Hi, I am looking at buying a property with the aim to renovate and sell. I think I have covered all the figures, but would like someone more experienced to confirm I have covered everything
Equity available in current property = $40K
Purchase Price = $195K
Purchasing Costs = $13K
Reno Costs = $14K
Total Cost = $222KLoan $ 182K ($40K deposit) (88% LVR so there will be some LMI)
Conservative sale price = $250K
Selling fees = $7.5K
Holding days = 60
Holding Costs = $2.4K (assumed 6.5% interest rate)
Profit = $18K (not including CGT)You may have some loan break fees (depends on the product – but the less you pay going in, the more you pay going out – so there may be some loan set up costs if you find a product that has few or any exit fees). Additionally, holding costs may incur some utility costs plus rates etc.
Not sure if you have included conveyancing fees in your selling and purchasing costs, am assuming so.I think things always cost more than estimated and it may also take twice as long to sell. Factor this in and add in LMI and legals on the purchase and the sale and there may not be much left. Not to mention time – how much could you have earned if working elsewhere during this period.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
As far as I can tell, all figures seem to have been covered but in my experience your figure for holding costs may be a little low.
Think of it as a 'money-in, money out' timeline i.e. you first put money in as a deposit, maybe wait 30 days for settlment, do the reno work, put it back on the market, sell the property, then wait for settlement (another 30 days maybe) which is when your money comes back out again.
If you can achieve this cycle in 60 days, that would be fantastic, but I feel that 60 days may not be long enough for this. I normally work on at least a 4 month 'money-in to money-out' timeline, and don't forget rates, utilities etc.
Good luck with the project if you decide to go ahead !
Those fugures don't look right to me on first glimpse.
I would be doing something a little more accurate with three senarios, best, worst and median and more margin, details etc.Thanks for your replies.
Yes the holding costs were a little low. Should be based on at least 90 day hold
Jaffasoft, all my figures were for worst case scenario. I.e. interest rate 1% higher than the current variable, Sale price $50K less than what others are going for, and the reno should only cost $10K, but I allowed $14K to be on the safe side.
Unfortunately we got our offer in too late and it is under contract with someone else now.
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