From: Glenn Mott
After seeing the post by Mark about his properties in Penrith and the abuse hurled his way, I have found 2 properties in metropolitan Perth that would meet most people's criteria for a positively geared property.
Both are in a suburb called Parmelia, 34km from Perth which has 26% of properties rented and 74% owner occupied.
Both are rented for $125 per week and have been for at least 6 months to their tenants.
The median price for properties in Parmelia as of March 2002 was $82,729
The median rent for properties rented in Parmelia as of March 2002 was $113 per week.
Therefore, the median yield is:
113*52/82729*100% = 7.1%
One property is listed for $86,000 and the other listed for $86,500. Therefore the yields for these properties based on their listing prices are:
125*52/86000*100% = 7.5% (rounded)
125*52/86500*100% = 7.5% (rounded)
After speaking with the agent who is selling these properties and quoting the median suburb prices to him, I asked him if there were any distinguishing features about the properties that would validate an asking price $4000 above the median price for the suburb. At this point, imagine several screws being tightened upon the poor guy as I go silent!!. He then advised me that although listed at or around $86,000 he would in fact anticipate a sale price between $80,000 and $82,000. Barrrgain...$6,000 discount already!
Now, lets say that $80,000 is in fact the selling price for both properties and you are the purchaser. Off you then trot to your favourite money lender (mine is ANZ at the moment and my figures will be based on using their finance). You take with you a copy of the Offer and Acceptance form, a copy of the Residential Lease Agreement and a print out of the suburb profile for Parmelia found at http://www.reiwa.com.au showing median house prices and rents and a print out of the cash flow statement that you have prepared for the properties showing rent, expected interest, council and water rates, insurance and management fees.
You can then put it to your lender that as your property is renting for $125 per week and the median yield is 7.1%, your property must be worth $91,549! Because you are putting as little of your own cash possible into the deal, you ask to borrow the following:
80,000 purchase price
1,560 stamp duty (WA)
1,200 provision for rates in advance
400 settlement agents fees
100 searches
-------
83,260
Because you are buying both properties, your total borrowings will be over $150,000. This qualifies you to be an ANZ premium customer so that you get a free VISA card, no bank fees on any account or loan and a .5% discount off the advertised rate for most of their residential property loans. Currently, ANZ have a product that has a honeymoon rate of 5%, meaning the interest you pay in the first 12 months is only 4.5% with no monthly fees!
Therefore, with an interest only loan, your figures would look like this for each property for the first year once purchased:
6,500 rent
-------
6,500 total income
3,746 interest
500 water rates
500 council rates
200 insurance
-------
4,946 total expenses
total income – total expenses = 6,500 – 4,946
year 1 income = +$1,554
Based on current interest rates, at the end of year 1, the interest rate would change to 6.07% (ANZ’s standard variable of 6.57% minus the discount) and the interest amount would change to $5,053. The figures would then look like:
6,500 rent
-------
6,500 total income
5,053 interest
500 water rates
500 council rates
200 insurance
-------
6,253 total expenses
total income – total expenses = 6,500 – 6,253
year 2 and thereafter income = +$247
These properties may never set the world on fire in terms of capital gain, but they offer investors a good entry into the property market at a price that will put money in their pockets.
Pick this to pieces if you will, but this deal is available to anyone with the time and inclination to browse the net and make a few phone calls.
Glenn
After seeing the post by Mark about his properties in Penrith and the abuse hurled his way, I have found 2 properties in metropolitan Perth that would meet most people's criteria for a positively geared property.
Both are in a suburb called Parmelia, 34km from Perth which has 26% of properties rented and 74% owner occupied.
Both are rented for $125 per week and have been for at least 6 months to their tenants.
The median price for properties in Parmelia as of March 2002 was $82,729
The median rent for properties rented in Parmelia as of March 2002 was $113 per week.
Therefore, the median yield is:
113*52/82729*100% = 7.1%
One property is listed for $86,000 and the other listed for $86,500. Therefore the yields for these properties based on their listing prices are:
125*52/86000*100% = 7.5% (rounded)
125*52/86500*100% = 7.5% (rounded)
After speaking with the agent who is selling these properties and quoting the median suburb prices to him, I asked him if there were any distinguishing features about the properties that would validate an asking price $4000 above the median price for the suburb. At this point, imagine several screws being tightened upon the poor guy as I go silent!!. He then advised me that although listed at or around $86,000 he would in fact anticipate a sale price between $80,000 and $82,000. Barrrgain...$6,000 discount already!
Now, lets say that $80,000 is in fact the selling price for both properties and you are the purchaser. Off you then trot to your favourite money lender (mine is ANZ at the moment and my figures will be based on using their finance). You take with you a copy of the Offer and Acceptance form, a copy of the Residential Lease Agreement and a print out of the suburb profile for Parmelia found at http://www.reiwa.com.au showing median house prices and rents and a print out of the cash flow statement that you have prepared for the properties showing rent, expected interest, council and water rates, insurance and management fees.
You can then put it to your lender that as your property is renting for $125 per week and the median yield is 7.1%, your property must be worth $91,549! Because you are putting as little of your own cash possible into the deal, you ask to borrow the following:
80,000 purchase price
1,560 stamp duty (WA)
1,200 provision for rates in advance
400 settlement agents fees
100 searches
-------
83,260
Because you are buying both properties, your total borrowings will be over $150,000. This qualifies you to be an ANZ premium customer so that you get a free VISA card, no bank fees on any account or loan and a .5% discount off the advertised rate for most of their residential property loans. Currently, ANZ have a product that has a honeymoon rate of 5%, meaning the interest you pay in the first 12 months is only 4.5% with no monthly fees!
Therefore, with an interest only loan, your figures would look like this for each property for the first year once purchased:
6,500 rent
-------
6,500 total income
3,746 interest
500 water rates
500 council rates
200 insurance
-------
4,946 total expenses
total income – total expenses = 6,500 – 4,946
year 1 income = +$1,554
Based on current interest rates, at the end of year 1, the interest rate would change to 6.07% (ANZ’s standard variable of 6.57% minus the discount) and the interest amount would change to $5,053. The figures would then look like:
6,500 rent
-------
6,500 total income
5,053 interest
500 water rates
500 council rates
200 insurance
-------
6,253 total expenses
total income – total expenses = 6,500 – 6,253
year 2 and thereafter income = +$247
These properties may never set the world on fire in terms of capital gain, but they offer investors a good entry into the property market at a price that will put money in their pockets.
Pick this to pieces if you will, but this deal is available to anyone with the time and inclination to browse the net and make a few phone calls.
Glenn
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