hi there, we are new to property investing in the Gold Coast. We are close to buying a brand new 2 bed townhouse in the Burleigh area for $410k; its close to all amenities, schools, transport etc. Apparently we are told the rent would be around $420-$480 (not sure if this is correct?) per week, with total costs being around $430 per week, so therefore it could be positively geared. Any thoughts on this anyone?
This is the breakdown:
$327 weekly mortgage repayments
$25 body corporate p/week
$34 agency fee p/week
$10 landlord insurance p/week
$33 rates p/weekTOTAL: $429 per week, with added depreciation benefits to be got on top. Thanks in advance.
A couple of ways to look at it. One is to look at how you found it and see if you’re just falling for a bunch of marketing tricks. Given the really big range of ‘potential’ rent, then I would immediately be concerned. Just check what the similar places are renting for now and see if it’s even in the ball park. Speak to a different real estate agent than the one selling and get a rental figure. Have you had the other costs confirmed, like body corporate / rates? Are you getting offered rental guarantees, or other perks to try and make you buy it? How did you calculate the mortgage? I used 425000 (100% house + stamp duty / other costs etc) @ 4.5% IO, and it was closer to $365/wk.
I imagine you’re in for a buy and hold, because as a townhouse you’re reasonably restricted in regards to improvements. Since it’s brand new then you really can’t add value to it. So you’d want to be confident in the rental figure and that it will go up over time. So, it will be a neutral hold with the plan to have capital gain. I don’t really count depreciation as ‘making money’ because in theory you’re supposed to replace everything you’ve depreciated anyway, so you’re just ‘saving money’ before paying it back.
I would never buy a brand new townhouse anyway, but I would be 100% confident of all my costs, rent and expected capital gain over the next 3 years before I did anything.
Hi Golderneye,
+1 for what TheNewGuy said !!
Add to that – how many townhouses in the string? 4 or 20? i.e. is this a boutique block, or a “slamasmanyasyoucanontheblock” build?
The important part is “How much land will you own?” Land is what appreciates over time – as infrastructure and desirability increase, so does the location of the land and thus the value.
If a boutique block, then it is likely that this could be in the heart of Burleigh with pre-existing infrastructure. If not, then you could be way West (near the M1) and into almost “greenfield estates”.
Speak to a different real estate agent than the one selling and get a rental figure.
… and also a comparable price for a similar townhouse for sale on THEIR books. If a rental guarantee is being offered, it doesn’t come free – you will be paying for it as part of the purchase price. A good deal does not NEED a rental guarantee.
Now, that is not to say that any Rental Guarantee is BAD !! But it is an alarm bell ringing, telling you to “Check further”. If too many alarms are ringing, I would be running away. Search the selling company by name to see if others have good words to say – or not !! If they are a “one-stop shop” (providing finance, solicitor as well as the property – RUN AWAY FAST!!!)
Deep breath, then get on the phone – and good luck,
Benny
PS If you are from Syd or Mel, $420k might seem to be a “giveaway price” – but don’t get caught! If the price is too high for a local, then it is TOO HIGH (paying for Rental Guarantee, extra $$ for the marketer, solicitor, etc). Gold Coast has been notorious for this kind of selling for decades – they sell the sizzle (beaches, etc) but hide the hook underneath it all.
Hi Goldeneye,
I would not wish to tell you what the values are at Burleigh but having lived on the Gold Coast for 30 years now, at Nerang, it seems to me that unless this unit has seafront views and is 50m to the sand it might be a little high in pricing. Couple that with your other comments regarding the sale, expected rental return and I would be suspicious as hell.
As Benny pointed out, the pricing might be a bargain in Sydney but on the Coast it seems high to me for just a unit at Burleigh. Shop around a bit.
On the philosophy that Steve runs and as a new unit it might be difficult to add value and therefore increase profits.
Tread carefully.Hi Guys,
Thank you for your thoughts and advice, we have decided to back out, not for reasons mentioned ,more to do with advice from our solicitors regarding the body corp, though I have taken onboard comments regarding improving the property.
Plenty of property about on the Gold Coast at present but I believe most sellers are trying it on with inflated prices!
Thanks again guys
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