HI all
I bought my first investment property 4 mths ago in Cooma NSW. 2 br, 8sq split level house on 930m sq block. Good quality houses in street with nice aspect from front verandah as on slope with big front yard. I did my first Landlord inspection last week, the tenant is immaculate with house & garden, even made some curtains, pays rent on time. She is 56, on disability pension, works P/T and struggled mowing the lawn so I am paying another Pensioner $25 cash a fortnight to mow the law.Costs for property a yr are $1900 rates, $910 Landlord and House insurance, R/E fees $560 yr, lawn mowed $650 yr. Rent received $140 week ($7280 yr). Add $1000 repairs to costs, TOTAL COSTS $5020. $2260 yr profit. Paid $140,000 for the property, owe $130,000 so is negatively geared, except for the lawn mowing.
I'm wondering if this investment was a good idea, no laundry, only enough room in bathroom for small washing machine, does have a carport. House in excellent condition. Am I right in paying for the lawn to be mowed in order to look after an excellent tenant? Maybe I should turn the yard into a native garden or should I extend out the front of the house, turn it into a 3 br, lge lounge room, big verandah, laundry and double garage under the extension. I was quoted $100,00 by a friend of mine who builds houses but have been advised I would be better off just to buy another house in the next 2 years.
Any thoughts would be appreciated.
Hi Anny,
Before I and everybody else say what we think of your investment, please follow your heart. You knew it was the right decision, whatever everybody else says cannot change the fact that it is yours and it is best to stick with it for at least a year, possibly even longer.
First, it is important to find as much tax deductible expenses as possible. If it was mine, I'll make sure to get GST invoice for the mowing services, otherwise it is not tax deductible. Also, lender's mortgage insurance is tax deductible. Contact your accountant to find out what else you can claim. You are a very nice person, but you don't really need to pay for lawn mowing.
From gearing perspective, as I learnt from this website, it is ok as long as I have enough cash reserve to cover emergency repairs and possibility of paying interest while having no tenant for the longest period needed to find a tenant.
Your annual return of $2260 is approx. 1.6% of the property value. It varies between investors, but I usually want at least 4% pa from my IPs. Unless I expect good capital gain.
No idea about capital gain potential. I suppose you are quite happy with this otherwise you wouldn't have bought it.
I don't know much about the property, but just from info you provided I wouldn't change a thing there. Not now anyway, not for $100k.
Good luck,
Cattleya.Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Cattleya
Thanks for the feedback. I will keep it and analyse my situation in a year or 2, I think the capital gain will be OK but am unsure as it is only a 2br. I have to consider as you say whether a 1.6% return is enough. Even if I totally owned it the return is low. In time I could sell it and buy a 3br with hopefully a better return or just buy another one.I can service any unexpected expenses, as I have a high income. Certainly, not an easy game IP buying but I will succeed and no doubt learn as I go.
Regards AnnyHi Anny,
Congratulations, you've taken your first step. Regardless of the detail of the investment, you have already set yourself apart from the masses.
The next thing IMO is to try learn from this investment, whatever it may teach you. The reality is that you will need to wait some time before you would be able to sell without making a loss (if you wanted to sell that is). So use that time to see what happens.
I agree with the others that you should hold off any further investment in this one until you see what it's going to teach you. Time is your friend, let it work for you.
WRT the lawnmowing, you might want to work out whether using someone who can give you a tax invoice will cost you more or less after the tax deduction than the current pensioner. If it's much of a muchness, you may well get a better job from the pensioner anyway, and it's a nice thing to do.
Best of luck,
Daedalus.
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