Basic calculations

Viewing 7 posts - 1 through 7 (of 7 total)

boney bream
Participant
@boney-bream
Join Date: 2011
Post Count: 22
October 30, 2011 - 1:45 pm
Hello, we have been reading this site for a while. We have 100k to invest, and have found our dream location which we would like to live in a few years time, after we are sick of working the mines. Our combined income is 200k+
We will need to borrow 550k (650k asking price). The brand new house has tenants for the next 24months at $860/wk. Just a simple question, as we do not have experience in these mathematical situations……. Is $860/week a fair return for purchasing a property for 650k. We do eventually want to live in this house – 5-10 years time.
Thanks for your help. You guys seem to have great knowledge, and generous with your assistance.
Mick C
Participant
@shape
Join Date: 2010
Post Count: 1,099
October 30, 2011 - 2:14 pm
Hard to say without knowing the location….
It all comes down to the location.
+ your calculation didnt include any stamp duty + another soft cost which would eat up ~ $20k of your deposit
Regards
Michael
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone Me
Same Banks. Better Rates. Served With a Passion.
boney bream
Participant
@boney-bream
Join Date: 2011
Post Count: 22
October 30, 2011 - 2:42 pm
We have enough cash to cover the stamp duty etc. Just wondering if the rent/purchase price ratio was ok. We really want to live in this house one day………..
thanks shape
boney bream
Participant
@boney-bream
Join Date: 2011
Post Count: 22
October 30, 2011 - 2:48 pm
We are confident the location is "great"
Mick C
Participant
@shape
Join Date: 2010
Post Count: 1,099
October 30, 2011 - 3:07 pm
boney bream wrote:
We are confident the location is "great"
Fair enough
It returns 6.8% Gross yield which is ok for Metro capital city.
Most metro returns 5 -6 % these days; but of course the larger the metro ie Sydney and VIC the lower the rental return..
Regards
Michael
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone Me
Same Banks. Better Rates. Served With a Passion.
kong71286
Participant
@kong71286
Join Date: 2009
Post Count: 261
October 31, 2011 - 12:46 am
Guess it depends what your goals are, and what you want to achieve from purchasing the property.
If you are buying it as a lifestyle asset then the numbers don't matter as much as the emotional side of things.
However if you are buying it as an investment, then numbers mean everything and due diligence mean everything.
As Michael mentioned, location plays a crucial part in terms of capital growth, and a gross yield of 6.8% seems average.
Personally I would prefer to have at least +1% return over the interest rate for the loan i.e. if interest rate is 6.7%, I would like to have a property that yields at least +7.7%, so based on $860/week , the most I would pay is $580,779 (unless there are cost effective means to increase rent or add more perceived value)
boney bream
Participant
@boney-bream
Join Date: 2011
Post Count: 22
November 1, 2011 - 4:09 am
Thanks for your replies. Appreciate your input