So let's make some reasonable assumptions and do a bit of DD ;
1.0 Capital
Assume you are able to negotiate a bit off the asking price and sign a sales contract for 1.95m
Maximum loan amount will probably be 70% LVR.
Assuming it values up at 1.95m.......big assumption right there !!
Maximum loan extended would be 1,365 K.
Stamp duty will likely be around 75 to 80K.
Other closing costs in total will probably be around 20K.
Purchaser will need to stump up cash of (30% of 1.95m) + 100K = 685K.
Big questions you have to ask yourself.....how much is a small block (less than 1 acre) out in the sticks of Collinsville worth.
...and how much are 16 demountables fitted out worth.
2.0 Income
This is the area where the Banks are really turning the screws on.
The Banks won't particularly like that the previous Landlord has given away such an attractive term to the Tenant. A 2+1+1+1+1+1 structure is very much in the favour of the Tenant. They done good negotiating that....it means they can bug out pretty much at any time and leave the Landlord high and dry. Further to that, they can demand, and reasonably expect to get, upgrades to both infrastructure and fit-outs within the 1 bed apartments.
The miners who used the facilities would be fairly harsh on brand new fridges / washers / bathrooms. I'm presuming all of the furniture you see is owned and being depreciated by the Landlord. The Tenants will no doubt help them along fairly quickly in depreciating the items. I think it's fair to assume that they will be more aggressive than that which the ATO allows the Landlord relief.
Gross Income = $ 6,000 * 52 = $ 312,000
It is unclear whether the Lease is for all 16 units, or whether they only pay for the units occupied at any one time. If it was the latter, that would kill the deal stone dead right there.
Outgoings (this is where a whole bunch of assumptions need to be made)
Shire Rates..............could range between $ 6K and $ 12K
Water Rates.............could range between $ 2K and $ 5K
Land Tax.................who knows.....say $ 4K....assuming only land in Qld
Insurances................these will be high....say $ 7K
PM fees....................all up probably 8%....say $ 25K
Maintenance.............cleaning / picking up cartons / cans / cigarette butts
Damage...................these boys can get really rough on equipment
All up outgoing costs say $ 70 K pa.
Nett Income of 312 K - 70 K = 242 K pa.
Interest costs of 1,365K * 8.3% pa = 114 K pa.
Therefore Nett Profit of 242 K - 114 K = 128 K pa.
3.0 Conclusion
IF the place is leased, the Purchaser can expect around 120 to 130 K pa or around $ 2,500 per week pouring into their pocket.
IF the place is empty, the Purchaser can expect around 180 to 190 K pa or around $ 3,500 per week ripping out of their pocket.
Therefore, breakeven tenancy amount appears to be about 10 out of the 16. If the place has more than 10 units rented, you're in front. Any less than 10, and you are going backwards.
Of course, if the mining compnay decides to pull the pin and you try and fill the place with locals, the quality of income will come waaaay down, and I'd also presume, having visited Collinsville, so will the rental rates obtained.
I think the Lease structure of 2+1+1+1+1+1 will be very off putting to both the Valuer and the Bank's credit dept.
An alternative to stumping up 685K of your own cash on this might be to take it and purchase outright something nice on a long 10 year Lease in the CBD of a major capital city earnign you probably 60K nett cash return. It would only be half of what the above property would do if fully leased, but the risks would be way less, and you wouldn't have 2m bucks tied up in some backward Qld country town.
Having visited distant relatives in Collinsville, I can say it isn't the @r$e end of the world, but you can see it from there.
