Hi folks,
I would like to get some opinions as to what sort of percentage returns would an experienced investor be looking for if he was to buy a property then rent it out.
I have a family member who has a large home that is 2 story, 3 bedrooms 1 bathroon 1 lockup garage & large kitchen large dining etc on EACH level, each level is completely self sufficent & private and can be let for say 360.00 per week each giving a total weekly rental of $720.00.
It will be put for sale soon,I would like some feedback as to what percentage return an ivestor would want,then I could work out as to what it might be worth.
The home is on one title but could be strata titled possibly, as both levels have separate entries exits laundrys etc.The land area is about 850m2
The home has undergone a large refurb with new paint,new carpet etc,Thanks for your replys
Sorry I don’t believe that question can be answered.
Different investors look for different things in a rental property. If you had a positive cash flow investor looking to buy it then they would want somewhere between 7%-12% rental return, if it is in a high growth area then someone might be willing to accept a 4% rental return.
Generally the rental return of a property is determined by the area it is situated in. The area will greatly determine the price of the property and it will also determine the rental income one can achieve…thus determining the rental return. Rural areas tend to have higher rental returns, inner city and high desired areas (such as waterfronts and beach areas) tend to have a lower rental return because properties are high in demand and thus command a high purchase price compared to rental return.
You can buy an Australian Property Investor Magazine from your local newsagency. At the back of the mag they have rental returns for almost every suburb in Australia. Check that out and you should be able to find out the average return of your area.
Ryan McLean | On Property
http://onproperty.com.au
Email MeI think that you will find that a property’s value to an investor and the potential maximum sale price are two very different things in the current market. Yields in Sydney are often as low as 3%.
The real question you should be asking is “how do I maximise the sales value of the property?”
It is quite likely that by strata titling and selling each unit individually to owner occupiers, that the value will be considerably higher than trying to sell to investors, as an owner occupier will have different decision criteria. (Often they are just stupid, with the ridiculous prices paid in the Sydney market at the moment).
Can you split the title and sell as two apartments?
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
trustieone wrote:…… what percentage return an ivestor would want,then I could work out as to what it might be worth.We buy a lot of these types of dual income properties for our investor clients. Generally speaking the kinds of yields are between 7 > 8% or a fraction more.
HOWEVER, this yield cannot be used as the basis of valuing the property.That is often how commercial property is valued – on a cap rate. But residential property is valued on a "comparable sales" basis. i.e. similar properties that have recently sold.
Thanks for the replies folks, todate I will work on or near the 6% ROI figure, I came to this conclusion after seeing what defence housing is offering which is anything from from 4.2% to a maximum i can find of 5.3% ROI which for an investor is on the low side to my way of thinking, I know they find the tennant and do some new carpets and paint job. All their properties were outside the Sydney basin as well.
mattnz
The property could be strated i am sure however my rellies just want it sold so wont go down that path.
Ryan
I will get that magazine as you suggested before making any final decisions on price, & thanks for the tip.
Thanks Everyone
just a valuer to vaue it
or pay for RP data report – desktop valuationTrustieone,
I am an investor and property sounds interesting. I have several other options in mind. Would be great to get an option on
this property. [email protected]
I have a few other ideas , so if you like happy to express them for sale.Hi trustieone.
If it was me, I'd look at what else is for sale in the area to get an idea of the likely value. If you are buying from a relative they may be willing to sell it for close to council valuation (normally conservative) for a quick sale, and to avoid agents' fees. From there you might consider that (in answer to your question) the property is worth buying if the two rents pay for the holdings costs (interest plus outgoings minus tax deductions) and (b) there is a likelihood that you could make money by subdividing and on-selling the two units.
Sounds interesting!
G
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