Sorry another topic from me…
I am just trying to see if I am on right track with potential IPs in WA… No plans to buy at this stage – still doing research (heck I only started last nite!).
IP #1. – Wembley – One bedroom Unit “Investors bargain, etc” – Asking price – $115,000. Currently rented out at $110 pwk.
* From my own calculations – it is a negative cashflow property:
($115,000 divided by 1000) x 2.5 = $287.5 pwk therefore a loss of $117.5 pwk
Is this right??
So if using the 11 Sec Sol., it will calculate as a bad buy: the loss of $54, 885…
Right?
Now next one:
IP #2. – Norseman – 3 bedrooms fibro house – asking price – $45,000. Currently rented at $95pwk.
* From my own calculations it is a postive cashflow property:
($45,000 / 1000) x 2.5 = $112.5pwk
therefore a postive gain of $17.5 pwk…Is this correct?
If using 11 Sec Sol., it would come to the saving of $2, 500. ??
It is just an exercise for me to see if I can work it out ‘correctly’…
Cheers with thanks, darls
I don’t think the 11 sec solution is designed to give you a shortfall – just used as a broad brush disrciminator.
To work out the actual figures you need something a little more sophisticated. Many different spreadsheets out there and some folks make their own.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Todays Hot Rate
3 year fixed – 6.57%Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
hi darls
one other thing to take into account are your expenses,over 3 properties i have and they range in age from 5-50years,expenses run out at 30% of my gross rent excluding interest.cheers
CHEVOriginally posted by darls_666:Sorry another topic from me…
I am just trying to see if I am on right track with potential IPs in WA… No plans to buy at this stage – still doing research (heck I only started last nite!).
IP #1. – Wembley – One bedroom Unit “Investors bargain, etc” – Asking price – $115,000. Currently rented out at $110 pwk.
* From my own calculations – it is a negative cashflow property:
($115,000 divided by 1000) x 2.5 = $287.5 pwk therefore a loss of $117.5 pwk
Is this right??
So if using the 11 Sec Sol., it will calculate as a bad buy: the loss of $54, 885…
Right?
Now next one:
IP #2. – Norseman – 3 bedrooms fibro house – asking price – $45,000. Currently rented at $95pwk.
* From my own calculations it is a postive cashflow property:
($45,000 / 1000) x 2.5 = $112.5pwk
therefore a postive gain of $17.5 pwk…Is this correct?
If using 11 Sec Sol., it would come to the saving of $2, 500. ??
It is just an exercise for me to see if I can work it out ‘correctly’…
Cheers with thanks, darls
Hey Darls,
Remember that real estate agents are trying to sell the property. If they call it an “investor’s bargain” or a “great investment”, all it means is “we want to sell it” – ie, it doesn’t contain any information at all.
On the face of it the 2nd place seems like a damn good deal, especially in today’s market.
The 11s solution is only meant to be a very quick discriminator. It comes out at 10.4% if the weekly rental is double the price divided by 1000 because 10.4% = 2 * 52 / 1000. Hence the 10.4% – the 7% or whatever your interest rate is leaves you with a 3.4% difference to pay for insurance, council rates, property management fees etc.
To work out the cashflow properly, you’ll need to calculate the interest on the loan, plus all the outgoings like insurance, council rates etc.
Thanks to all who replied…
I know it is just generalised formula but still I’d like to sort all the ‘formulas’ to see which can work better for me in a ‘flash’…
I found this Positive Cashflow Calculator which is much useful when it comes to calculate most of required stuff, so will work with that for time being till I get used to all the things I need to remember (interest, stamp duties, rates, loan, etc).
Apparently, according to the Calculator, both properties are ‘in the bin’… smiles.
I actually would like to invest some in NSW, so am working things through before I actually start doing my research. You can say its like exercise stuff for me at the moment.
Cheers with thanks, darls.
Hi Darls,
I wouldn’t consider either of these two properties a good investment.
Wembley is the equivalent of one bedroom flat city – they are a dime a dozen in the area and their long term growth has been average to say the least.
Norseman on the other hand is even worse.
When evaluating properties do not neglect the fundamentals of the property.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Darls,
If you are having fun playing around with some formulae you may also be interested in Jaffasoft’s calculators. You can find them at:
Cheers,
Ali G
Hi
I wouldn’t buy in Wembley at the moment.
Poor capital growth and low rents.
I’ve recently seen a one bedroom unit in Como $157,000 @ $185/pw. Good cash flow for the area and good capital growth.
Do a little more looking around.
The 11 sec solution isn’t the answer to everything.
Cheers
Scott
I live in Karratha and for a fee find quality cash positive deals there, email me at [email protected] to join our database
Those two examples are extremes, and I’d agree with Derek that they are unlikely to be champion investments.
As for Norseman, I’ve seen houses there for $15k, so $45k is a bit much – you’d probably get something in a slightly better town (eg Merredin) for that. Not that I advocate Merredin, but it would have to be better than Norseman, and less remote, too.
I would pick something that’s closer to an ‘average’ property for a first IP.
It could be in a large regional centre or Perth suburb. Maybe a modest house, duplex half or 2-3br unit in a small complex. Well-located, basic but well-presented for tenants and not too expensive to own.
As for price look around 70% of the median price for the area so it’s not a hovel but is still sufficiently cheap that it will not be too long before you can buy IPs 2, 3 & 4 as well!
Regards, Peter
Perth is diffucult to find +ve geared properties. Focus more down south in remote towns
Precise,
I’d ‘research’ those ‘remote’ towns also, check population and economic trends etc also..
Some inland places look great, then when you do a bit of research..
I prefer coastal..but thats just me..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculator
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