Gday all.
i have been looking and looking around Brisbane and I am finding it hard to find a "good" investment. I am starting to think that I am missing a part of the puzzle when I am looking at properties.
Here is what I have been doing.
I look at a property on RE.com.au.
I take the purchase price and plug it into a mortgage calc (i usually use the one off the CBA web site purely because it opens in its own little window and gives IO figures). This gives me the monthly repayment on the loan amount.
I then get the monthly rent, body corp and council rates. (usually already stated on RE.com or I email the agent).
I also allow 8.5% of the rent for management
With this info I work out what the property will cost each month to own (not allowing any extra for maintinence).
I then take the monthly loss and multiply it by 12 months to get the annual loss.
I then use a basic 45% (good salary) figure to estimate how much of this annual loss I will be able to claim back which I then divide by 12 months and take it off the loss to give me my final monthly net loss.
for example.
a $295K property
Monthly rent = $1083.33
Monthly IO repayment = $2206 p/mth
Monthly Body Corp = $110 p/mth
monthly council rates = $110 p/mth
monthly management fees = $92.08
Gross monthly cost to own property $1434.75 ($17217 P/a)
Claim back 45% of the $17217 loss at tax time ($7747.65)
$7747.65 divided by 12 months = $645.63 p/m in tax return making the cost of owning the property $789.12 p/mth (after tax return) (or $182.10 per week -ve geared)
Am I working this out correctly?
Its just that when looking at sooo many of the properties on RE.com it is obvious to me that the sellers are doing a few things.
1: they are trying to sell their properties for what the properties will be worth in a year or so's time not what the areas median prices reflect to be the current value.
2: rental returns are very low in alot of areas making properties so -ve geared that by buying one property you basically kill your borrowing power for any more.
3:Almost every property that is listed on RE.com.au with the words "investor" or "perfect investment" or "great first starter" or other things along the same lines are in actual fact really crap investments. I.E a 1 bedroom unit in an area that has had falling price growth rates for the last 3 years returning a poor 4.5% rental return.
I am getting a pretty bleak view of this and I have come to the conclusion that I must be missing something very basic from my calculations.
I do know that I dont know how to factor in predicted price growth into the equation to make the investment look more inviting.
How does that work.
Also am I missing anything/doing anything wrong in the figures that I have worked out so far?
Cheers all.
i have been looking and looking around Brisbane and I am finding it hard to find a "good" investment. I am starting to think that I am missing a part of the puzzle when I am looking at properties.
Here is what I have been doing.
I look at a property on RE.com.au.
I take the purchase price and plug it into a mortgage calc (i usually use the one off the CBA web site purely because it opens in its own little window and gives IO figures). This gives me the monthly repayment on the loan amount.
I then get the monthly rent, body corp and council rates. (usually already stated on RE.com or I email the agent).
I also allow 8.5% of the rent for management
With this info I work out what the property will cost each month to own (not allowing any extra for maintinence).
I then take the monthly loss and multiply it by 12 months to get the annual loss.
I then use a basic 45% (good salary) figure to estimate how much of this annual loss I will be able to claim back which I then divide by 12 months and take it off the loss to give me my final monthly net loss.
for example.
a $295K property
Monthly rent = $1083.33
Monthly IO repayment = $2206 p/mth
Monthly Body Corp = $110 p/mth
monthly council rates = $110 p/mth
monthly management fees = $92.08
Gross monthly cost to own property $1434.75 ($17217 P/a)
Claim back 45% of the $17217 loss at tax time ($7747.65)
$7747.65 divided by 12 months = $645.63 p/m in tax return making the cost of owning the property $789.12 p/mth (after tax return) (or $182.10 per week -ve geared)
Am I working this out correctly?
Its just that when looking at sooo many of the properties on RE.com it is obvious to me that the sellers are doing a few things.
1: they are trying to sell their properties for what the properties will be worth in a year or so's time not what the areas median prices reflect to be the current value.
2: rental returns are very low in alot of areas making properties so -ve geared that by buying one property you basically kill your borrowing power for any more.
3:Almost every property that is listed on RE.com.au with the words "investor" or "perfect investment" or "great first starter" or other things along the same lines are in actual fact really crap investments. I.E a 1 bedroom unit in an area that has had falling price growth rates for the last 3 years returning a poor 4.5% rental return.
I am getting a pretty bleak view of this and I have come to the conclusion that I must be missing something very basic from my calculations.
I do know that I dont know how to factor in predicted price growth into the equation to make the investment look more inviting.
How does that work.
Also am I missing anything/doing anything wrong in the figures that I have worked out so far?
Cheers all.