Hey guys, just your opinion….
What are your thoughts on a I.P in NSW? population 10,000 people house $80,000 rental $130 pw. they are putting in a new industry worth $110 million dollars creating 300 new jobs.
buy it?
should i buy sight unseen? like i drove through area for 3 hours and i drove past this house!
well im no expert but after doing the 11 second test on your figures you would have to buy that property for $65,000 dollars or under for it to be positively geared. Although you may be able to buy and put a wrap on it???
Not sure how you came up with a value of $65k for it to be positively geared. Ok the variables will differ but lets assume :
1. You are on the top marginal tax rate paying 48.5%
2. The property was constructed prior to 1985 and therefore not eligible for the Division 10D capital allowance.
3. Assume depreciation on fixtures and fittings at say 2,000 per annum.
4. Interest rate of 7% per annum.
So the rental income will be $ 6,760
Interest will be $ 5,600
Depreciation $ 2,000
NET LOSS $ 840
TAX EFFECT $ 395
TAX REFUND $ 445
So the property will result in a refund of $445 per annum. This is a good investment. Without taking into account the depreciation the property is positively geared.
If the capital growth is there as well then this sounds like a good investment to me.
You failed to take into account council rates, insurance, property management commission and possible repairs and maintenance. These are all cash expenses which effect the cashflow – depreciation is a “non cash” expense, it effects profitability but not cash flow.
Nathan, if you are happy with your research on the area otherwise, and buy subject to building and pest reports, then I would buy sight unseen….. but that’s just me.
I think we’ve seen many threads where people definitely wouldn’t, and a few where people have done a few times.
Cheers
Mel
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