Viewing 6 posts - 1 through 6 (of 6 total)
  • Profile photo of Nathan BirchNathan Birch
    Participant
    @nathan-birch
    Join Date: 2004
    Post Count: 189

    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!

    Profile photo of mrsuccessfulmrsuccessful
    Member
    @mrsuccessful
    Join Date: 2004
    Post Count: 15

    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???

    stephen love

    Profile photo of aussiemikeaussiemike
    Participant
    @aussiemike
    Join Date: 2004
    Post Count: 66

    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.

    Profile photo of mrsuccessfulmrsuccessful
    Member
    @mrsuccessful
    Join Date: 2004
    Post Count: 15

    Like i said Im no expert and looks like I have a lot of learning to do :( back to the books

    stephen love

    Profile photo of IbuycashflowIbuycashflow
    Participant
    @ibuycashflow
    Join Date: 2004
    Post Count: 274

    Hi Aussiemike

    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.

    Cheers
    Jeff

    Profile photo of melbearmelbear
    Member
    @melbear
    Join Date: 2003
    Post Count: 2,429

    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

Viewing 6 posts - 1 through 6 (of 6 total)

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