depreciation - how to make a good property decisio

[WebBoard]

From: Carrie Reedy


This is all new to us. We have decided to get into the property game, but were hoping for some advice from those who have been doing this for some time.

1) How can you know ahead of a purchase if you will be cash flow positive or negative if you cant get the qs report info till after you have made an offer to purchase the property, and it is even hard to get info from real estate agents on things like actual building costs etc (it seems like most agents don't even know about the need for this info to help make the purchase decision)
2) If you work your figures on the building cost method, then get a qs report done, how far different will the figures be?
3) I have been reading recently that Perth is at the top of a property cycle, (I'm from Perth) what do other readers feel on this one?

It seems to me that you need so much info before you can use programs like PIA, but the info is hard to come by..any suggestions for how to make this whole process any easier

 

[DaleGG]

Reply: 1
From: Dale Gatherum-Goss


Hi

There is no way to do this accurately without a QS report. You can though, guess at the costs based on your experience and the age of the property.

As you see more properties, and more QS reports, you will become more accurate in your estimations.

I wouldn't even bother asking the real estate agent as most of them would not have the faintest idea.

Sorry I can't help more.

Dale

 

[Glenn]

Reply: 2
From: Glenn Mott


Carrie,

Unless you lodge a tax variation request, calculating the gearing position of a property goes something like this....

Expenses = Interest + Insurance + Prop Man Fees + Rates

Income = Rent

If Expenses > Income, property is neg geared on a cash basis

If Income > Expenses, property is pos geared on a cash basis

With the neg geared property, you will be going to work each week to subsidise your tenant's standard of living

With the pos geared property, your tenant will be going to work each week to pay for the cost of living in the property plus a bit extra for you for the risks involved. At the end of the financial year, depending on the property, you may also receive a return from the tax department.

Regards

Glenn

 

[tonyd]

Reply: 3
From: Tony Dixon


Carrie wrote:
>3) I have been reading
>recently that Perth is at the
>top of a property cycle, (I'm
>from Perth) what do other
>readers feel on this one?

REIWA has just announced the latest Perth property stats. Highest growth figures in 7 years.

See http://www.reiwa.com.au/

Just listened to REIWA President Graham Joyce on ABC who seemed to think it would continue for at least another 18mths based on the usual lag behind Sydney/Melbourne.

You'd imagine that future interest rate rises would have a cooling effect though?

cheers, Tony