One down....

[johnnyb]

Hi All,

Just wanted to thank the forum for the advice and discussions over the last few months which has helped us get our first IP.

It is a 3BR BV in Morayfield (north of Brisbane). It settled on Monday, and is being rented out already. For those interested in the numbers, we bought it for $182K, and with the current rent ($210/wk) it should be about neutral or slightly CF+ once depreciation is taken into account. There is still strong demand for properties and low vacancy rates in the area, so hopefully we may get a bit more growth in the current cycle. If not I'm not too woried, as I'm treating this as a relatively cheap learning experience.

Now I'm on the lookout for #2....

John.

 

[Harris]

Good to hear John, Good luck with your second IP

Cheers,

 

[chrislaw]

John,

Sounds great, could you spare some more details.
I was thinking about this area and was wondering if this price was about average for 3 bed houses? How old is the house? What size block? Is that about the normal rental return for the area? I take it BV is brick veneer?
Any details would be appreciated and happy hunting for number 2. If its like the first I'm sure you will be off to a great start.

Chris

 

[johnnyb]

Hi Chris,

Some more details....

I think the price I paid is a bit below average for the area - I'm still not sure why as the property seems to be in a good location. The vendor was pretty motivated I think (due to a family situation) The area was developed in the early 90s, my house was built in 91, so I still get some building depreciation. The block is a (slightly above?) standard 806m2 (although it's a bit of a funny triangular shape).

Apart from looking at heaps of ads on the web I inspected about 5 or so houses (I only live about 30 mins away). Typical prices seemd to range from $180 - $220K, although as you can imagine the lower priced ones don't last long. Some 4BR in nicer locations (close to the river) were asking maybe another 20-40K. I was lucky with mine as I'd been in close contact with the agent who had shown me a few other properties. The contract fell through on this one because of finance and she gave me a call. The owners were going to go to auction because they didn't want to loose a sale because of lack of finance again. I was willing to offer a contract without a finance clause which I think helped the sale along.

As for rent levels, $200-$220 seems about typical for the 3BR BV (brick veneer) houses. There seems to be a shortage of rental properties available. The agent I went through did not have any available, and a few of the others I saw only had a couple.

Hope that helps. Let me know if there is anything else I can tell you.

John.

 

[johnnyb]

P.S. I forgot to say that I just got the depreciation schedule from Deppro. In the first few years the depreciation is $5,347, $5,854, and $4353. It comes to a total of $53K over 40 years. I'm amazed at how much it is. Certainly money well spent.

John.

 

[kissfan]

Well done Johnny. Hope you acquire more properties in the near future. The abovementioned I/P didn't seem to cause you too much stress like some investors seem to encounter. As a matter of interest do you mind revealing how much Deppro charged you.

Cheers

Marty

 

[johnnyb]

Hi Marty,

Deppro cost $440. Morayfield is not far from Brisbane so I think this is their normal cost for Brisbane. I believe they charge more if the property is not in the capital city.

It was very painless - I sent them an application form with the property details and the payment, and two weeks later I got the schedule in the mail. They even contacted the PM to organise a time to do thier stuff, so I wasn't involved at all. I wish everything else in life could run so smoothly.

John.

 

[kissfan]

Thanx Johnny (that was a quick response time) and once again congratulations on your purchase and all the best of luck for the future.

Cheers

Marty

 

[chrislaw]

Hi John,

Thanks, thats exactly the sort of info I was interested in. I was going to ask the cost of Deppro as well. Also why does the depreciation go up in the second yr?

Chris

 

[Jacque]

Hi Johnny! Congratulations on the first big leap- don't you feel better now?!
I'm sure you will do well with Morayfield. That place has a few fans here on the forum (I'm surprised Brains hasn't replied to this post yet, as he's got quite a handle on that area) and the rental returns are certainly better than the lousy ones on offer in my part of the world just now!
Keep up the enthusiasm and the end goals in mind and you will go far.

 

[johnnyb]

Thanks everyone for your support. I do feel much more confident now that I've bought something. As I said earlier, it may not be a great deal, but it's OK for a start. Can't wait to attend Steve Navra's course this week-end to get a different perspective on stuff.

Chris,
The depreciation is greater in the 2nd year compared to the 1st because this year I only get to claim for the part of the year that I own the property (which I think is about 310 days). If I owned the property from the 1st July the depreciation would have been about $6200 I think.

John.

 

[brains]

Gday JohnnyB (and Jacque)

Looks like you got yourself a great buy there mate. I know the market in the area pretty well and $182k is a bargain right now and the rent return (6%) is excellent. If i were to buy my houses now my rental yield would be about 4.5 - 5%, they were about 9% when i bought them in May 02.

You can expect some more growth there. It only really started gaining momentum early this year and i think wiill keep going until rent yields get to about 3.5% - 4%, then investors will look elsewhere. Just my opinion tho i could be wrong and hope i am
(The demand there has been mainly driven by investors like you and me)

As far as depreciation goes, i got 5 houses done by Deppro and they charged me $380 each and similar to you i did jack - filled out a form and gave them my visa details.

A friend of mine who owns 3 houses there and used her dep. reports in FY03 tax return is getting $12 200 back.......woohooo!!....good on her and again, congrats on a great buy.


But dont forget the dep. deductions are only deferring tax cause it lowers the cost base of the purchase price so you will pay more cap. gains tax later, but if, like me, you are not thinking of selling it doesnt matter.

 

[chrislaw]

John,

Thanks again, didn't think about it being only part of the year, going quick isn't it?

Congrats again.

Chris

 

[Roger]

Hi John,

I am planning to buy an investment property in Morayfield. I am from Sydney and I am not familiar with this area. On the Internet there are new properties advertised for 4 bedrooms at $235K +.

Does Morayfield have parts, which I should be wary off?

Regards,
Roger.

 

[RetiredBy50]

I have been doing some home work on Morafield area.
Some people say it has a very low vancy rate.

When I look up the realesate.com web site. there are quite a lot of new properties for rent.

Does anyone know the actaul vacancy rate in that area ?


Thanks

 

[johnnyb]

Roger,
Sorry but I don't know Morayfield well enough to say whether there are good or bad areas. However, like anywhere I'm sure there are places that are less desirable to be in. I also don't know where the new houses you are referring to are located.

RetiredBy50,
I don't have a figure for the vacancy rates (maybe Brains does?). The agent I bought through did not have any rentals, and most of the other ones I went to (about 4 or 5) only had a handful. That was about 1 month ago. Maybe the new properties you've seen have just been released?

John.