Jason and Ad,
Thanks heaps for your reply. I really appreciated
your comments. I went back over the figures like
you suggested and found the rates were much higher
than I thought. So at $140,000 the property was
actually negatively geared by $7.00 per week. At
$135,000 the rent would probably have just covered
the outgoings. This was a really good experience
for me and really brought home the importance of
getting the figures right. It also has me wondering
if those of you with experience,
has developed a benchmark or rule-of-thumb
for how much cashflow after the expenses (rates, insurance,
property management fees, interest)to aim for when
looking at a property.
Thanks everyone
TaraI suppose the answer for me is …the more the better…seriously though each property has it’s own merits so where one might deliver lower cashflow but was bought at great discount another might have been retail cost but great cashflow. As a personal benchamrk I just want the property to pay itself off over about 15 years. I must admit that I believe I will have all my properties paid off within 8 years but I like to stretch myself.
I guess you have to find what you feel is sufficient to keep you happy. Another angle to consider is that a property doesn’t have to be rented only ….any wrap property is cashflow positive from day one.
Two examples…..
1. bought for $64500 rents for $150/week. Great house to rent and has actually grown in value to boot.
2. bought for $85000 rents for $160/week (will be $170 on renewal). This one I paid more for because it was discounted heavily. Other similar houses are selling for $110-120K in the same area.For me I can where the nuetrality of the deal for the capital gain.
Hope this helped and just remember to keep on enjoying yourself Tara and don’t get to worried.Enjoy
ADA great deal of talent is lost to the world for want of a little courage. Every day sends to their graves obscure men whose timidity prevented them from making a first effort.
-Sydney SmithHi Tara (and everyone else [
])good question to ask I must say !
I wholeheartedly agree with the other great advice given here. Do the numbers three or four different ways, add in all the costs you can possibly think of, add in a few extra % for contingencies and tehn see how it stacks up.
Steve & Dave’s 11 Second Solution is a great filter.
i.e. (“weekly rental”/2) x 1,000 = “maximum purchase price”This does not always produce cash flow positive properties but it certainly filters out the ones that aren’t.
As Jason so rightly said there are many deals around. You just need to spend time to learn to spot them (and funnily enough) having spent the time to prepare, the universe rewards you by sending deals your way when you are ready for them…..
We try to buy 12% yield plus, BUT, still very carefully analyse each situation as the real return is a function of so many paramters. Recently we found one at 10% yield (about what the 11sec solution gives) and it had a great return due to low rates and other costs.
cheerio
Bruce
Ad & Bruce,
Thanks for your reply. It’s great to hear how you
approach it. It has helped me a lot.
Tara.
])The topic ‘How much to pay?’ is closed to new replies.
