Hey guys, I think I will end up buying a property like this:
http://www.bendigorealestate.com.au/41_MYRTLE_STREET_BENDIGO_VIC_3550.What I appeals to me about this property is its location and price. Vacancy rates in Bendigo are a low 1.5% (API magazine) and this property is very close to the city centre which, means that I will be able to find tenants quickly.
Lets say I buy the property for $330,000 with a 20% deposit ($66K + closing costs), leaves me with a $264,000 mortgage.
The repayments will be (assuming 7% interest):
= 7% of 264K
= $18,480 per annumIn the advertisement the rent of the property is stated to be $390 per week.
$390 * 52 weeks = $20,280.Ultimately, I will be receiving $1800 per year from this property. Most of this would probably go into repairs and maintenance etc for the property so I would probably do some renovations to increase the rental yield after a year.
Does this sound like a good plan?
I am I missing something?Toss in the following and see what you think…….although everyone differs on their interpretation of positive, neutral and negative.
* Property Management at say 7 – 9 %
*Council Rates $1200 and Water rates $750
* Also interest on the deposit and closing costs if you have had to borrow them as well via redraw, a line of credit, or a separate loanCheers
Valid points, v8ghia. I was hoping that the $1800 remaining after repayments would cover most of the costs of the property (council and water rates). I don’t plan on getting a property manager while I only have one property so that can be a saving. I will probably end up using a few hundred $ from my own pocket for repairs or any unseen costs but I don’t mind doing that for a year, as I plan on doing some renovations and increasing rent after a year (hopefully making it cash-flow positive). Also, I am currently saving the deposit for a property, I wont need a loan for that
This sort of property would most likely still be negatively geared for a couple of years, however it would seem it should only be maybe a couple of hundred a month at most, and I assume you would be able to cover this expense fairly comfortably.
Renovations are definitely a good way to be able to get access to instant equity, and also a reason to increase the rental return to get this property up to neutral/positive.
This all sounds good. I am not sure about rent at $390 pw. This sounds a bit high? It looks like a nice place…..
Vacancy rates may be low but not sure if this rent is what is the going rate in this market.
I was a former real estate agent in Melbourne – so I dont know much about Bendigo.
have you compared other properties around the area? Also prices of similar properties in the area around Bendigo?
I think Bendigo is a good place to invest- not too far from Melbourne- I found when looking at regional area’s hard to pin point what is a good price.
This property looks renovated – so you are paying for someone elses work. You say you want to renovate yourself as well but it looks like the work is already done?
Hope to see you Wednesday night and we can chat more.Don't forget insurance. But you will get a good amount back on depreciation seeing that it seems newly renovated. Don't forget that you also need to add the costs of stamp duty and solicitor costs.
So will not likely be negative *given the 20% deposit. But not REALLY CF+ as the deposit you have put into it could be earning interest else where.
I like to count ALL costs.Yeah, I reckon it's more negative geared than neutral.
Insurance costs will be around $400 per year or higher or lower depending who you go with – oh and I tihnk it might be different for you since you plan to self-manage the property.
Also consider that even though you will manage the property yourself, there will be costs such as advertising and other related costs in finding new tenants.
Its sounds ok personally I do not see the point in buying something with little capital growth just to be neutral. However thats just my opinion.
Nigel Kibel | Property Know How
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