Hi All,
The senario is as follows,
Regional NSW double block cost $60K. Building 4 separate units total $260K turn key stage.All costs to be included in loan including stamp duty. Lets say for argument sake $16K. Estimate income $150x4x52 weeks equals $31K per annum. Runnings costs lets say $6K. Take into account depreciation $6.5K and $2K for fixtures and fittings. Loan to be based on LOC. Paying P=I. Tax rebate approx $6K. Objective is for long term to use property as income for retirement in 10-15 years. All going well intend to buy 2 more the same. I have equity in my own home to cover the deposit/s. The above figures reflect positive income. Does it meet the minium requirement for return? Your opinion on the above would go a long way with helping me to make the right choice. And yes my eyes are wide open and not signing nothing until all is investigated. I hope the above information is sufficient for you to advise. I am not too concerned with capital gain moreso the income. Secondly what sort of exit stategy would you recommend. Thirdly should I start small and work up to larger investments. Looking forward to your comments.
Thanks
GazaHi Gaza,
Any accountants out there [
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Tonights Steve’s Launch of his new Bestseller book, so the forum might be a little quiet tonight. I’m sure someone with nouse for figures (unlike me) will be able to help out.Cheers
Sooshie []“small steps make the journey” (SAS)
Hi there,
Before you commit to build, have a really good look for what you could get for the same money in existing units or houses or block of flats for that price, and what they would return rent-wise. You may be able to get better returns by buying something older. Or maybe renovating some older-style units.
However building new has some definite plusses to do with capital value – though you say that’s not your main motive, if you have equity, you can use it…
Also it should be a few years until you have to do much in the way of maintenance…Minusses are the chance of going over budget for unforseeable reasons, delays, you might be paying interest on the money a while before you have income from it…
cheers-
MiniGaza
Let me see if I help you.
Land Cost $60K
Building Costs $260K (that is $65K each Unit)
Other Costs S/Duty etc. $16K
This makes a Total of $336KThe Building costs are extremely cheap. Am concerned that $16K is not enough to cover variations and non-building cost items such as landscaping. Have you taken into account Architect Fees, Council Permit Fees, Surveyor/Subdivison Fees. Then there are holding costs whilst it may take anywhere from 6 to 9 months to get the Council Permits and get a builder signed up, plus add the time to build – another 6 months.
Building costs are averaging about $10K to $13K per square. So for a 10sq Unit with a Single Lock Up Garage would be $100K upwards. This does not include landscaping or driveways.
If you use the 11 second solution – $150 x 4 / 2 x $1000 = $ 300,000 – it indicates that you would be overcapitalising on a per weekly rental.
You should probably not retain all 4 Units. Perhaps sell 2 to recoup building costs and retain 2. You need to check out what the current sales are for the type of Unit you intend to build. Also whether there is a demand for this type of property in the area.
Am looking at a similar situation at the moment, but the sale values are too low. The project would be a break even situation so not worth proceeding when there is no profit.
If you re-do your figures you may come up with a break even scenario too.
Hopes this helps.
Cheers
Nessie
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