Hey guys, been inactive for a few months but since the mega conference in Melbs i have had my passion for investing re-sparked. I have an absolute doozy for you guys as I am trying to help my mother keep her only asset (house).
Ideal situation is to get this baby as close to neutrally geared as possible so she can hold on to it when she moves in with her new boyfriend. She wants to sell but im urging her to keep it if she can afford it, as its the only thing she owns.
So here goes.
Property is worth 375k in Oakden in Adelaide. 3br 2bthr 1car semi-detached house.
RP Data says 360pw rent with a range from 340-380pw possible.
House is in fairly good condition and has solar on the roof. Lets say for arguments sake we manage to achieve $370/week rentFinance is structured as 2 loans
1st : P&I Loan FIXED for 2 years at 4.890% pa
Balance: $260k owing Repayments : $390/week2nd : P&I Loan VARIABLE at 4.64% pa
Balance: $19,250 owing Repayments $30/week
(second loan was for a car)What are the costs associated with getting this place ready for rental. I know about landlords insurance, property manager rates (7%) but what else do i need to take into account. I was hoping that the place being pet friendly would be useful to collect the higher rental bracket?
As well as this, is there a way i can get better finance and in turn suck a bit more juice out of this lemon. Converting the loans to I/O and perhaps combining them to save on fees?Id love any help you wonderful people can give. I can provide more information where necessary :D
Cheers in advance.Hi Liam.
In terms of your questions, landlord insurance + property management will certainly be the main additional costs than currently.
With regards to the finance – the lender *may allow the loans to switch to IO, this depends on the lender and specifics of the loan (how many years in etc). You’re not going to be able to combine the two loans with one loan being fixed – this would trigger a break fee which will likely cost thousands. It wouldn’t be ideal to combine the two in any case, as you would be combine a personal use loan with a future investment use loan, muddling the tax deductibility causing long term tax issues for negligible if any gain.
If the intention is to rent the property out, it’d be best to touch base with the lender to see if she can initially switch the loans to IO, then get in touch with a property manager. David Traeger on this forums is a well known Adelaide property manager who runs http://www.dtproperty.com.au – I’m sure he’d be able to shed some light on the rent potential, whether to advertise at pet friendly to boost the yield etc.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Hi Liam
If you want an opinion on the rental estimate let me know and I can shoot you over the details of the firm we deal with and refer all of our clients too.
Big enough to have some clout in the market yet small enough to still care and have that personal touch.
Sent them 30 or so clients this year alone and all seem extremely happy.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Not sure about Adelaide but I have found that allowing pets does provide a small increase in rent, but it comes with additional risk.
When does the 2 year fixed period end?
If your mother is still working then there is capital depreciation – you’ll need to get a report done.
In general I agree with you and selling sounds a bit risky. It might seem harsh but you don’t want your mother to split with the boyfriend and have no home. Chances are any cash made from the sale would get spent and she might end up with nothing.
Yeah DT was my first port of call in Adelaide, he was the one that gave me the RP Data sheep for the property. Thanks for the offer Richard, ill deffs shoot you a message.
As i understand the next step is to talk to the bank and organize an OI change if at all possible. Its with a small credit union here is SA so i don’t know how lucky we will be, but heres trying.
Ill get back to you when i know the answers.
Thanks Lads
Yeah NewGuy, im pretty cautious mate. In terms of depreciation, everything in the home is over 5 years old so would there still be depreciation available?
She still works full time :D
Definitely still depreciation. I bought a place that was 20 years old and still claim thousands per year.
Depreciation and Capital Allowance claim would still be available to you.
Let us know how you go with Xenia.
Let her i said Hi.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Nice to meet with you and your mother this evening, glad to be of assistance.
D.T. | DT Property Management
http://www.dtproperty.com.au
Email Me | Phone MeAdelaide Property Management - whole Adelaide metro
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