Minimogul

hi Mr Charchie,

yeah I could, but why not ask them here and I will try to help? Then others can read it too
cheers-
Mini

hi there OK
house number one 16 plus 9 = 25K
rent 95 p/w
95 times 52 = 4940 minus ten percent management fees = 4446 minus insurance 300 and rates 1200 =
2946 which equals more than a 10 percent return after holding costs. of course if you are borrowing add borrowing costs on, which will depend on how much you borrow etc and your rate. but as long as borrowing is less than 10 percent you could have 100 percent finance and still break even and then some. Also bear in mind that there should be minimal maintenance because it was all done in the 9K spent originally.

so doing the 27,300 house, the rent is 110 times 52 weeks, 5720 minus 572 management equals 5148, less rates and insurance of 1300 equals 3438.

divide 3438 by the purchase price and you get 14 percent. The reality was a bit less than that because I had some plumbing, let’s say 1000, so the real figures for the first year was more like 3438 – 1000 equals 2438 divided by purchase price equals 8 percent.

But if you capitalised the plumbing or whatever your initial renovation and maintenance is into the purchase price (which I do) then you get 3438 divided by 28300 which is 12 percent.

the third one works the same way, 19k plus 10 k renovations in order to rent it for 115 p/w/, i call that a 29k house. 115 times 52 weeks equals
5980. minus 598 management minus rates and insurance (1600) equals 3782. divided by the purchase price (capitalised to 29K) equals 13 percent.

I don’t have any mortgages on these ones. But this is an example of the kind of property you could 100 percent finance and it should still break even.

hope this helps. cheers-
mini

PS I also didn’t do depreciation, basically as i bought all the properties after march this year I won’t do the NZ tax return until march next year, when i will do all that tax deductible jazz. I think you can depreciate the whole house at 4 percent p/a in NZ without having to get a chattels valuation etc.

I also forgot about purchasing costs which were $550 per conveyance and $330 per builders report, give or take a hundred

That makes it a little worse if you capitalised it all in but still not too bad at all, i am well pleased with them

PPS also I made heaps of mistakes when i typed the original thing, how embarassing, i must have mucked up with the copy and paste thing – but just to clarify, they rent for 95, 110, and 115.
all the insurance is 300 and the rates are from 1000 -1200 p/a

Hi Charchie,

yeh that’s right, 3838.

OK re: would these deals be good if financed 100 percent?

Hmm. Good question. I would think so, because now that they are all set up and earning nicely with good stable tenants it would be a good time to offer them as collateral/serviceability income to buy more.

but for someone else? i don’t know..IMO the higher yields are in towns that many would consider higher risk. Especially if purchasing from o’seas. The areas i was investing in were the sort that people (my family!!!) said ‘ why do you want to buy THERE for?’
I guess not too different to Steve and West Wendouree!!! It was a small town, with a low average wage, but my research told me there was a high rental demand in the area for low-cost rental houses, and as long as they were decent (which mine became after renovation) they would get rented. with high yields.

the other thing to bear in mind that even though the town was maybe higher risk than a major town, I was adding to that risk by buying at the bottom of the market type properties- basically, renovating dumps that were structurally sound ex-state house type places. But, because I didn’t have to borrow, my *personal* risk was less, because i didn’t have borrowing costs from day one, which have me precious weeks to get them fixed up and get tenants without too much worry or any hardship to my life.

As they are now, renovated and tenanted, i would say it wouldn’t be too risky to finance against them, but i happen to know that lenders will probably only be prepared to lend me 70 percent because of where they are.

if I had got a single property with the same money i could have got +ve CF in an area with capital gain, and would have actually made more money in the same amount of time. But it wouldn’t have got me further towards my goals, necessarily, because what I want (for my specific situation) is regular income on paper to *service* future borrowing, as i am self employed freelance yada yada.

So really i think it depends on what you want to achieve. but theoretically, yes, and that is what I am planning to do next year.

cheers-
Mini