Dear investors,
Help me calculate ROI for this investment please
How do you think what would be the approximate price of this property without a contract?
http://www.realestate.com.au/property-apartment-qld-surfers+paradise-119307259My estimate is $180-220K but I’m just a newbie :)
Best regards,
Alex-
This topic was modified 9 years, 7 months ago by
RussianAussie (QLD).
RussianAussie (QLD)
https://www.facebook.com/sanderinozFeel free to write me a message or add me in Facebook to chat about property investing
Never mind about the price. It’s not a great investment proposition. Just looking at the holding costs quoted in the ad, it is cashflow negative even if you bought the place without a mortgage.
38067-31611-3604-5922 = – $3070 per annum. That’s a loss of $3070 per annum, even if you bought the property for cash without the burden of mortgage repayments.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thank you for your reply!
If this property costs above $250K it could be still a good investment
Cost: $115K+$3K*8years=$139K
Final cost in 2022:
$180K, compound annual ROI = 3.28%
$200K, ROI = 4.65%
$250K, ROI = 7.61%
$300K, ROI = 10.09%So the question is what final 2022 price could be assuming 0% p.a. capital gains?
Best regards,
AlexRussianAussie (QLD)
https://www.facebook.com/sanderinozFeel free to write me a message or add me in Facebook to chat about property investing
So you are asking what the price could be in 2022 with 0% capital gain? The answer is the same as today.
Regarding ROI: The property is running a loss of $3070 p.a. and assuming 0% capital growth, the ROI will be -ve.
This is a negatively geared property and you would solely rely on capital growth for returns.
Cheers
AndrewsuperAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auHello Andrew,
Today’s this 112 m2 property costs $115K that is significantly below Gold Coast average because it’s under a contract
Are you sure that the price will be the same without the contract that will end in 2022?
Best regards,
AlexRussianAussie (QLD)
https://www.facebook.com/sanderinozFeel free to write me a message or add me in Facebook to chat about property investing
Sorry I didn’t get the contract part.
Investors have difficulty estimating the value of a property today but you want to estimate it 7 years into the future. Any answer you come up with will be heavily reliant on your assumptions.
If your strategy is to buy this property with the contract at a discounted price and then sell it when the contract expires then you can:
1. Figure out the value of the property today without the contract using comparable sales.
2. Estimate an average capital growth rate for the next 7 years. (Here you can’t just take an average capital growth rate that includes houses, townhouse and apartments. It should be specific to the property type and number of beds)
3. Apply the cap rate to the value of the property without the contract.Then you can use that value, the purchase price and holding costs to estimate the ROI.
Cheers
AndrewsuperAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auThank you for your help!
RussianAussie (QLD)
https://www.facebook.com/sanderinozFeel free to write me a message or add me in Facebook to chat about property investing
Keep in mind that this is in a building with many apartments and many different owners. It is quite unlikely that at the end of the contract, every owner will vote to not renew the contract. Be careful in assuming the use of the property will become normal residential at the end of the contract. Many a person has been stung by this assumption.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
So owners do not have a direct agreement with the management if they have to vote, don’t they?
Who is usually the second participant of the agreement with onsite management in this case? Body corporate?
Best regards,
Alex-
This reply was modified 9 years, 7 months ago by RussianAussie (QLD).
RussianAussie (QLD)
https://www.facebook.com/sanderinozFeel free to write me a message or add me in Facebook to chat about property investing
Keep in mind that this is in a building with many apartments and many different owners. It is quite unlikely that at the end of the contract, every owner will vote to not renew the contract. Be careful in assuming the use of the property will become normal residential at the end of the contract. Many a person has been stung by this assumption.
Do all the owners need to agree not to renew the contract? I guess you would need to read the contract in detail.
Given the current yield of the property I don’t see it that unlikely that they wouldn’t vote to renew it.
Cheers
AndrewsuperAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auIt only takes one person with insufficient understanding or business smarts to be the odd one out and mess up a unanimous vote…
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
OMG!
If I decide to participate in such type of deal, I will hire best real estate solicitors to check these papers
Thank you for the advice!
Alex
RussianAussie (QLD)
https://www.facebook.com/sanderinozFeel free to write me a message or add me in Facebook to chat about property investing
I think this concept is designed for only one winner and it’s not the guy buying in.
If there is clearly a “Greed Button” being pushed by the seller then buyer beware!
Assumptions that sound all-good on paper usually come back to bite the buyer, long after the seller is gone.
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This reply was modified 9 years, 7 months ago by Modernity Investing.
Modernity Investing
Email MeAway from all of that good luck in getting finance at anything over around 50% lvr (if you were lucky).
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thank you!
Alex
RussianAussie (QLD)
https://www.facebook.com/sanderinozFeel free to write me a message or add me in Facebook to chat about property investing
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This topic was modified 9 years, 7 months ago by
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