Hi,
I went to auction an in melbournes inner east... suburb called glen iris.
http://www.realestate.com.au/property-apartment-vic-glen+iris-106571232
Property sold for $522k. very nice street, bigger than normal 2 bedroom unit.
For an investor looking at an L.V.R ratio of 80% I have calculated the below
Purchase Price $522,000
Stamp Duty/purchasing costs $28,000
Loan amount 80% $417600
Cash Deposit Required - $132,400
Interest only loan at 7 % $29,172 per year or $561 per week.
Expenses
Body Corp $2000
Water $600
Rates $600
Total holding cost per annum $32,372
Rental Return Estimate - $19,760 p.a
Property Agent Fees - 6% $1000 p.a
Total Expenses - $33,373
Total Income -$18,760
Deficit Per Annum - $13612 ($261 per week holding Costs)
Other Expenses ( interest lost on deposit for property/ stamp duty)
$132,400 @ 6% p.a = $7,944
I undestand there are tax implications for every individual investor.
But the way I see it the property would need to increase by $21,566 in the first year to just break even.
And If the owner wanted to sell the property to crystalise a profit there would be fees of 2.2% in realestate agent fees, not to mean any capital gains that the owner is liable to pay.
I know property is a long term investment, but one would have to argue that the holding costs of this property are very high and the risk reward doesnt appear to be in the buyers favour over the short to medium term.
Maybe I am missing something here.... maybe this particular property may suit a high income earner who is after some tax breaks and is happy to run an investment at a significant loss cashflow wise.
If interest rates hit 8.5-9%... the numbers look even worse and an investor would be looking at significant cashflow problems, which could hinder future investment, due to lack of power on the borrowing power front.
My analysis doesnt cover everything.. its kind of a simplistic way of looking at things.. and really i just beleive the only reason to purchase this property would be if you beleived the property was going to go up in value signficantly.... in my opinion pure speculation given the lack of rental return. 2.8 % returns seem pretty ordinary... Past performance in glen iris has bee great, but if this was a company trading on the stock market it would be trading on very very very high P.E ratios.
any thoughts would love to hear regarding this purchase at 522k...
I went to auction an in melbournes inner east... suburb called glen iris.
http://www.realestate.com.au/property-apartment-vic-glen+iris-106571232
Property sold for $522k. very nice street, bigger than normal 2 bedroom unit.
For an investor looking at an L.V.R ratio of 80% I have calculated the below
Purchase Price $522,000
Stamp Duty/purchasing costs $28,000
Loan amount 80% $417600
Cash Deposit Required - $132,400
Interest only loan at 7 % $29,172 per year or $561 per week.
Expenses
Body Corp $2000
Water $600
Rates $600
Total holding cost per annum $32,372
Rental Return Estimate - $19,760 p.a
Property Agent Fees - 6% $1000 p.a
Total Expenses - $33,373
Total Income -$18,760
Deficit Per Annum - $13612 ($261 per week holding Costs)
Other Expenses ( interest lost on deposit for property/ stamp duty)
$132,400 @ 6% p.a = $7,944
I undestand there are tax implications for every individual investor.
But the way I see it the property would need to increase by $21,566 in the first year to just break even.
And If the owner wanted to sell the property to crystalise a profit there would be fees of 2.2% in realestate agent fees, not to mean any capital gains that the owner is liable to pay.
I know property is a long term investment, but one would have to argue that the holding costs of this property are very high and the risk reward doesnt appear to be in the buyers favour over the short to medium term.
Maybe I am missing something here.... maybe this particular property may suit a high income earner who is after some tax breaks and is happy to run an investment at a significant loss cashflow wise.
If interest rates hit 8.5-9%... the numbers look even worse and an investor would be looking at significant cashflow problems, which could hinder future investment, due to lack of power on the borrowing power front.
My analysis doesnt cover everything.. its kind of a simplistic way of looking at things.. and really i just beleive the only reason to purchase this property would be if you beleived the property was going to go up in value signficantly.... in my opinion pure speculation given the lack of rental return. 2.8 % returns seem pretty ordinary... Past performance in glen iris has bee great, but if this was a company trading on the stock market it would be trading on very very very high P.E ratios.
any thoughts would love to hear regarding this purchase at 522k...