Reply: 1.1.1
From: Mike .
Hi Susan,
Although Steve made some valid points, your question regarding the 'right' property still deserves an answer. So I'll make a few comments on the subject.
The first thing to consider is that you will be generally marketing your wrap properties to people unable to save a deposit but have a good and stable work history and also have a good rent record.
The rent they are currently paying is used as a guide to the repayments they will make on the wrap mortgage.
That figure Steve likes to use as a 10% yield. In other words, if their current rent is $100 per week, ie $5000 pa then the value of the property is $50,000.
Next step is to locate 10% rental yield properties. Normally they are found at the bottom end of the market. Steve has done many wraps in country towns, for example.
Inspect them yourself and cross-out anything that is not near transport, schools or shops. Cross-out anything which needs major repairs. Your wrap client should be able to move in straight away.
Get an independent valuation and bear in mind that the Valuer will have regard to the "apparent" state of repair and condition of the property but will not inspect those parts of the property which are covered, unexposed, or inaccessible. Those parts will be assumed to be in good repair and condition.
Based on that criteria and depending on the age of the building I'd urge you to get a property inspection report done. If there are hidden problems you can negotiate the price down or not purchase at all.
Finally, if you purchase, get a quantity survey report done so that you know what depreciation amounts you can deduct for tax purposes.
Regards, Mike