Hi guys,
I have found a borderline investment and was wanting to pick your brains to see if you think it is worth it…
Block of 4 units
Large regional town, different industries.
Population over 15000
Price $245000
Rental income $440 per week ($110 each)
Based on my calculations the rent will cover an interest only loan, plus outgoings, and leave a little bit of profit.
These units are about 30 years old, in a great location and are bottom of the market for rental.
That is I haven’t found another unit/flat in the area renting so cheaply, cheapest was $125 pw.
In fact, I believe the rent should rise in the area soon as there seems to be a slight shortage.
As there are four, the rent only has go up by $5 to make $20 extra a week. I realise that there would be 4 times the maintenance as well….
What do you think? Worth buying and holding or am I putting all my eggs in one basket?
The trouble is I have been looking for quite a while now and I have reached the point where I’m wondering if I am passing up oportunities because I am too scared….[blush2] and I think I make up excuses for not buying…is this a deal you would go for?
Feel free to amke any comments…positive and negative….
Sue [biggrin]“Be careful not to step on the flowers when you’re reaching for the stars”
Sue.
Have a good look at the building and make sure it doesnt need to much money spent on it.See what you could do to add value to each unit to warrant a rent hike.Do your sums and make a low offer to start as the figures are still a bit low at 9.3%gr.There are better deals out there so dont go with it unless it absolutely measures up.
Russ.Hi Diclem,
According to my calculations (that’s if I have done it right, correct me if I am wrong anyone) the rental return on this investment is 9.3% and if you up the rent by another $20 p/w it should make it a nice 9.7% (not quite the 10% most +CF people are chasing) but good in my books.
Before you buy, if that is what you decide:
a. Firstly, research the area as much as possible
b. Try and get the 245K down as much as possible.Without know where they are, it is hard to comment, but they sound good to me. Also, are the units on strata titles, as this will help should you get stuck financially and need to sell one or a couple off, to make ends meet in case of hardship.
Again, as I said, market is down, so negotiate like mad….!!!!
Jo
is it on one title or 4?? is there an active body corporate? Is there a property manager in place and what management rates?
Is the area growing and if so why?
Is there a slush fund in the body corp for you to do renos out of so you dont hit your money?
Have you got a building and Pest report yet?
What structural or other damage needs repairs? Answer these and you are getting close to an informed decision and not just base figures. Does each have a garage or carport? Are they covered or open?Get to it its all to easy on the face of it, do some real digging first.
DD
Sounds like a good deal on the face of it. Don’t get sucked into having to get 10% or more return straight up, look to the future too.
Why would you take an IO loan when you could probably cover P&I for a few dollars more? I have never understood this “strategy”.
A.
Wow, some great replies, thanks guys.
Russ, The building seems solid, one building BV, all units attached. Small improvements, such as new standard kitchen would help increase rent.
Monopoly, Units are all on one title. Have spoken to the council and all indications are that they could easily be strata titled. If I was to do this they would be worth more, approx.80K each. This is an option I am looking at. I could sell one or two and really increase return on Inv.
DD, Only one title and stratatitling the group is an option.So for the moment no body corp to worry about.The town is spending millions on a “new development” and actively encouraging new business to the area. The units are also only one street from a major hospital and right in the heart of town.
Anubis, The IO loan is due to the fact that we will only qualify for lo-doc loans as we are self employed with horrible yearly income (On paper!)
Thanks again guys…any further comment?
Sue [biggrin]“Be careful not to step on the flowers when you’re reaching for the stars”
Hey Sue, can I have the details so I can go and buy them [
]If you have the options of both increased cashflow, and future gains, grab them!!
Not sure what you think of wraps or whatever, but you could always sell one or two of them to existing tenants if they have been there long term – you could do a ‘real’ vendor finance deal by taking a second mortgage rather than a complete wrap too.
Cheers
MelSorry – I meant to say
Deal!
Cheers
MelHi Melbear,
Thanks, some interesting advice.
I should have gone with my gut instinct on these, you guessed it, they’re sold![evil4]
Another blow for Sue the procrastinator [biggrin]
I’ll keep up the search….
Cheers,
Sue [biggrin]“Be careful not to step on the flowers when you’re reaching for the stars”
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