I have just bought my first home / investment property. I believe i was neglegent to the number crunching when doing the deal. Its a 2×1 unit in Burswood Perth (approx 2km from City centre)73msq in a 30yr old well kept buliding complex with 79 units, (pool) and needs a little work. I negotiated 235,500 from 225-245k price range. Gathers $200 rent/wk. Interest repayments should be approx $290-$300 per week and body corporate and rates add up to $2250/annum.Have i done an allright deal, and for future reference what is the better product to help me with working out whether im doind a good deal and what i should pay at the most on a property is it 1. Buyer beware or 2. Investment Detective. Help
Hi mspartal
Weather it is a good deal or not depends on why you purchased it.
1. Negative geering. Loose money now – save tax = good deal
2. Positive geering earn money now = poor deal
3. Add value & sell = unknown
4. Dip toe in water with first property = good dealOn rough figures you will be loosing about $10,000 per anum. The question is are you going to get more than this in growth per year?
The main questions are why did you purchase it and how are you going to make money
It’s great you have made a start.
Mark
Is this taking us CLOSER to our goal?
Hey Mbutler
Thanks for the reply, To answer your question, yeah i guess this is one step forward to my goal. I worked out based on the interest + holding costs i would be approx $7000 down (100 per week interest + 2250 holding costs). I did have negative gearing / capital growth in mind when doing the deal because it is so close to the city. i purchased it to get into the market before prices continue to rise, i have a plan to hold it for a while and use the equity to build my portfolio. So based on that im counting on captial gain i guess. Are most negatively geared properties like this.
G’day mspartal,
Congratulations on your purchase. Looking at your numbers (what else matters right – in this game we play )
Gross yield = (200*52) / 235,500 = 4.4%
Outgoings : Not sure you’ve included everything. You’ve got rates (I presume you mean shire and water) and body corp fees which should include insurances…..what about Land Tax and PM fees, or if self managed you cannot do this for free….anyway…
As a roughy lets say 2250+850 for PMing+400 for Land Tax
Outgoings Impost = 3,500 / 235,500 = 1.5%
Nett yield on prop = 4.4 – 1.5 = 2.9%
Cost of money = (300*52) / 235500 = 6.6%
Hence, your property needs to appreciate by about 6.6 – 2.9 = 3.7% per annum for you to break even.
Tax implications will help you a bit, and may bring the requirement down to about say 3%.
Anything less than 3% and you are going out the back door. Any more than 3% and you are making unrealised profits.
So, what did your research tell you about these30yr units, have they been appreciating quicker than 3% p.a. ??
In terms of what do you need to buy to work out the figures…..maybe just a sharp pencil and a calculator…..do you really need to buy anything ??
Hope this helps. Cheers.
hi mspartal
The answers so far have been right and i would also add learning the first step is the hardest for anyone to take there is always the (am I doing the right thing) but with the fiurst purchase as it is a learning curve it should be buy the cheapest thing( least loss)
I f you end up making a profit and looks to me like you will in perth thats an added bonus.
you have not said how or what structure you havre put in place for this purchase but again thats learning.
for me the most important is now to learn from this purchase hone your buying procedure and If with dazzling with regard to the pencil and calc.
thats all you need oh and a sharp mind
good luckhere to help
If you want to get involved in some of the projects I’m involved in email to [email protected]
You must be logged in to reply to this topic. If you don't have an account, you can register here.
