looking at a property in tassie for possible wrap/ reovate.
we will be living in the property for 12 months while building house.
buy for 90k needs 11,500 approx on renovating could easy sell for 144k-145 k in 12 months after renovation.
in growing area near where we building.
if we did a wrap after 12m taking into consideration renovations our Cash on cash return would be 18.32% and after pay out renovations it would be 50.88% cocr.
an immediate amount of 44 per week would be our profit and the vendor payments would be $ 248 per week. it would prob rent for 180 per week so it would be negative gearing if we did this by -$55 a year.
anyway with a wrap over 10 yrs a profit of 35,203k
this inc repairs allowed.
with a renovate after 1 yr we would make 41,280k clear profit after all exp inc our 12,550 start up costs.
what sounds better?Hi Lizzy
I’m not sure how you’ve worked out your property would be negative geared renting at $180 per week, on a purchase of $90K.
An option for you to get cash in 12 months, and still wrap, would be to get it revalued at that time, refinance to pull out all extra equity, and then wrap. At a value of $144K, you could borrow $115.2K at 80% which certainly seems to cover all purchasing and renovation costs, and gives you some more cash in pocket. Then if you wrap it for weekly payments of more than your mortgage, you are well in front.
I’d check your figures, and refinance, and maybe even keep as a rental proposition.
cheers
Melhi mel
how i worked out the figures was
purchase price 90k
deposit 10% 9k
closing costs 3,550k
initial cash needed
12,550
our loan 81k
p & i loan
25 yrs at 6.5%
weekly repayment $126.14
annual cashflow out would be
loan 6,559.28c
rates 1,200
insurance 200
repairs budget 468
total cash out $8427.28
total cashflow received
9,360
but this is not allowing for any repairs to the property.
so when the repairs are taken into consideration it would be negative
or am i wrong????Hi Lizzy
I’m not sure how you’ve worked out your property would be negative geared renting at $180 per week, on a purchase of $90K.
An option for you to get cash in 12 months, and still wrap, would be to get it revalued at that time, refinance to pull out all extra equity, and then wrap. At a value of $144K, you could borrow $115.2K at 80% which certainly seems to cover all purchasing and renovation costs, and gives you some more cash in pocket. Then if you wrap it for weekly payments of more than your mortgage, you are well in front.
I’d check your figures, and refinance, and maybe even keep as a rental proposition.
cheers
Melhi mel
how i worked out the figures was
purchase price 90k
deposit 10% 9k
closing costs 3,550k
initial cash needed
12,550
our loan 81k
p & i loan
25 yrs at 6.5%
weekly repayment $126.14
annual cashflow out would be
loan 6,559.28c
rates 1,200
insurance 200
repairs budget 468
total cash out $8427.28
total cashflow received
9,360
but this is not allowing for any repairs to the property.
so when the repairs are taken into consideration it would be negative
or am i wrong????Hi Lizzy
I’m not sure how you’ve worked out your property would be negative geared renting at $180 per week, on a purchase of $90K.
An option for you to get cash in 12 months, and still wrap, would be to get it revalued at that time, refinance to pull out all extra equity, and then wrap. At a value of $144K, you could borrow $115.2K at 80% which certainly seems to cover all purchasing and renovation costs, and gives you some more cash in pocket. Then if you wrap it for weekly payments of more than your mortgage, you are well in front.
I’d check your figures, and refinance, and maybe even keep as a rental proposition.
cheers
MelLizzy
From your outgoings mentioned versus rent, there is still a surplus of close to $1000 per year. Even if you borrowed the $11.5K for renovations, I would have thought that the rent would cover it?
If it is a growing area as you say, and the property will cover itself, and grows enough for you to then refinance to pull out any cash you put in, and then some, why not keep it?
Cheers
MelHi Lizzy1
looking over your figures you have left out management fees on the rent. I also find that the 11sec rule doesnt always give you a cashflow +ve place. Maybe someone else can explain how hey have done it. In steves book the first property he buys the rent is 2.7 times the purchase price/1000 and he only makes $1000/y if it fit the 11sec rule he would make a loss of $621.
So if someone has a working example I would love to see it.
Erikathe property sold for 111k, so we missed out!
LizzyFrom your outgoings mentioned versus rent, there is still a surplus of close to $1000 per year. Even if you borrowed the $11.5K for renovations, I would have thought that the rent would cover it?
If it is a growing area as you say, and the property will cover itself, and grows enough for you to then refinance to pull out any cash you put in, and then some, why not keep it?
Cheers
Melyes i agree with you i would like to see the 11 sec rule put into action and given some examples as if they just fit the 11 sec rule it seems to be negative gearing!
lizzy
Hi Lizzy1
looking over your figures you have left out management fees on the rent. I also find that the 11sec rule doesnt always give you a cashflow +ve place. Maybe someone else can explain how hey have done it. In steves book the first property he buys the rent is 2.7 times the purchase price/1000 and he only makes $1000/y if it fit the 11sec rule he would make a loss of $621.
So if someone has a working example I would love to see it.
Erika
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